What a spousal surcharge is
A spousal surcharge is an extra amount an employer charges an employee to cover a spouse on the workplace health plan when that spouse could get coverage through their own employer. It is added on top of the usual cost of the spouse tier. Some employers go further and do not allow the spouse on the plan at all in those cases, which is sometimes called a spousal exclusion or carve-out.
Not every employer does this, and the rules vary by employer, plan and location. This article is general information, not insurance, legal or financial advice.
Why employers do it
Employers generally explain these policies in terms of cost. If a spouse has access to coverage elsewhere, the employer may prefer that the other employer carry that risk. Covering spouses is a significant part of plan spending, and surcharges are one tool employers use to manage it. The aim is often to encourage people who have a good alternative to use it, not to penalize anyone arbitrarily. Whether this is fair or effective is a matter of debate, and it can feel like a burden to families.
Common designs
- A flat monthly surcharge. A fixed dollar amount is added to the employee’s contribution when a spouse is covered despite having other coverage available.
- Eligibility-based rules. The spouse is only eligible if they have no access to employer coverage elsewhere.
- A minimum-quality test. The surcharge may apply only if the spouse’s employer plan meets some standard, such as a certain share of costs paid by the employer.
- No restriction. Many employers simply charge the regular spouse rate and do not ask about other coverage.
Some employers require an attestation, which is a statement you sign, on whether your spouse has other coverage available. Others ask for proof. Providing inaccurate information could have consequences, such as being billed retroactively, so answer carefully and ask questions if the form is unclear.
A hypothetical comparison
All figures are invented to show the arithmetic.
Suppose a spouse’s tier adds $400 per month to your cost on your employer’s plan, and there is a $100 monthly surcharge because your spouse could use their own employer’s coverage. Your extra cost would be $500 per month, or $6,000 across a year.
Now suppose your spouse’s own employer plan would charge your spouse $150 per month. On premiums alone, $150 per month is $1,800 per year, which is $4,200 less. But premiums are not the whole story. The two plans could have different deductibles, provider networks, covered services and out-of-pocket costs. A plan with a lower premium may cost more once care is used.
What to compare
Before deciding where a spouse should be covered, consider:
- Total premium cost under each option, including any surcharge.
- Deductibles and the out-of-pocket maximum. Combined household costs matter, and a family deductible may work differently depending on whether everyone is on one plan or split between two.
- Provider networks. If your spouse sees a particular doctor, check whether that doctor is in-network under each plan.
- Prescription drugs. Formularies, the list of covered drugs and their costs, can differ.
- Plan quality and stability. Employers can change benefits each year.
- Coordination of benefits. If a person is covered on two plans, the plans have rules about which pays first, and the second may pay some of what the first did not. Having two plans does not always mean all costs are covered.
Timing
Changes to coverage usually happen at open enrollment or after one of the qualifying life events, such as a spouse gaining or losing other coverage. If a spouse’s job changes, ask your benefits team about deadlines, since they can be short. A spouse who loses other coverage may qualify for a special enrollment opportunity, but time limits apply.
Questions to ask
- Is there a spousal surcharge or restriction, and exactly when does it apply?
- What counts as other coverage available?
- Is documentation required, and how often?
- Can the surcharge change at renewal?
Your plan documents and benefits team have the definitive answers, and a tax or financial professional can help with questions about how the choices affect your household.