OBAMACARE: Companies forced to discontinue spouses from coverage
Feb. 22, 2013, 9:20 a.m. EST
By Jen Wieczner
“The question about whether it’s obligatory to cover the family of the employee is being thought through more than ever before,” says Helen Darling, president of the National Business Group on Health.
By discontinuing health care coverage to spouses, employers save the annual $3,000 premiums, and the new fees that went into effect as part of the Affordable Care Act. In 2014, companies have to pay $65 “per life” covered on their plans. Health law guidelines already mandate coverage of employees’ dependent children (up to age 26), but husbands and wives are optional.
While surcharges for spousal coverage are more common, last year, 6% of large employers excluded spouses, up from 5% in 2010, as did 4% of huge companies with at least 20,000 employees, twice as many as in 2010, according to human resources firm Mercer. These “working spouse provisions,” generally prohibit only people who could get coverage through their own job from enrolling in their spouse’s plan.
Such exclusions barely existed three years ago, but experts expect an increasing number of employers to adopt them: “That’s the next step,” Darling says. HMS, a company that audits plans for employers, estimates that nearly a third of companies might have such policies now.
When employers drop spouses, they often lose more than just the one individual, when couples choose instead to seek coverage together under the other partner’s employer. Terre Haute, which pays $6 million annually to insure nearly 1,200 people including employees and their family members, received more than 20 new plan members when a local university, bank and county government stopped insuring spouses, according to Bennett. “We have a great plan, so they want to be on ours. All we’re trying to do is level the playing field here,” he says.
While couples generally prefer to be on the same health plan, companies often find that spouses are more expensive to insure than their own employees. That’s because, say benefits experts, covered spouses tend to be women, who as a group not only spend more on health care. Indeed, JetBlue’s covered spouses cost 50% more than crewmembers themselves, according to the airline’s online Q&A about its health plan.
About a fifth of companies had policies to discourage spouses from joining their health plan in 2012, according to Mercer, though most charged extra to cover spouses who could get insurance elsewhere, rather than deny coverage entirely. Indeed, large firms including generics maker Teva and supply chain manager Intermec have spousal surcharges costing $100 a month, or $1,200 annually, while Xerox charges $1,000 for the year.
Experts say more firms are likely to drop spouses, whether they work or not, because of the new federal health-care exchanges that open in 2014, providing an alternative for spouses. “When there’s a place for people to go, employers won’t feel as pressured to cover the spouse,” says Joan Smyth, an employee benefits consultant with Mercer.
Firms that recently decided to drop spouses from their plans range from private insurance agencies to school systems and universities like Ball State, as well as large companies like pump and valve manufacturer Flowserve. Wisconsin-based furniture company KI carved out spouses this year when couples flocked to its plan for the first time during open enrollment. “Now, each employer is responsible for its own employee,” says Timothy Van Severen, corporate risk manager for KI, which insures about 1,700 employees in its health plan. “We were going to see a higher claim cost if we didn’t do that, because of the migration coming back to us.”
Some companies have been forced to reduce health care cost for their employees by making spousal coverage more expensive through higher surcharges. The share of employers who allow spouses in their plan but don’t pay for any part of it rose from zero to 3% this year, according to human resources consulting firm Towers Watson. Northrop Grumman, the large security firm, will cover spouses who can get insurance through their own employers, but only if they first enroll in their own plan, and use Northrop’s as secondary coverage.
The separation of spouses into different health plans can be frustrating for families. Greg Fischer, a vice president in the employer solutions division at HMS, says demand has increased for the company’s dependent audits, which have revealed that 3% of spouses are ineligible for the health plans, either because of plan rules or divorce and legal marriage issues. The news can be confusing and complicated to couples when one partner needs to pay more for coverage or accept lesser benefits. “I think that’s where the pain point comes in for the employee—that their spouse may have to be covered under a different plan, or their benefits might be reduced,” Fischer says.
For their part, employers say they try to educate employees on their options well in advance of the change, and health plans or insurance brokers sometimes step in to guide people through the transition and help them find doctors in their new network. In announcing its spousal carve-out, Ball State University, for one, warned employees well ahead of the Obamacare start date. The university employee benefits staff worked with spouses and their employers to guide them through the transition onto their own plan, and have even allowed some spouses with “uncooperative” companies to stay on “until the conflict is resolved,” says Joan Todd, a spokeswoman for the university. “We want to be very careful that no spouse would lose coverage before they can be placed on their own employer’s plan.”