What Is Spousal Language in Health Insurance Coverage?

Blog, Employee Benefits, Group Insurance, Individual Insurance, Uncategorized

Pink highlighted text with the word "Spouse" defining what that word means in terms of a person who is married

Spousal language in health insurance coverage refers to restrictions on coverage for an employee’s spouse. These restrictions are designed to control healthcare costs. Spousal Language will typically come into play where an employer either will not cover a spouse, or the employer will charge a surcharge. This is for employees that have coverage available through their employer.

For example, you are married and work full-time for a large employer that offers healthcare insurance. What are employers in this situation required to cover? Under the current law, large employers are not required to offer health insurance benefits to spouses of full-time workers.  Under the law, they do not have to pay any type of penalty for refusing to offer coverage to their spouse.

Small businesses are not required to offer health insurance benefits to part-time or full-time employees or their dependents.  In fact, they are not even subject to a tax penalty for failing to offer them.

However, today most employers, large or small, do typically offer some sort of plan for health insurance benefits.  They may not include your spouse, but here are a few ways that businesses can approach offering health insurance solutions that work for you and your spouse.

Spousal Language Terms:

a woman's hand with a ring on her finger

Navigating spousal language is key to understanding the options you have for health insurance benefits for your spouse.  It is also important to understand your plan offered by your employer. Here are some basics.

What is Spousal Carve-Out?

A spousal carve-out makes spouses ineligible for an employer’s group health plan if they are eligible for coverage through their own employer. This can help employers control healthcare costs.

Another way to limit spousal eligibility is a spousal surcharge. Employees typically aren’t subject to the surcharge if their spouse doesn’t work or isn’t eligible for health insurance through their own employer.

Employers can choose to offer medical insurance benefits only to employees and their dependent children, not to employees’ spouses. This rule must apply consistently.

Specifics of spousal carve-out policies can vary widely. Some employers might completely exclude spouses from their plans if they have access to other coverage, while others might still allow spouses to join the plan but require them to pay a higher premium.

How Does the Working Spouse Rule Work?

The Working Spouse Rule states that a spouse must enroll in their employer’s health plan. The rule applies if the spouse works for an employer who offers a health plan, and the employer pays at least 50% of the total premium for single coverage.

A spousal surcharge is an extra fee that employers charge employees whose spouses have alternative insurance but choose to join their partner’s plan. The surcharge is used to help control employer costs. To avoid the surcharge, the spouse can enroll in their employer’s medical plan.

Paper cut outs of a family with spouse crossed out in red indicating not having health insurance coverage through other spouse.Why Do Employers Limit Spousal Coverage for Health Insurance?

When you look at the cost to employers for offering health insurance benefits it is easy to see why employers are looking for options to offset cost increases in health insurance plans.  Despite rising costs, most employers are not planning to increase their employee’s cost of coverage.

Among large employers (those with 500 or more employees) responding to the survey, employees will be required to pick up 22 percent of total health plan premium costs, on average, in 2023 through paycheck deductions, unchanged from 2022 and 2021. – SHRM

However, to try and curb the cost of offering health insurance benefits to employees a common option is to require a surcharge for spousal coverage.  That cost could be implemented per paycheck and is typically $50 to $100

What is a Spousal Surcharge?

A spousal surcharge typically refers to an additional fee or cost that is imposed on an employee’s health insurance coverage. Assuming their spouse is eligible for health insurance through their own employer but chooses to be covered under the employee’s health insurance plan instead.

This surcharge is intended to encourage individuals to enroll their spouses in their own employer-provided health plans when available. The goal is to reduce the employer’s healthcare costs. Spousal surcharges are a way for employers to manage their healthcare expenses and promote cost-effective coverage options.

To avoid paying the surcharge, a working spouse could enroll in their own employer’s medical plan.  Or if it makes sense, they can shop on the marketplace for personal health insurance. Depending on the plan and the options, both could be great choices.

How Can AUI Help?

Our team at of health insurance brokers is here to help you as an individual navigating the health insurance market. Or as a business owner trying to figure out the best way to offer coverage to employees.  There are so many options available and determining if spousal coverage should be addressed is part of it.  We can help.  The most important thing is to find options that work for everyone involved.  We know as employers, the last thing we want to do is make our benefits package less than desirable.  We also know that in many cases, it is helpful to have a team like AUI to help your family find a solution when your spouse is not included in your benefit options at work.  Contact us today to start the conversation.  We are here for you.

We do more than cover small businesses and individuals with the right insurance policies and benefit plans – what motivates our team is helping you save more so you can invest more in your team, family, and goals.

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