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Have employers dropped spouses from employer-sponsored plans because of Obamacare?

Some employers have changed their approach to spousal coverage in recent years, but this is a trend that was in place long before the Affordable Care Act. | Image: Krakenimages.com / stock.adobe.com

Some employers have changed their approach to spousal coverage in recent years, but this is a trend that was in place long before the Affordable Care Act. | Image: Krakenimages.com / stock.adobe.com

Have employers dropped spouses from employer-sponsored plans because of Obamacare?

Q. I have heard that because of Obamacare, employers have been dropping spouses from their plans. Is this true?

A. Obamacare (the Affordable Care Act) 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 2020 Kaiser Family Foundation data, 99% of firms with 200 or more employees offer coverage to employees’ spouses, and 95% of smaller firms also do so. This is largely unchanged since ACA implementation began; in 2014, the first year that ACA-compliant coverage was available, those figures were 99% and 96%, respectively.

But it has become more common in recent years 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: As of 2020, 86% of employers allow spouses to enroll even if they have access to coverage from their own employer, and only 13% of those companies impose a surcharge in that scenario.

These incentives go both ways, however, with some employers encouraging their employees to enroll in their spouse’s plan instead of their own. 2018 Kaiser Family Foundation data indicated that 13% 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. (This was up from 10% in 2016).

Why are employers adding surcharges or incentivizing spouses to enroll in their own employer-sponsored plans? “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.”

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 (enough to make it meet the definition of “affordable”), 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.

But it’s important to understand how premium subsidy amounts vary based on the size of the household and total household income in relation to the premiums for the family members enrolling. Here’s an explanation of how this works. (In short, a spouse enrolling in a plan in the exchange on their own might find that they don’t actually get any premium subsidies, even if total household income is well within the subsidy-eligible range. This is less likely in 2021 and 2022, since the American Rescue Plan has increased premium subsidies and made them more widely available.)

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.


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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M Ritch
M Ritch
1 year ago

I have a brand new employer, my current company was bought by another hospital. My spouse’s insurance says they can only be secondary if I’m eligible through my employer. My thoughts are if there is only one insurance company, you can’t pay as secondary. Is this wrong?

Louise Norris
Louise Norris
1 year ago
Reply to  M Ritch

You’ll need to get the specifics from your spouse’s employer. But it’s possible that they are taking an approach similar to how a small group plan would work if a person is eligible for Medicare but doesn’t enroll in Medicare: https://www.medicareresources.org/medicare-eligibility-and-enrollment/why-you-cant-afford-to-get-medicare-part-b-wrong/ (ie, only covering the portion of the bills that wouldn’t have otherwise been paid by Medicare).
It’s more common to see a spousal surcharge or a simple ineligibility for spousal coverage if you have access to your own plan. So you’ll want to ask them for more details about how they would handle the practical application of this policy.

thomas dill
thomas dill
1 year ago

can an employer restrict spouse to come onto employer plan since the are on medicare

Louise Norris
Louise Norris
1 year ago
Reply to  thomas dill

It depends on the size of the employer. But if the employer has 20+ employees, they have to offer the same coverage to spouses age 65+ that they offer to other spouses (assuming they do offer spousal coverage). See more here in the first link under “I have Medicare and” https://www.medicare.gov/supplements-other-insurance/how-medicare-works-with-other-insurance

Fdanner
Fdanner
11 months ago

My husband’s employer won’t let him add dental insurance without filing Life Change form. We have been married for 13 years and I have always included him on my employee group insurance. T-Mobile won’t let me add him without this jackass stupid life change form

Louise Norris
Editor
11 months ago
Reply to  Fdanner

Just like health insurance, dental insurance can only be added or dropped during an employer’s open enrollment period, unless the person has a qualifying life event. Without a qualifying event, you can’t add dental coverage part-way through the plan year. But he’ll be able to sign up for dental coverage during open enrollment (either for his own employer or yours, depending on where he’ll be getting his coverage).

Tracey
Tracey
6 months ago

My husband has ins. with his job and union which bind me and refuse to let me off that policy its seem I’ll legal can I do something I work for the state and gotten sick went on disability and I have full coverage can some one give me some information on how I can disenroll

Louise Norris
Editor
6 months ago
Reply to  Tracey

You generally cannot disenroll from an employer-sponsored health plan unless you do so during the employer’s open enrollment period or during a special enrollment period triggered by a qualifying life event. The mandatory qualifying life events are very basic (marriage, birth/adoption, or loss of other coverage).
But employers have the *option* to offer special enrollment rights due to other circumstances: https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/midyearelectionchangeshealthinsurance.aspx If your current coverage just recently became available to you, it’s possible that your husband’s employer might offer a special enrollment period right due to that, thus allowing you to disenroll. But again, that’s optional for the employer, and it will depend on the rules they’ve adopted. We recommend that you discuss this in detail with someone in the HR department at your husband’s work, and ask them to provide you with the Summary Plan Description (SPD) that outlines exactly what counts as a qualifying event.

Nancy.Boyland
Nancy.Boyland
3 months ago

Is there a trend for insurance companies to phase out family plans while encouraging single employee plans?

Louise Norris
Editor
3 months ago
Reply to  Nancy.Boyland

This would be the employer’s decision, not the insurance company. But in general, no, that’s not a trend we’re seeing. Family coverage remains very popular with employers and employees (that’s not to say that employers necessarily *pay* for the coverage for family members; some employers require the additional family premiums to be payroll deducted, and this varies from one employer to another).
The ACA requires large employers (50+ workers) to offer health coverage to full-time (30+ hours/week) workers and their dependents, although they are not required to offer spousal coverage (but most employers do anyway).

.Barb T
.Barb T
2 months ago

My son is on his wife’s employer based plan. she has threatened to remove him from the plan. Can she do that at any time?

Louise Norris
Editor
1 month ago
Reply to  .Barb T

No. Employees can only make changes to their coverage (including removing family members) during the employer’s open enrollment period or following a qualifying life event that triggers a special enrollment period.

If they were to get divorced, she would have to remove him from the plan at that point (he might be able to continue his coverage with COBRA or state continuation, depending on the plan). But assuming that’s not the case, the employer will not allow her to remove anyone from her plan outside of open enrollment or a special enrollment period.

Many employers have their open enrollment period in the fall, with a new plan year that starts on January 1. But employers can have plan years that don’t follow the calendar year, so some employers have open enrollment that happens at other times during the year.

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