The Cost of Spousal Health Coverage

Rising premiums and the reform law have created a stir of activity in regard to employment-based health insurance.  One issue which some employers have considered for years is whether to provide spousal or dependent coverage, especially to spouses who also work and have coverage available at their work place.  For a couple, it can be cheaper for one to be a dependent on the other’s coverage as opposed to each being enrolled at their own workplace.  The Employee Benefits Research Institute examines the issue.  (EBRI Article)   In 2012 about 7% of employers did not provide spousal coverage when other coverage was available to the spouse and another 8% of employers over 1000 people said they were planning to eliminate coverage in these circumstances.  About 4% of employers currently don’t provide spousal coverage at all.  UPS, a very large employer, recently decided to eliminate spousal coverage when the spouse can enroll in other coverage and that may help accelerate the trend.  The reform law and most state laws do not and cannot require that an employer offer coverage for spouses or other dependents.  The reform law’s employer mandate applies only to workers.  If all employers in essence forced each spouse to get coverage at their workplace, there would be a significant re-ordering of source of insurance, which might result in winners and losers.

Using a commercial claims database, the authors looked at the health spending for over 315,000 couples.  In 2011, spousal spending was about $6,609 a year, around $1,180 more than for the enrollee.  Because spouses are more likely to be female some of the difference is due to gender and there may be age and health status differences.  Adjusting for these and other factors reduces the difference to only $404.  How many of these spouses work is unclear and whether there is a difference between those who work and those who don’t is unclear, but the authors estimate that non-working spouses do cost more than working ones, but there still is a higher cost for a working spouse than the enrolled person.  The net effect of eliminating coverage for working spouses who have access to coverage, however, might be that the costs for the non-working spouse who remain would be higher than the current average costs across all spouses, raising expected spending per person.  If an employer picks up a number of workers on its plan who previously were getting spousal coverage, that could also raise their costs, since most companies pay more of the total premium for a worker than for a spouse or other dependents.  It is apparent that eliminating spousal coverage will not automatically save money for any particular company, but it appears on current trends that many employers are going to be grappling with the issue.