This article was published on August 5, 2019 on IFEBP.org written by Lois Gleason, CEBS.
More and more employers are seeking cost savings by discouraging or blocking employees from enrolling a spouse in the employer’s health plan. Here’s what you need to know about the growing trend of spousal carve-outs:
Employers often use one of the following four methods to reduce the number of spouses they cover:
- Charging employees more to cover spouses who have access to employer-sponsored coverage through their own jobs.
- Charging employees more to cover spouses whether or not they have access to other coverage.
- Choosing not to cover any spouses who have access to their own employer-sponsored coverage.
- Choosing not to offer coverage for any spouses under any circumstances.
Recent survey data reveals a clear trend:
- The 2018 International Foundation Employee Benefits Survey showed that 20.1% of responding health plan sponsors imposed spousal surcharges or exclusions.
- The June 2019 PWC Health and Well-being Touchstone Survey results showed that 38% of survey respondents apply a spousal surcharge if the spouse has access to coverage through another employer. The median surcharge is $100 per month.
- The December 2018 issue of AYCO Compensation & Benefits Digest reported that just over 25% of its survey participants are imposing a spousal surcharge in 2019. The most commonly used surcharge amount is $100 per month.
- The 22nd Annual Willis Towers Watson Best Practices in Health Care Employer Survey shows that 27% of companies used a spousal surcharge in 2017.
At least three factors are driving this spousal carve-outs trend:
- Plan sponsors are looking for new ways to stem the rising tide of health care benefit costs.
- Employees, especially those on single-only coverage, may view spousal surcharges as a more equitable way for an employer to allocate health benefit costs among single and married employees.
- As more plans impose surcharges or exclusions, plans that cover spouses without a surcharge could be at risk for adverse selection.
In an effort to save costs, health plan sponsors are increasingly nudging (or pushing) spouses of employees to obtain coverage somewhere else.
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