Cutting Spousal Coverage Could Have Unexpected Consequences: EBRI

Companies trying to save money on health costs by requiring working spouses to get health insurance through their own employer may find the move has some unexpected consequences, according to a recent report from the Employee Benefit Research Institute (EBRI).

While the Patient Protection and Affordable Care Act (ACA) requires that employers with 50 or more workers provide health coverage to workers and dependent children until they reach age 26, the ACA does not require employers to provide health coverage to spouses.

As of 2012, 7 percent of employers did not cover spouses when other coverage was available to them and 4 percent of employers with 1,000 or more employees reported not providing such spousal coverage. As of late 2012–early 2013, another 8 percent of large employers were reporting that they planned to exclude spouses from coverage when other coverage was available, according to EBRI.

Unexpected consequences. However, the EBRI report also notes that as some employers adopt new rules to exclude spouses with health coverage through their own jobs, they may find that they will, in turn, inherit new participants, as other employers adopt the same rules.

“While ‘first-mover’ firms may save money in the short run by eliminating working spouses from their plan, they may in time gain the responsibility for covering employees who were previously covered as a spouse under another plan, now left without that coverage by other employers implementing the same strategy of eliminating access to health coverage for their workers’ spouses,” explained Paul Fronstin, director of EBRI’s Health Research and Education Program. “Ultimately, savings over the long term will depend upon each firm’s composition of couples and their respective employment statuses.”

The EBRI study suggests that the working spouses being sorted by primary insurance coverage likely have lower spending than non-working spouses, and that employers with net reductions in covered spouses may therefore witness a worsening in average risk, resulting in higher spending than expected.

EBRI found that in 2011, primary health insurance policyholders spent an average of $5,430 on health care services, compared with $6,609 for spouses. Employers subsidize employee-only coverage more than they subsidize family coverage. As a result, employers pay $4,095 toward the cost of spousal coverage, and $4,453 per worker. Were the employer to experience a situation where a new employee joined the plan for each spouse that dropped off the plan, instead of paying $4,095 per spouse, they would pay $4,453 per worker that joined the plan.

The full report, The Cost of Spousal Health Coverage, was published in the January EBRI Notes. For more information, visit http://www.ebri.org.

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