In 2013, UPS announced that it would no longer offer coverage to employees’ spouses who had the option to get health coverage through their own job on its company health plan; 15,000 or so spouses were dropped from the plan. With annual premiums for employer-sponsored health coverage reaching $17,545 this year (up 4% from last year), this type of cost-saving move may become much more common.
Called a spousal carve-out, prohibiting employees’ spouses with other coverage options from being on a plan represents a huge savings for a company. Surcharges are another way a company can control costs – charging a fee to employees whose spouses want to be part of the company plan. (Carve-outs and surcharges are usually only applied to working spouses who have coverage available to them through their own employers, and neither affects an employee’s dependent children.)
If a spousal coverage restriction is something you’ve been thinking about as a way to contain or reduce your health insurance costs, answer these questions first to see if it makes sense for your company:
- On average, how much does the company pay for an employee’s spouse?
- What are your state’s regulations for carve-outs, surcharges, and coverage splits? There may be contribution requirements for spouse coverage or carve-outs may not be allowed.
- If your group plan is compliant under the ACA because of a grandfathered status, could changing your spousal coverage cause you to lose it? To retain that status you can’t reduce the percentage you contribute by more than 5% – would imposing a spousal surcharge reduce your contribution below that?
While either approach could save you money, there are a couple downsides. First, implementing and keeping track of spouses’ eligibility is time-consuming and sometimes requires legal counsel to ensure there’s no violation of state or local laws. More importantly, putting restrictions on spouses doesn’t do much for employee morale.
A Better Alternative to Restricting Spousal Coverage
There are alternatives to spousal carve-outs and surcharges that save your company money – and accommodate the needs of employees and their spouses. One of these alternatives is taking advantage of all the individual health insurance market now has to offer.
The individual market puts health insurance choices and decisions in the hands of the employee. Plus when an employer transitions from its group plan to the individual market with help from Gravie, it can easily give employees additional compensation to buy coverage. This amount can be given based on whether or not the employee has a spouse or children. Because health insurance plans are typically less expensive in the individual market, what a company chooses to compensate can be less than what they’re currently paying for in their group plan (while allowing employees to choose less expensive coverage that's a better fit for them).
But it’s not just about the money. The employer also rids itself of the administrative burden so commonly associated with traditional group plans; no more open enrollment meetings, worrying about endless rate increases, or answering employees’ sometimes-personal questions about health insurance. Gravie takes care of it all. Employees benefit because they get to select the plan that best fits the needs of their families, and they'll probably save money, too.
Every employer wondering how they can maintain or reduce health insurance costs should know about Gravie. We’ll be glad to demonstrate how it could work for your company and employees – just call us at 844.540.8701, fill out our employer contact form, or tweet us @gogravie.