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Will Your Plan Cover Spouses? Decisions Under PPACA

Posted in Plan Administration, Welfare Plans

I happened upon two interesting articles today about spousal coverage under employer sponsored benefit plans.  The first was an article about UPS eliminating spousal coverage and blaming PPACA.  The second was a study conducted by the Employee Benefits research Institute that concluded that, on average, spouses cost more to insure than employees, but elimination of spousal coverage may not save money in the long run.  Without opining on whether or not the elimination of spousal coverage makes financial sense, there is an issue here about how to eliminate spouses from eligibility under a health plan which bears some consideration.   

Generally, PPACA defines affordable coverage based on the single “employee only” rate.  Employers are required to offer dependent coverage, but that requirement excludes an obligation to offer coverage for a spouse.  So, like UPS, an employer can eliminate coverage for souses, keep coverage for children and still satisfy PPACA’s requirements.  But UPS did not eliminate all spouses from eligibility, only those with coverage available from their own employer.  So if the decision is made to eliminate spousal coverage that is not necessarily the end of the process.

Will the coverage be offered to spouses who don’t have other options or will all spouses be excluded?  What are the definitions of dependent in the plan?  Do you offer family coverage and not “single plus children” or “single plus spouse’?  It comes down to the ongoing requirement to make your PPACA compliance plan meet the ERISA requirements.  Remember that eligibility is dictated by plan terms and if your plan does not define terms like “spouse,” “dependent” and “family,” you could be creating a problem with ERISA by having conflicting interpretations of those terms.  Then, assuming your definitions are complete, you have to make sure the eligibility rules you outlined not only use those definitions but also clearly explain the eligibility requirements.  In the case of UPS, what does it mean to have “other available coverage”? 

If you decide to offer coverage to spouses who don’t have other coverage, how will you verify eligibility?  What are your rules for confirming eligibility?  How are these rules communicated?  There are no absolute answers to these questions and employers have a variety of options for plan administration if they decided to go this route.  But they have to think these things through in advance.  Never lose sight of the fact that when an employer provides health insurance to employees, it is a plan sponsor under ERISA.  Make sure that if you decide to restrict spousal coverage because of PPACA, you follow ERISA rules in the process.