In a futile attempt to save money on health care costs, 20% of employers have adopted a spousal surcharge. A spousal surcharge is a nicer way to say: “Get your working spouse off our plan and other their employer’s plan – we’re sick of paying for them!” It is meant to discourage couples from selecting one employers insurance plan over the other. The average spousal surcharge is about $100 per month.
On Wednesday, UPS decided to take things a step further and completely stop offering insurance to spouses who had other coverage available to them. Since it’s UPS and they are a well known name, it was featured in an article in the New York Times. About 8% of companies in the US follow this practice of not allowing the spouse to enroll if they have other coverage.
First of all, I know that there are some cost benefits for companies to doing this and I do predict that it will become more prevalent as a way for companies to try to lower some of their cost to avoid the Cadillac Tax in 2018. However, for those individuals who have children, I can almost guarantee that parents will start double covering their children because there is no penalty for that and I wonder how much that will drive costs back up. I also wonder the amount of lost work time that occurs while families try to figure out who is covered under what insurance – I have single employees who can’t even remember their own insurance plan.
So before you make decisions like this, try to determine the actual financial impact of this and whether the savings are significant enough to offset the bad PR and employee sense of security as well as any potential increased cost in picking up more dependents and lost productivity associated with confusion about coverage. And I also imagine that somewhere down the line, someone will come up with a lawsuit challenging this or a proposal to change ACA so that coverage has to be offered to employees and families.
