Public employers continue to face increasing pressure to balance rising health care costs with fair and equitable benefits for employees and their families. One area gaining national attention is spousal risk, or the financial impact of covering spouses on employer-sponsored health plans.
Why Spousal Coverage Costs More
Utilization data consistently shows that spouses cost more to cover on the health plan than employees. Spouses often drive significantly higher medical and pharmacy utilization, due in part to age differences and because they may not be subject to employer wellness initiatives or pre-employment health requirements.
M3’s historic data aligns with these trends:
- A spouse typically costs 25% more than an employee.
- Dependents cost roughly one-third of the employee’s cost.
- In some public-sector groups, spousal costs can be double the cost per employee.
The underlying reason is simple:
Employees must be healthy enough to work. Spouses are not tied to the employer’s health or wellness standards and spouses with high medical costs may be more likely to enroll in the employee’s plan, especially when alternative coverage is more expensive.
UHC’s 2024 analysis reinforces this trend, noting that spouses have higher inpatient hospital admission rates and increased prevalence of chronic conditions compared to employees. ²
Know Your Population
Without clear population insights, employers risk implementing changes that add cost and frustration without improving plan sustainability. Understanding your unique spouse demographics is the next essential step.
Nationally, UHC data shows that 60% of spouses have access to other employer-sponsored coverage.² For public-sector employers, this is a critical metric because it helps determine whether strategies like spousal surcharges or tiered contributions will meaningfully influence enrollment behavior.
However, population nuances matter. For example:
- If many spouses in your district or municipality are self-employed, or work in industries like agriculture or small business, they may have no affordable alternative coverage options.
- In these cases, a surcharge may do little to shift enrollment and may instead be perceived as punitive.
A data-driven analysis helps ensure your approach is both effective and equitable.
Designing a Fair and Sustainable Strategy
If your data supports action, public employers often consider these primary strategies:
1. Spousal Surcharge
This is an added fee when a spouse has access to other group coverage but chooses to remain on the employee’s plan.
A commonly used benchmark is setting the surcharge at 130% of the marketplace cost of a single plan, which helps offset the higher expected utilization associated with spouses.¹
However, M3’s Population Health and Data Analytics team notes based on decades of data, in most cases the greater financial impact comes when the spouse enrolls elsewhere not when they remain on the plan and pay the surcharge.
2. Tiered Contribution Structure
Increasingly, public employers are adopting contribution structures where employees covering spouses pay a higher share, often through:
- A separate “employee + spouse” tier
- Higher premium contributions for family or spouse-inclusive tiers
This approach is often viewed as more equitable because contributions are tied more closely to actual cost.
3. Benefits in Exchange for Waiving Medical Coverage
Employers may offer employees additional taxable compensation in exchange for waiving coverage under the group health plan. These arrangements are also known as opt-out arrangements. There are several ways to offer health insurance opt-out incentives, and it is important to understand the compliance considerations that accompany each alternative.
Key takeaways:
Spousal risk management is not about restricting benefits, it’s about ensuring long-term sustainability while maintaining fairness and access.
Public employers should:
- Analyze cost drivers to understand how spouses impact the plan
- Evaluate spouse demographics and access to other coverage
- Model financial impact of surcharges, contribution tiers, or alternative designs
- Align strategies with workforce realities rather than national averages
With the right data and thoughtful plan design, public entities can make informed decisions that support both fiscal responsibility and employee well-being.
How to start the Conversation:
Reach out to your M3 team to understand which spouses have alternative coverage, clarify spouse-related cost and risk drivers, and model financial and enrollment impacts to determine whether plan design changes could strengthen your program.
Sources
- UnitedHealthcare – Understanding Spousal Utilization: Data Insights for Employers
https://www.uhc.com/agents-brokers/employer-sponsored-plans/news-strategies/spousal-utilization - SHRM – Carving Out Spousal Benefits May Cut Costs, but Could Bring Repercussions
https://www.shrm.org/topics-tools/news/benefits-compensation/carving-spousal-benefits-cost-cutting-repercussions