Understanding Spousal and Family Health Insurance Coverage and Exclusions

family health insurance coverageOne benefit health plans offer participants is the ability to include spousal health insurance coverage in the package. This is particularly beneficial for spouses who don’t have access to affordable health care at his or her employer — or are currently unemployed.

With the cost of health insurance rising each year, however, some companies have started adding exclusions to employee health coverage that limits just how much care a spouse can have access to, particularly when that spouse has health insurance options at his or her own employer. The changes could have a major impact on how much families will have to pay for their coverage in the near future.

The Basics of Spousal Health Insurance Coverage

Spousal health insurance coverage is an option many families take advantage of to save money. Couples often take advantage of the option to jump on their spouse’s health insurance plans, which may save the family hundreds, or even thousands each year. Adding a spouse to a health insurance plan is usually pretty simple.

If the employee recently had a health plan made available, then he or she can add their spouse at the time of enrollment. Also, if the employee had a qualifying event, such as recently getting married, there is usually a 60-day window to sign the new spouse up for coverage.

In ordinary circumstances, policyholders may have their spouse added to the coverage during open enrollment, which is held for a one-month period, typically sometime in the fall.

After spouses have been added, the policy typically transitions from an individual plan to a family health insurance coverage plan (if children had not already been added to coverage at an earlier date). Beyond this transition, and the higher cost associated with covering an extra person, all other elements of the plan will remain the same.

2014 Changes to Spousal and Family Health Insurance Plans

The Health Care Reform Act, which passed in 2010, has resulted in a number of changes to the health care industry. One major change that families may not be aware of is that, starting in 2014, workers will have the opportunity to choose between their employer’s health insurance coverage and one provided by their state’s health insurance exchanges.

A health insurance exchange is an insurance marketplace where American consumers will be able to compare policy options, then select one that is best suited for them. This option was created to lower costs while providing consumers with a wider variety of affordable insurance options. While exchanges will likely be the primary option for individuals who are self-employed or don’t have access to insurance through their employers, they will also be available to employees with coverage options from their employers.

It’s good to note that companies can be fined as much as $3,000 for each employee who chooses to go with an exchange, especially if that employee receives a subsidy to pay for coverage through the federal government. On the other hand, if an employee chooses to go with a spouse’s plan after 2014, the employee’s company won’t be penalized. However, some say companies that must bear the brunt of insurance costs thanks to spouses choosing to go the family health insurance coverage route, rather than sticking with their own employer’s plan, may punish their employees by hiking premiums considerably — or opting for spousal exclusions.

What You Need to Know about Spousal Exclusions

One way that employers have chosen to avoid the high cost of accepting their employee’s spouses on their family health insurance plansis to implement spousal exclusions. By adding “working spouse” provisions to their health care plans, companies are able to limit access to their coverage when an employee’s spouse works for another company that already offers its own health insurance options.

According to a story published by the Society for Human Resource Management (SHRM), spousal exclusions typically take three forms:

  1. Employee’s working spouse may be required to pay a premium surcharge for coverage through the employer’s plan, if the spouse’s employer offers health insurance.
  2. Employee’s working spouse may be required to purchase coverage through their own employer’s plan before also purchasing it through their spouse’s employer’s plan.
  3. The employer may decide to outright exclude the employee’s spouse from coverage, if a similar coverage plan is available through the spouse’s employer.

It appears that the third option is actually uncommon with only 3 percent of companies opting to not cover spouses at all, according to the SHRM. So while being completely rejected for coverage is unlikely, the employee and spouse could face higher costs that essentially defeat the purpose of joining together on one plan. There’s no doubt that spouses will have a lot to consider in the coming years as they decide whether to join one or the other’s health insurance plans, go with a health insurance exchange, or simply stick to their own plans.

A thorough examination of plan types (e.g. HMOs, PPOs, and POSs), costs and possible spousal exclusions will be necessary to determine how families are able to benefit most from this important decision.