Most employers to keep health benefits for workers but some may drop spouses

Originally posted June 9, 2014 by Jerry Geisel on

Most employers will continue to offer health care coverage to their employees, but some will eliminate coverage for employees' spouses, according to a survey released Monday.

Just 6% of employers surveyed by Willis Group Holdings P.L.C survey say they will not comply with a Patient Protection and Affordable Care Act mandate that requires employers with at least 50 employees to offer coverage to their full-time employees or be hit with a stiff financial penalty. Sixty-two percent said they will comply with the mandate, and 32% said they were undecided.

That requirement goes into effect in 2015 for larger employers and in 2016 for smaller firms.

“The results of the survey underscore that organizations recognize the value of offering competitive medical benefits to employees and, despite concerns over health care reform, appear poised to continue to offer employer-sponsored health plans as part of a total rewards package,” said Jay Kirschbaum, St. Louis-based practice leader of the Willis human capital practice's national legal and research group, in a statement.

On the other hand, 12% of employers already have added a special surcharge or eliminated coverage to employees' spouses if the spouse is eligible for coverage from his or her own employers, while 3% plan to take such action between 2015 and 2018, and 20% will likely do so but haven't set a date yet.

The motivation behind such action is financial. Employers can reap significant financial savings when employees' spouses are not covered or are required to pay premium surcharges when they are eligible for coverage through their own employers but don't take it.

For example, the average premium in 2013 for employee-only coverage was $5,884, according to the Kaiser Family Foundation in Washington. Adding a spouse easily will double that premium, experts say.

Other findings

The health care reform law also gives employers a further incentive to pare their health plan enrollment numbers.

In 2014, employers have to pay a $63 reinsurance fee that is imposed for every health care plan participant, while a $44 per participant fee will be assessed in 2016. The amount of the fee in 2017 — the last year such fees will be imposed — has not been set yet by federal regulators. Revenue generated by the transitional reinsurance program fee will be used to partially reimburse insurers for covering high-cost individuals through health exchanges.

The survey also found that just 37% of respondents have calculated the cost of the reform law on their health care plans.

That relatively low percentage “demonstrates that for many organizations, determining an accurate assessment of these figures is still a challenge,” the survey said.,

Among respondents that have calculated the cost impact, 54% said the law would boost costs between 0% and 5%, while 22% put the increase in the 5% to 10% range.

The survey is based on the responses of 1,033 employers, including 36% with between 100 and 499 employees and 26% with less than 100 employees.

Will Your Plan Cover Spouses?

Originally posted by Keith R. McMurdy on

I happened upon two interesting articles today about spousal coverage under employer sponsored benefit plans.  The first was an article about UPS eliminating spousal coverage and blaming PPACA.  The second was a study conducted by the Employee Benefits research Institute that concluded that, on average, spouses cost more to insure than employees, but elimination of spousal coverage may not save money in the long run.  Without opining on whether or not the elimination of spousal coverage makes financial sense, there is an issue here about how to eliminate spouses from eligibility under a health plan which bears some consideration.

Generally, PPACA defines affordable coverage based on the single "employee only" rate.  Employers are required to offer dependent coverage, but that requirement excludes an obligation to offer coverage for a spouse.  So, like UPS, an employer can eliminate coverage for souses, keep coverage for children and still satisfy PPACA's requirements.  But UPS did not eliminate all spouses from eligibility, only those with coverage available from their own employer.  So if the decision is made to eliminate spousal coverage that is not necessarily the end of the process.

Will the coverage be offered to spouses who don't have other options or will all spouses be excluded?  What are the definitions of dependent in the plan?  Do you offer family coverage and not "single plus children" or "single plus spouse'?  It comes down to the ongoing requirement to make your PPACA compliance plan meet the ERISA requirements.  Remember that eligibility is dictated by plan terms and if your plan does not define terms like "spouse," "dependent" and "family," you could be creating a problem with ERISA by having conflicting interpretations of those terms.  Then, assuming your definitions are complete, you have to make sure the eligibility rules you outlined not only use those definitions but also clearly explain the eligibility requirements.  In the case of UPS, what does it mean to have "other available coverage"?

If you decide to offer coverage to spouses who don't have other coverage, how will you verify eligibility?  What are your rules for confirming eligibility?  How are these rules communicated?  There are no absolute answers to these questions and employers have a variety of options for plan administration if they decided to go this route.  But they have to think these things through in advance.  Never lose sight of the fact that when an employer provides health insurance to employees, it is a plan sponsor under ERISA.  Make sure that if you decide to restrict spousal coverage because of PPACA, you follow ERISA rules in the process.

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