Q. I have heard that because of Obamacare, employers have been dropping spouses from their plans. Is this true?
A. Obamacare increased the options employees’ spouses have for obtaining health insurance, and the law does not require employers to offer coverage to spouses. Some employers have changed their approach to spousal coverage in recent years, but this is a trend that was in place long before the ACA.
And the vast majority of organizations that offer health insurance continue to offer coverage for spouses. According to 2016 Kaiser Family Foundation data, 99 percent of firms with 200 or more employees offer coverage to employees’ spouses. And even among smaller firms that offer coverage, 89 percent offer spousal coverage.
But it is becoming increasingly common for employers to restrict spousal coverage to spouses who don’t have access to their own employer-sponsored plan, or to add a surcharge to their premiums if they have access to their own employer-sponsored plan but choose to be added to a spouse’s plan instead. It should be noted, however, that the majority of employers are not yet restricting spousal coverage or adding surcharges for spouses who have access to their own employer-sponsored plan. Towers Watson reported that 27 percent of employers were using surcharges in 2015.
Why are employers adding surcharges? “The fact is that spouses cost more — about $1,500 more” than employees, explains Tracy Watts, who leads the health care reform team at Mercer, a benefits consulting firm. Often, the spouses covered on employer plans are either wives who are younger and using maternity coverage, or husbands who are older and suffering from chronic conditions.
The concept of steering spouses towards their own employer-sponsored plans (via surcharges or restricted access to coverage for spouses who have their own plan available) predates the ACA. Julie Stone, a consultant with Towers Watson, told NPR back in 2013 that this is hardly a new idea: “A decade ago a number of employers were looking at spouse surcharges for employee spouses who declined coverage with their employer.” Stone went on to explain that “the surcharge and the concept of a penalty for spouses who choose to opt out of their own employer coverage — that’s not related to the health care reform law at all.”
These incentives go both ways, however, with some employers encouraging their employees to enroll in their spouse’s plan instead of their own. Kaiser Family Foundation data indicates that 10 percent of employers who offer coverage provide “additional compensation” for their employees if they enroll on a spouse’s plan instead of enrolling in the plan offered by their own employer.
What other options do spouses have?
The ACA (Obamacare) requires employers with 50 or more employees to offer affordable health insurance to their full-time employees, and to extend the coverage offer to those employees’ dependent children, up to age 26. But it does not require employers to offer coverage to spouses, and it does not require employers to pay for any portion of the coverage offered to dependents.
This is where the family glitch comes into play in some circumstances, when the employer pays for a portion of the employee’s premium, but does not cover any of the premiums for family members who are added to the plan; those family members still do not have access to subsidies in the exchange, due to the family glitch.
When employers opt to not offer coverage to spouses, and assuming the spouse does not have access to their own employer-sponsored plan, individual market coverage is available, regardless of pre-existing conditions. If the spouse enrolls in a plan through the exchange, subsidies are available based on the total household income, as the family glitch does not apply if the spouse is ineligible for coverage under the employer-sponsored plan.
People who have access to their own employer-sponsored plan will want to consider enrolling in their own plan instead of being added to their spouse’s plan, especially if the spouse’s plan has a surcharge for spouses who decline their own employer’s plan.
Will this change under the Trump Administration?
The future of the ACA is very uncertain (see more in our blog). The employer mandate is likely to be eliminated in the coming years, but as noted above, spousal coverage was never required under the ACA. Employers who offer spousal coverage do so in an effort to provide top-notch benefits packages to attract and retain the best workers, and that didn’t change under the ACA.
The surcharges for spouses who decline their own employer-sponsored plan and enroll in a spouse’s plan are not likely to be impacted by the impending changes to the ACA. Employers will probably continue to encourage workers’ spouses to enroll in their own employer-sponsored plans if available. But the majority of employers (especially large employers) will also likely continue to offer spousal coverage, particularly for spouses who don’t have access to their own employer-sponsored plans.