Navigating the Issues of Working Spouse Surcharge

A spousal surcharge is an extra fee employers charge employees whose spouses have alternative insurance but choose to join their partner’s plan instead. This charge applies when an employer’s spouse has a job that offers them group health insurance but declines and joins their partner’s coverage. Let’s break it down.

Mr Moore is an employee at Smart Automobiles but his wife Mrs Moore works with Tom & Tom Maternity. Mrs Moore rejects her company’s medical insurance and instead joins her husband’s insurance group plan, covered by Smart Automobiles.

Now Mr Moore has to pay a working spouse surcharge, an additional fee for having his wife on his employer’s group plan. The spousal surcharge method is a reliable option to help both businesses and families save costs on medical insurance.

Is Spousal Surcharge Tax-deductible?

Yes, the working spouse surcharge is a pre-tax deduction. About 95% of large companies in the United States offer spouse health coverage, but premiums differ significantly across firms. Employees of the same company may pay different premiums, depending on their respective situations.

From an organizational perspective, the working spouse surcharge helps employers control costs and keep premiums in check. With shared costs, the spousal surcharge keeps the impact of health insurance minimal and balanced between employers and staff. It subsidizes healthcare costs for employees and saves companies thousands of dollars each passing year.

What are the Conditions for Working Spouse Coverage?

Conditions for a spousal surcharge vary across companies but here are common rules:

·        The spouse is employed, not self-employed

·        The spouse’s company has a medical insurance group plan

·        The spouse is eligible for coverage under their company’s medical plan

·        The spouse has declined their company’s insurance coverage

·        The spouse opts in for their partner’s company group plan

Is Working Spouse Surcharge Legal?

Spousal surcharge is permitted by law. The Affordable Care Act (ACA) requires employers to provide medical coverage for staff, with a regulated surcharge, provided they have at least 50 full-time staff. The most common models are the 80:20 and 70:30 ratios, where employers pay the larger percentage of monthly premiums.

However, most employees frown at the pre-tax deduction and often request surcharge waivers or try to avoid it altogether. Surcharge irregularities are common in large companies. And it causes companies to spend more than necessary on their health coverage plans.

How to Minimize Company Health Insurance Costs

The following strategies are necessary for detecting wrongly waived surcharges and keeping health insurance affordable.

·        Contract an Independent Auditing Firm

Proper auditing is the key to a successful spousal surcharge system. Thanks to auditing, large companies in the United States recouped an average of $1200 per employee in 2019! Employers could use the service of reputable auditing companies for best results.

An auditing firm will track registered spouses and conduct adequate background checks to verify their eligibility. They will also trace deduction errors, wrongly waived surcharges and related irregularities.

·        Adopt Alternative Packages to Spousal Surcharge

Employers who cannot cover employee spouses can adopt alternative approaches. These include encouraging employees to have their spouses registered on other health insurance plans. A common method is to pay employees whose spouses are not on the plan a set amount each year as compensation.

Companies can equally work with risk advisors to create suitable packages to lower costs. However, it is important to keep alternative approaches compliant with the Affordable Care Act (ACA) rules.