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Employers scaling back family coverage

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in Compensation and Benefits,Human Resources

Health coverage for employees’ spouses and dependents is on the chopping block as employers seek to rein in health care costs and avoid the Affordable Care Act “Cadillac tax” on high-value insurance plans set to take effect in 2018.

A new survey by the HR consulting firm Towers Watson found that over the next three years, more employers will make significant changes in how they subsidize health care coverage for their employees’ family members.

Results from the 2014 Towers Watson Health Care Changes Ahead Survey show that by 2017, 63% of employers will add surcharges or exclude working spouses from coverage if they can obtain health coverage from their own employers.

“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.”

He said many of the firms surveyed plan to raise the share of premiums employees pay for family coverage or add family-coverage surcharges.

However, a small percentage of employers plan to exclude 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 have already begun to take.

The survey showed 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 of about $100 per month or more when other coverage was available to the spouse. For some employees, surcharges increased the cost of spouse coverage by more than $2,000 a year.
  • 2% of employers surveyed offered no subsidy at all for spouse coverage.

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