Posts

Employers Cutting Health Benefits for Spouses

Unpopular Opinion Alert!

This isn’t really news, but it is mentioned in this post. The reality is that this may make financial sense for the employer, and surprisingly for the employee as well.

Why?

a. The spouse can cost more than the employee depending on the specific plan. The math of money may be better for the employee’s family, if the spouse finds his/her own individual insurance. This is especially true if the spouse is eligible for Medicare.

b. People may wrongly conclude that employer-provided health insurance is always using pre-tax dollars. That is not always the case: the employer saves on payroll taxes for the amount it contributes, and the MOST that the employee can save is the “income tax rate” that he/she ultimately pays. The bottom line is that the employee is simply deferring taxes, or has an effective “discount.”

SO, it comes to a “math of money” question.

a. What good is it if the price is 35% higher, and your tax rate is 15%?

b. The PPACA makes it impossible for carriers to exclude you based on health information.

c. You will qualify for a life qualifying event if an employer cancels your eligibility during a period that is NOT the Open Enrollment Period (which keeps moving).

The landscape has changed because costs are higher, there are tax incentives at small employers that use SHOP, and the PPACA has eliminated the worry of a spouse being refused coverage by a carrier. When you add these together, the only conclusion we can draw is that it makes sense to check it out yourself.