Human Resources News & Insights

Employers pumping the brakes on dependent health coverage

To either help you decide how to adjust your benefit offerings this open enrollment season or justify some of the decisions you’ve already made, here’s a look at what other employers are doing with dependent health coverage. 

With healthcare costs continuing to climb into 2015, employers are scaling back how much they’re willing to pay for dependent coverage — particularly spousal coverage.

In fact, about one-fifth (22%) of employers said they have already reduced the amount of money they’re willing to contribute toward dependent coverage. And a whopping 50% plan to do so over the next five years.

On top of that 10% of employers said they’ve already eliminated coverage for spouses and domestic partners who have access to other health insurance, with 49% planning to do the same in the next five years.

Those figures came from the 2014 Aon Hewitt Health Care Survey of 1,234 employers.

At this point, it’s worth mentioning that the healthcare reform law does not require employers — even large employers subject to the employer mandate — to provide coverage for employees’ spouses or dependents.

The law also says that in cases where employers do decide to offer such coverage, it does not have to meet reform’s affordability requirements.

Under the law, just employee-only coverage is subject to the affordability rules.

Unitized pricing

The Aon survey also revealed that more companies may be considering adopting a “unitized” approach to health insurance.

Under a typical unitized plan, an employee’s premiums would be based on the number of people he or she chose to cover.

For example, an employee with five children would pay more than an employee with two children — as opposed to both employees having access to the same family plan and paying the same premiums.

Dropping spouses: A double-edged sword?

While dropping spouses from your plan may seem like a good way to reduce insurance costs, a recent analysis titled The Cost of Spousal Health Coverage by the Employee Benefit Research Institute (EBRI) found it could be a practice that comes back to bite you.

EBRI said that as an increasing number of employer-sponsored plans begin excluding spouses who are offered coverage through their own employers, many of those plans will wind up with new employee enrollees because those employees’ spouses work at organizations that have adopted similar policies.

EBRI then surmised that could cause spending to escalate quicker than if employers had just continued insuring spouses.

The reasoning: Employers generally pay more for employee-only coverage than they do for family coverage. So trading a spouse to cover another employee wouldn’t be an even swap.

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