More employers cutting health benefits for employees’ spouses
More employers are trying to reduce the costs associated with healthcare claims by no longer offering spousal coverage if the non-employee spouse has access to medical benefits through their employer, finds new research from actuarial firm Conrad Siegel.
“We have been doing this survey for 13 years and historically we have lagged emerging national benefits trends,” says consulting actuary Rob Glus, of the regional survey of 110 companies located primarily in central Pennsylvania. “But this year our findings are comparable to national data coming from groups like the Kaiser Family Foundation.”
In 2015, 52% of participants did not offer spousal coverage to spouses of employees eligible for workplace health care coverage, as opposed to only 31% of companies reporting in 2014.
“Employers are getting hit with healthcare cost increases every year,” says Glus. “They have made benefit changes and reduced deductibles, but eventually there comes a point where they don’t always want to impose these cost-cutting measures uniformly across all of their employees.
“The rationale is that to make budget, instead of increasing everyone’s deductible by $500, the employer can simply require that spouses be forced to use the plan offered by their own employers.”
Furthermore, some companies that still offer healthcare benefits to all spouses are openly discouraging them from joining their program by adding spousal surcharges that have jumped from 16% to 27% over the last year for spouses with access to other coverage.
“Let’s assume a company has a $100/month spousal surcharge. That means if the spouse wants to remain on the plan, the employee is going to have to pay, in addition to the spouse’s five percent premium share, an additional monthly charge of $100,” Glus explains.
In addition, 33% of participating companies report that they offer cash compensation to their own employees who waive medical and drug insurance. “Generally employees who opt out are required to certify that they have access to other coverage, but it’s not required by law,” he notes.
The average annual cash compensation paid is $2,083. This taxable payment may be paid in a couple of installments over the year or up front in one lump sum. But if for some reason an employee who opted out needs to come back on to the employer’s plan, the money has to be repaid.
“We have seen some employers with crazy opt-out benefits like 50% of the premium in cases where premiums for the family are $20,000,” says Glus. “But you don’t want to make the opt-out too big because if you knock out a bunch of healthy people from your plan you are not really doing anything for your overall cost structure.”
Survey results also show an increase in consumer-directed plans with 50% of employers offering either an HSA or HRA account. In 2015, 24% of employers offered an HSA to their employees. This increased from 2014, when 20% of employers offered an HSA.
Of employers who offer an HSA, 79% fund at least part of the account, The average employer funding for individuals in an HSA account is approximately $769, and the average funding for families is $1,337. However, this is down from $847 and $1,560 in 2014, respectively.
“Whether deductibles are increased or universal spousal benefits are eliminated or company HSA contributions are reduced, it’s all a symptom of the same problem,” Glus concludes. “Healthcare costs keep on going up and employers are looking for plan design changes that will reduce the impact on their bottom line.”