Can Employers Refuse to Cover Spouses?

The Affordable Care Act (“ACA”) requires employers to cover dependents (meaning children) until they turn 26 years old, or pay a penalty. 42 U.S.C.A. § 300gg-14. However, the ACA does not require employers to cover spouses.

In response to the ACA, some companies, including UPS, have decided to stop covering working spouses if they have access to coverage at their own jobs. Other employers offer incentives to get spouses off their plans. They may charge workers extra if a covered spouse has access to other insurance, or they may pay bonuses when spouses are not on the company policy. Reports that most companies are dropping health coverage for spouses to cut costs associated with the ACA are somewhat hyperbolic. Surveys show that only a minority of companies have implemented a spousal exclusion.

Under the ACA, an employer can choose to offer medical insurance benefits only to employees and their dependent children, not to employees’ spouses, but it must apply the rules consistently. An employer cannot discriminate by extending coverage to some employees’ family members but not to others. If employers introduce a spousal exclusion, the employer must ensure that benefits plan decisions are nondiscriminatory, keeping in mind the adverse impact on protected groups and any unintentional discrimination that may result from those decisions. Like retirement benefits, health insurance benefits must be provided without regard to the race, color, sex, national origin, or religion of the insured.

Employers should beware that a spousal exclusion may be tricky to apply in a non-discriminatory fashion. Excluding spouses may impact protected classes more than non-protected classes. For example, a spousal carve out may impact an employers’ male employees more than an employers’ female employees, which could form the basis of a sex discrimination suit. Thus, employers implementing a spousal ban may be risking a possible lawsuit for a small amount of savings. Further, employers should be cautious about adding a spousal exclusion, as family coverage is a valued employee benefit, and employers may lose top-notch talent if they stop offering spousal coverage.