Cutting coverage for employees' spouses may not save money in the long run, analysis finds

Employers may not save any money in the long run as they cut health costs by eliminating coverage for the spouses of their employees, according to a new analysis from the Economic Benefit Research Institute, a non-partisan economic think tank.

It generally costs more to subsidize health insurance for spouses than for employees, which makes cutting that coverage an attractive option. But their own employees—the expensive spouses on someone else's plan—will return as other employers exclude spouses from coverage, too.

"This goes on the assumption that all employers move in this direction," said study author Paul Fronstin, director of EBRI's Health Research and Education Program. "If you as an employer want to do this, and your employees all have coverage with you, then yes, you're going to come out ahead (by eliminating spousal coverage). But if you don't cover a lot of your employees and other employers make the same move, the employees you don't cover will wind up back on your plan."

The study found that in 2011, primary health insurance plan holders spent $5,430 on average on healthcare services compared with $6,609 for spouses. Employers spent more toward subsidizing employee-only coverage, paying on average $4,453 per worker, than they spent subsidizing spouses, which averaged $4,095.

If the number of employees who joined a plan was the same as the number of spouses dropped from coverage, then an employer would end up paying more, Fronstin explained.

"For each spouse that moves off your plan, you may get an employee that moves back on to your plan." Fronstin said. "On a one-to-one basis, if that's the case, then you have to look at how much of the cost of coverage are you subsidizing for spouses versus employees. Each employer is going to be different, but on average it seems like employers will be worse off."

While the number of employers moving to cut spousal benefits remains small, more are expected to follow the lead of large employers such as UPS, which last year announced it was dropping coverage for spouses able to obtain insurance through their own employers.

In 2013, about 4% of more than 500 large employers reported having policies that excluded spouses if they had access to similar coverage through their employer, according to a survey conducted by consulting firm Towers Watson. In that survey, 8% of employers said they plan to implement similar measures in 2014.

While the Patient Protection and Affordable Care Act requires employers with 50 or more workers to provide health coverage to employees and their children up to the age of 26, no such protection exists that would require employers to cover spouses.

Follow Steven Ross Johnson on Twitter: @MHSjohnson