Employers Scaling Back Health Coverage for Spouses and Dependents
To better control rising health care costs and minimize the risk of triggering the Patient Protection and Affordable Care Act’s excise tax, over the next three years, a growing number of employers will make significant changes in how they subsidize health care coverage for their employees’ spouses and dependents. This is according to survey data from global professional services company Towers Watson (NYSE, NASDAQ: TW).
Results from the 2014 Towers Watson Health Care Changes Ahead Survey, show that by 2017, 63% of employers will add surcharges or exclude spouses from coverage when employer-sponsored health coverage is available elsewhere.
“Health care coverage for spouses and dependents is a charged topic,” said Randall Abbott, a senior consultant for Towers Watson. “Historically, virtually all large employers have offered and subsidized it, but it’s expensive. As employers seek to manage their expenditures, a growing number are rethinking their willingness to cover a working spouse who has a health benefit option elsewhere. The emphasis has been on increasing employee contributions or introducing surcharges, with a small percentage of employers actually excluding working spouses from coverage altogether.”
Results from an earlier survey, the 19th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, provide more insight into the specific actions employers are already taking. The survey shows that in 2014:
- 49% of employers increased employee contributions for spouse and dependent coverage at a faster rate than for individual employee coverage.
- 24% implemented spouse coverage surcharges in 2014 of about $100 per month or more when other coverage was available to the spouse. These surcharges increased the cost of spouse coverage for employees by $1,200 a year, on average, and at the high end, by more than $2,000 a year.
- 2% offered no subsidy at all for spouse coverage.
“These subsidy changes and surcharge levies are just some of the many changes employers continue to make to control costs,” said Abbott. “The overall goal is to manage costs and derive greater value for each dollar spent while also improving worker health, quality of care and health outcomes. The challenge for employers is that there is no single solution; rather, they must look across all program dimensions.”
ABOUT THE SURVEYS
The 2014 Towers Watson Health Care Changes Ahead Survey offers insights into the focus and timing of U.S. employers’ plans and perspectives related to their health benefits, and their efforts to better manage costs and employee engagement, as well as their planned responses to the business risks associated with the 2018 excise tax. The survey was completed during July 2014 by 379 employee benefit professionals from midsize to large companies across a variety of industries and reflects respondents’ 2014 – 2017 health care benefit decisions. The responding companies comprise a broad range of industries and business sizes, and collectively employ 8.7 million employees.
The 19th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care tracks employers’ strategies and practices, and the results of their efforts to provide and manage health benefits for their workforce. This report identifies the actions of high-performing companies, as well as current trends in the health care benefit programs of U.S. employers with at least 1,000 employees. The survey was completed by 595 employers between November 2013 and January 2014. Respondents collectively employ 11.3 million full-time employees, have 7.8 million employees enrolled in their health care programs and represent all major industry sectors.
ABOUT TOWERS WATSON
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 15,000 associates around the world, the company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Learn more at towerswatson.com.
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