What Is a Spousal Surcharge For Health Insurance

Certain employers contemplate implementing spousal surcharges on health insurance to mitigate escalating healthcare expenses.

However, due to its unpopularity among employees, many companies debate the wisdom of adopting this practice.

Explore what a spousal surcharge entails and whether it can effectively control your health insurance premiums, considering other relevant factors.

Spousal Surcharge in health insurance
Spousal Surcharge In Health Insurance: Photo Source (Healthline)

What is a Spousal Surcharge for Health Insurance?

Many employers cover 70-80% of employee health insurance premiums, leaving employees responsible for the rest.

A spousal surcharge is an extra fee if an employee’s spouse has alternative healthcare coverage but chooses the employee’s plan.

Research shows 25% of employers use spousal surcharges, with 9% planning to implement them soon.

Is a Spousal Surcharge Legal?

Though sometimes questioned by employees, spousal coverage surcharges are legal, but employers must remain in compliance.

It’s best to consult with a professional risk advisor or legal counsel to structure a benefits package that contains proper language and treats all employees fairly.

Pros and Cons of Spousal Surcharges

Spousal surcharges are used by employers to limit healthcare costs by dissuading spouses with other insurance options from joining the employee’s plan.

The surcharge aims to balance the costs and maintain plan affordability, qualifying as a pre-tax deduction for the affected spouse.

However, the savings from these surcharges are limited, and they could hinder recruitment and retention efforts, potentially outweighing the savings due to the high cost of hiring new employees.

Alternatives to Spousal Insurance Surcharges

When advising business owners on lowering health insurance costs, options like spousal surcharges or higher deductibles are considered.

Some companies compensate employees who opt out of coverage, although ACA compliance is crucial.

Encouraging behavioral changes among employees, like quitting smoking and losing weight through wellness programs, is highly effective.

One company reduced their health plan loss ratio significantly using these strategies.

Are Spousal Surcharges Right for Your Company?

Before adopting spousal surcharges as part of your benefits package, consider the implications.

Have a thoughtful discussion with your insurance broker about how the practice could impact your workforce.

Work with a trusted and strategic risk advisor who can conduct a thorough review to make sure your plan design remains in compliance with all state and federal regulations while still providing value to your employees.

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