Here Comes the Bride ... There Go the Spousal Health Benefits
Forcing spouses onto their own employer’s plan creates challenges for families as they cope with the logistics and coverage differences.
Spousal health benefits have traditionally been considered a de facto package deal for workers, but recent employer wavering on this customary commitment might result in unintended consequences, one analysis shows.
By this year, 45 percent of employers planned to either levy a spousal surcharge or exclude those with access through their own employer, compared with 24 percent in 2013, according to a Towers Watson & Co.-National Business Group on Health survey involving 583 employers. Spouses (working and nonworking) do spend more on medical services, $6,102 compared with $5,698 for workers who are policyholders, according to the analysis of 2011 data by the nonprofit Employee Benefit Research Institute.
But employers also typically subsidize worker coverage at higher rates, 82 percent for employees vs. 71 percent for family coverage, according to Kaiser Family Foundation data cited in the analysis. “For every spouse you lose, and employee you gain, you end up losing more because you subsidize employee coverage more than you subsidize spousal coverage,” said Paul Fronstin, a report author and the EBRI’s director of health research.
Fronstin said he embarked upon this analysis, in part, because of the media coverage last year surrounding UPS Inc.’s decision to stop insuring working spouses of nonunion employees with other insurance options. In its analysis, the EBRI adjusted for some variables like age, gender and health status, but didn’t have any data regarding which spouses were working.
'I would be surprised if the subset of employers who are in the war for talent do this kind of stuff to the same degree.'
—Ian Morrison, a consultant and author
Such spousal changes, which follow on the heels of reductions in retiree health benefits, represent “the next frontier” for employers seeking to hold down health costs, said Ian Morrison, a consultant and author who specializes in long-term health forecasting.
This “benefits buy-down,” as Morrison calls it, predates the Affordable Care Act, he said. Forcing spouses onto their own employer’s plan, though, creates challenges for families as they cope with the logistics and coverage differences of two health plans. Increasing the family’s costs through a spousal surcharge “is still basically cutting compensation,” he said. “But it is a little bit less disruptive.”
“I would be surprised if the subset of employers who are in the war for talent do this kind of stuff to the same degree,” Morrison said.
Market competitiveness is one of the factors for employers to consider as they run their own cost analysis, Fronstin said. Another consideration is the composition of their currently insured mix: Are they mostly covering employees already? Also, to what degree do spouses subsidize their health care?
While some employers might follow UPS’ lead, Helen Darling, the outgoing president and CEO of the National Business Group on Health, believes they’ll be more inclined to exert influence indirectly by boosting costs for spouses through increased contributions or surcharges. “If you charge them enough, then they are going to make another choice anyway,” Darling said.
Very large employers with 5,000 or more workers are more likely to levy a surcharge, with 15 percent going that route and 3 percent opting to exclude spouses, according to a 2013 Mercer survey involving 2,842 employers. Those with 500-plus employees were more evenly split on their approach; 9 percent chose the surcharge and 7 percent the spousal exclusion.
But what about spouses who are not working, self-employed or for some other reason don’t have insurance access? Under the Affordable Care Act, employers with 50 or more full-time workers are required to cover children until age 26, but not their spouses.
Employers offering health insurance for the first time might decide not to extend the option to spouses, said Tracy Watts, Mercer’s national health care reform leader. “You are not kicking anybody off the plan — you didn’t have a plan before.” But, she added, “I think it would be challenging to take coverage away from people that you are providing it to today.”
Morrison is less convinced, saying that the health exchanges and potential subsidies provided through the Affordable Care Act open the door to some employers cutting workers’ spouses loose.
“I think that this is going to be very fluid,” he said. “And it’s going to take a while to shake out. A lot will depend on how functional the public and private exchanges are three to five years from now.”