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Friday, 15 November 2019 11:40

Making Spouses Coverage Work for You

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It’s renewal season, a time when we are all painfully reminded that the cost of healthcare keeps going up. In order to stay competitive, employers want to keep their benefits packages extensive and their contributions generous, but how to manage that desire against the reality of cost? One way to tackle this is by considering alternate contribution structures for spousal coverage. 

Some options for managing costs regarding spouses are:

  • Not covering spouses at all

  • Not covering spouses who have an offer of coverage elsewhere

  • Adding a spousal surcharge for all spouses, or spouses who have an offer of coverage elsewhere

  • Covering spouses at a lower percentage than dependent children

Let’s look at these strategies one-by-one.

Not covering spouses at all

This first option is by far the most restrictive, and companies not allowing spouses to be considered eligible dependents under the plan (regardless of whether they have another coverage option) are likely to find a hard time attracting the highest quality candidates. While the Affordable Care Act does not require employers to offer coverage to spouses, there have only been a very few national companies that have used this strategy.

Not covering spouses who have an offer of coverage elsewhere

The second option is also quite restrictive and not very competitive from a recruiting point of view either. Back in 2013, UPS went this route by denying coverage to spouses that had an offer of coverage elsewhere (such as through the spouse’s employer). At the time, the company employed around 77,000 people, had about 33,000 spouses on the health plan, and anticipated that this new practice would eliminate coverage (and therefore claims expenses) for about 15,000 spouses. They still covered unemployed spouses and spouses whose jobs did not provide health coverage. One caution when considering this strategy is that there isn’t a way to force employees to prove their spouses don’t have an offer of other coverage, but you can request that employees who wish to add their spouses sign an affidavit stating the spouse has no other offer of coverage.

Adding a spousal surcharge for all spouses, or spouses who have an offer of coverage elsewhere

The third option of adding a spousal surcharge adds a bit of administrative work, but may be worth consideration. Depending on how the surcharge is structured, you may need to collect signed affidavits and include the surcharge on those for whom it is applicable on the payroll side. A typical surcharge may be anywhere from $50-$250 or more per month, although amounts of $100 or less per month appear to be the most common.

Covering spouses at a lower percentage than dependent children

The final option is the least restrictive and possibly the most competitive. Different contribution rates for employees and dependents are common, and employers can take this a step further and contribute at a different percentage (or flat dollar amount) for dependent spouses than dependent children. Children tend to have a stabilizing impact on claims experience in most cases, so a higher level of subsidy can make sense, which also keeps employees’ contribution for this tier competitive in the job market. Contributing less to dependent spouses makes their offer of coverage through their own employer more attractive, potentially reducing your upfront costs as well as the associated large claim risk.

These strategies might be considered if employers are looking for a way to reduce their healthcare expenses, especially if they have data that shows spouses as being high utilizers of claims. If you would like more ideas that are specific to your plan, please reach out to your Fall River client manager.

Read 1389 times Last modified on Monday, 14 September 2020 10:27
Amy De Lorenzo

Amy Johnston is an Account Manager with extensive experience working with both large and small employers as a broker.  In addition to five years of broker experience prior to joining Fall River, she also brings eight years of insurance carrier expertise.  Amy is an expert on ERISA, the Affordable Care Act, and other compliance issues.

Ms. Johnston received a Bachelor of Arts degree in Communications from Colorado State University. She is a Colorado native from Steamboat Springs, and loves spending time in the mountains with her husband, two children, and Tucker the cocker spaniel. She enjoys snowshoeing, hiking, and philanthropy work to promote education.