Spouses Cost More for Employers to Cover

This is from Paul Fronstin, Ph.D., EBRI, and M. Christopher Roebuck, Ph.D., RxEconomics:

• As of 2012, 7 percent of employers did not cover spouses when other coverage was available to them and 4 percent of employers with 1,000 or more employees reported not providing such spousal coverage. As of late 2012–early 2013, another 8 percent of large employers were reporting that they planned to exclude spouses from coverage when other coverage was available. 

• A recent decision by United Parcel Service to eliminate health benefits for spouses who were eligible for coverage through their own employer may be a tipping point in employment-based health benefits, in part due to provisions in the Patient Protection and Affordable Care Act (PPACA). 

• This study documents that spouses, on average, cost more to cover than otherwise comparable policyholders. This, in conjunction with the latitude offered by PPACA, makes spousal coverage a target for employers seeking ways to lower their health care expenditures. However, this analysis finds that working and non-working spouses are likely quite different in their use of health services. Therefore, the strategy of not covering spouses who are employed may have unintended consequences for employers. 

... In 2011, policyholders spent an average of $5,430 on health care services [for employees], compared with $6,609 for spouses. Because spouses in an employment-based health plan are more likely to be female than male (twice as likely in this study), a key question is how much of the $1,179 difference is due to gender.  This analysis estimates that the marginal effect of being a spouse on annual total healthcare costs declines by $268, which means gender explains about 23 percent of the difference.  Next, it includes age and overall health status in the model and finds the spouse effect on total healthcare costs further declines to $392.  Finally, controlling for region and plan type only slightly increases the estimate, to $404.

Because spouses still have health care costs that are roughly 7 percent higher than policyholders for reasons other than gender, age, and general health status, the source of this variation remains a question. A key limitation of this study is that it does not have information on the employment status and other health insurance eligibility of spouses. As a result, it cannot directly determine if the remaining differences in health services spending are attributable to employment status. ...