Spousal Carve Out and Waiver

Many medical plans are implementing either spousal carve out or spousal surcharge plans in an attempt to control health plan costs. There are some design considerations that should be reviewed before putting one of these into your health plan. Some considerations are:

• Which type of program to implement: spousal carve out v. spousal surcharge.
• There is no ERISA requirement to provide spouse or dependent coverage but there might be applicable state law requiring you to offer these individuals coverage.
• State laws may have applicable marital discrimination laws.
• A spousal surcharge could affect the plan’s grandfathered status. A reduction of more than five percent in employer contributions in any coverage tier will result in a loss of grandfathered status.
• What constitutes other coverage? Does a limited medical plan offered by another employer (with very limited benefits available) count as other coverage requiring the spouse to enroll in that plan?
• Are you going to offer someone a chance to enroll if the spouse’s plan exceeds a certain cost and what is that cost?
• Can the spouse also enroll in your plan as a secondary coverage?
• How are you going to police compliance? What are you willing to do if someone is untruthful?
• Are your contributions going to allow you to pass the non-discrimination testing?
• If your form of policing requires another employer to complete the spouse’s information, this may cause HIPAA privacy issues. May want to consider including an approval for the release of HIPAA information to be signed by the employee and spouse.
• If you implement a spousal surcharge, can the spouse enroll in their plan (does their enrollment period match your enrollment)? Also, an increase in premium does not always allow a HIPAA special enrollment.
• If you implement a spousal carve out, this would not be considered a qualifying life event to allow the spouse onto their plan. If the spouse then enrolls in COBRA make sure that your carrier and stop loss vendor (as applicable) will cover the spouse under COBRA.
• If not, the spouse may be without coverage until such time they can enroll in their own plan.
• Be sure to update plan documents to clearly define spousal eligibility, especially where state insurance laws conflict with the plan provisions.

For additional information, please see spousal carve out and surcharges. If you need assistance in setting up one of these plan design alternatives and appropriate forms, documentation, etc., please contact your Horton representative.