You might remember reading our May
2012 newsletter on whether or not spousal carve out would be allowed after 2014. At the time, we were unsure how spousal carve
outs would be affected and our debate was centered around two main points: The
PPACA requirement that coverage must be offered to all employees and their
dependents and the fact that legislative intent does not mandate how the final
law is interpreted. Now that we now the PPACA definition of “dependent”
specifically excludes spouses, disallowing or charging extra for spouses who
have access elsewhere is a good way to make sure employers can continue to
offer compensation by way of rich benefits right now.
There are several different options
for employers looking to save benefit dollars by implementing some type of
spousal carve out.
· Spousal surcharge – employees are charged a
fee each pay period when they choose to enroll a spouse that has access to
group coverage from their own employer
· Spousal Exclusion with a monetary limit –
spouses can enroll in coverage only if their own employer sponsored coverage is
more expensive
· Spousal Exclusion – spouses can enroll in
coverage if they are unemployed or they do not have access to group coverage
from their own employer
As you may expect (and have probably
already noticed) more and more employers are choosing to implement one of the
options above. Once an employer decides
which type of spousal carve out will best fit their needs, the next question
becomes “how do we ensure compliance?” Without a full documentation verification
(including a Spousal Affidavit signed by the Spouses Employer AND page one and
two of a redacted Tax Return), studies suggest that only 44% of employees will “tell
the truth” and comply with the new policy.
Client A: Spousal Surcharge
Operational Goal:
To implement new spousal
surcharge as cost saving option in the wake of health care reform.
Business Challenge
As a brand new auto-manufacturing plant, Client
A had a benefit program that was appropriately rich for its industry but
significantly better than the majority of other employers in the region. Client
A wanted to set the stage as a caring and responsible company in the way it
treats its employees without becoming the default insurer for the area.
Implementation:
Client A determined that it would offer
coverage to working spouses with a spousal surcharge. Spouses with access
elsewhere who enroll in Client A’s coverage must pay $46 per pay period, which
served to push spouses toward their own coverage while still offering the
option to be on the client’s plan if the spouse’s employer plan was more
expensive.
Spouses can have coverage without
a surcharge if…
·
they are not employed.
·
they are also employed by Client A
·
they don’t have access to medical benefits
at their employer.
Verification:
ContinuousHealth’s DA2
dependent verification. The audit identifies ineligible dependents as well as
informing on spousal coverage using proprietary software.
A spousal affidavit included in each audit
packet required sign off from the employee, the spouse and the spouse’s employer.
That reduces the likelihood of confusion or fraud, since the spouse’s employer
is answering questions about current coverage rather than the spouse.
ContinuousHealth also suggested requiring the second page of the tax return to generate
more accurate representation of spouse unemployment/employment status.
Results:
As a fully-insured plan, cost savings are
greatest when ineligible dependents resulted in tier changes.
○
21.8%
of those who were in EE+ Spouse tier changed to EE Only
○
14%
of those in EE+ Children changed to EE Only
○
5.3%
of those in Family moved to EE Only
With
those tier changes, Client A saw extended savings of $635,000, in addition to
any increased plan dollars from the spousal surcharge. After the success of the
project, the client decided to integrate the ContinuousHealth software to
verify both dependent eligibility and spousal exclusion in-house. This ensured
HIPAA-compliance and streamlined the enrollment process.
Client B: Spousal Exclusion with Monetary Limit
Operational Goal:
To
implement a spousal exclusion in order to continue to offer an affordable and
rich benefits plan.
Business Challenge:
As a
well-respected leader in the grain industry, Client B is very focused on
providing just business practices, including having a compliant plan, and on
treating employees well.
Implementation:
Client B’s
consultant walked the client through best options and they decided to offer
coverage for working spouses if the employer’s coverage was more expensive than
being on Client B’s plan. This would apply only to traditional major medical coverage,
which also serves to encourage adoption of the new consumer plan.
Spouses can have coverage if…
·
they don’t
have access to major medical at their employer.
· they have
access, but the least expensive single plan offered costs the spouse more than
$190 per month.
·
they are also employed by Client B.
·
they are unemployed.
·
they are
on secondary coverage and are enrolled in their own employer’s coverage with no
contributions to an HSA.
Verification:
ContinuousHealth’s
DA2 dependent verification. The audit identifies ineligible dependents as well as
informing on spousal coverage using proprietary software. A spousal affidavit
included in each audit packet requires the employee, the spouse and the
spouse’s employer’s signature and proprietary technology notes all results.
Results:
The audit
identified 9.2% of dependents on group plan as ineligible for coverage, a first
year savings of $658, 000. That represents 3.8% of Client B’s total annual
budget for health care. Spousal verification identified that 11.3% of spouses
are only eligible for secondary coverage and about 8% are only eligible for
dental and vision, based on the response of the spouses’ employers.
Rather
than burdening Human Resources with the project after the initial verification
ended, Client B decided to continue using ContinuousHealth to verify dependent
eligibility and spousal exclusion. Ongoing costs are minimal compared to an
initial project, and the transition to ongoing was seamless.
Client C: Spousal Exclusion with Employer Premium Percentage Limit
Operational Goal:
To find a third
party solution for current spousal exclusion practices.
Business Challenge:
The Architecture
and Planning company had tried to do a dependent verification last year with a
well-known audit company, but Client C had been displeased
Implementation:
Client C had
a policy in place that offered coverage for working spouses only if the employer
portion of spouse’s premium was low.
Spouses can have coverage
if…
●
they are not employed.
●
they don’t have access to group coverage
at their employer.
● they have access, but the spouse’s
employer’s group plan requires that the spouse contribute more than 50% of
total annual premium.
Verification:
ContinuousHealth’s DA2 dependent
verification. Client C was interested in feedback about ContinuousHealth’s
responsiveness and educate/assist approach, something it had not found in the
last firm. The process would identify ineligible dependents while streamlining
the current working spouse verification. A spousal affidavit included in each
audit packet requires the employee, the spouse and the spouse’s employer’s sign
off.
Results:
The audit identified 7.70% of dependents on the
group plan as ineligible for coverage. Despite the recent verification with the
other audit company, 4.4% of the dependents were self-identified as ineligible
once the plan requirements were outlined to them with the offer of amnesty.
Employees opted out 8.4% of the spouses on the plan after reviewing the spousal
carve out requirement, even though these were known requirements that had been
in effect for over one year.
After
the success of the project, Client C decided to continue using ContinuousHealth
to verify both dependent eligibility and spousal exclusion on an ongoing basis.
If you’re working to implement a working
spouse policy for one of your clients, let us know if we can help. We would
love to talk through the options with you and help you serve your client
through that transition.
Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.
Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.
