Spousal Exclusions

November 13, 2015

Employee Benefit & HR News

The cost of providing health care has become an increasingly larger expense for employers.  Many employers are seeking strategies that will help limit exposure to members perceived as having higher cost.   Studies indicate spouses enrolled on a health plan cost more than other comparable enrolled members.  This make spouses a focus for cost control.

The Affordable Care Act (ACA) requires employers with 50 or more full-time equivalent employees to provide health coverage to full-time employees and dependent children up to age 26; however employers are not required to cover spouses.  Because of this employers are able to choose from several different strategies to reduce the expense of dependent spouses.

These strategies include:

  • Increasing the employee’s contribution rate for dependent coverage
  • Adding a spousal surcharge to cover a spouse who elects to be covered as a dependent on the plan even though other coverage is available to them
  • Exclude all spouses from the plan (regardless if other coverage is available)
  • Exclude working spouses from enrolling if other coverage is available through their employer

Let’s discuss the ramifications of these strategies in more detail.  While on the surface these may appear to be effective cost controls, there are some long-term outcomes to be considered.  Employers who are early to implement may realize some short-term savings as spouses are pushed off their plan.  However, the result over the long-term in a world where all employers push spouses off their plans may ultimately result in a cost increase.

In this future world, employers will likely be covering new employee participants pushed off of dependent coverage.  These employers will be responsible for subsidizing the cost of employee-only coverage on these former dependent spouses.  According to the 2013 Kaiser Family Foundation survey, employers paid 82% toward the cost of employee-only coverage and 71% toward family.   Therefore, employers might in-fact be subsidizing a larger portion of the contribution.

In summary, the short-term spending reductions can be perceived as immediate and enticing while the long-term possibilities more distant and intangible.  It remains to be seen if the long-term consequences are enough for employers to re-evaluate these strategies.  In any event, employers should be prepared to see their cost savings diminish over time.

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About Rick Ewers

Mr. Ewers is an analytical consultant providing financial analysis, vendor evaluations, market & compliance analysis, as well as national industry trending for group employers.

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