Surcharges added for those who can get other insurance
First comes love. Then comes marriage. Then comes spousal surcharges for health insurance? More U.S. workers will be paying them in 2018 as employers shift more costs to them — or to their spouses’ employers. Let’s look at how and why the fees for spousal coverage grow.
How surcharges typically work: Workers pay $80 to $400 a month more for health coverage if their working spouse takes their insurance and declines their own. About 8% to 10% of companies levy working-spouse surcharges, benefit consultants say. That’s likely to increase slightly next year, estimates Rich Ostuw, a senior consultant at Towers Perrin. Surcharges are “something a lot more employers are interested in,” agrees Tom Billet of consultant Watson Wyatt.
As health care costs soar, large employers see surcharges as a way to avoid being “dumped on by other employers,” especially smaller ones, who aren’t offering good insurance, says Ken Sperling of benefits firm Hewitt Associates.
Companies that have added working-spouse surcharges some years include Clorox and Gannett, which owns USA TODAY and other media outlets. Clorox’s is $180; Gannett’s is $230 a month. Surcharges don’t apply to other dependents, including children, or to spouses or domestic partners who don’t have other coverage.
Savings can be significant. Some year ago, utility company Florida Power & Light added spousal surcharges starting at $50 a month. As a result, 370 of 4,070 spouses dropped FPL’s coverage and 900 pay the surcharge. That, among other changes, helped FPL keep 2010 premiums to an 8% increase, says Andrew Scibelli, manager of health promotion for FPL.
The hit to employees can hurt, though. Vicki Nisonger-Maack, 46, a medical assistant for Seattle-based Group Health Cooperative, faces proposed increases for health coverage, including a possible $200 a month surcharge for her husband. He has coverage through his own employer but is on her plan. “My raise would do nothing,” she says, as she adds up proposed increases vs. her proposed raise. Her union and Group Health are amid contract negotiations.
Spousal surcharges aren’t new. Procter & Gamble and Wal-Mart are among companies that have had them for years. Verizon added a $50-a-month surcharge a decade go for 78,000 Northeast and Mid-Atlantic union workers. The policy has some exceptions.
A recent survey by the Kaiser Family Foundation says 12% of U.S. employers vary what they pay for family coverage if an employee’s spouse is eligible for benefits elsewhere. An additional 11% were “very” or “somewhat” likely to do so this year and next.
A 2013 Hewitt survey of 640 large companies said 7% required working spouses to enroll in their employer’s health insurance program and 32% were considering doing so. The survey also found 8% required employees to pay more if a working spouse declined their own coverage; 27% considered doing so in the future.
Expect more working-spouse restrictions from small companies still providing coverage, too, says William Dunkelberg, chief economist for the National Federation of Independent Business. Plus, “There’s going to be more pressure on the wage side because the benefit side is so expensive,” he says.
Tom Will, vice president of benefits firm Aon Consulting, says employers will be more mindful to assure their benefits aren’t so generous they encourage working spouses to stick with them.
Surcharges aren’t without hassle, and that limits their popularity, benefit consultants say. Companies have to rely on employees to honestly report their spouse’s employment status, and frequent changes add to administrative headaches.