As health care costs continue to rise there has been an increasing number of employers considering the implementation of a spousal carve-out or spousal surcharge as a strategy to reduce costs. In its simplest form, an employer will either impose a surcharge for a spouse’s coverage, or make that spouse ineligible for the plan when the spouse is eligible for their own employer-sponsored coverage.
The impact on costs will vary obviously from employer to employer. For example, fully-insured plans may see little or no rate reduction from the insurance carrier depending on the size of the group, and how the group’s claims experience is factored into the final rate calculation. In contrast, self-funded plans tend to experience a more direct benefit since removal of a spouse from the plan means that the employer will no longer be liable for claims incurred by that individual. Before implementing this strategy, employers should carefully consider a number of design and compliance issues.