For many small businesses, employee retention efforts include offering comprehensive health insurance benefits. However, rising health costs have caused some businesses to cut certain aspects of their health-related coverage, including spousal benefits.
While the decision to remove spousal coverage may be understandable given the high costs associated with insuring a spouse, companies that fail to offer spousal benefits risk alienating workers who place a high value on these benefits.
Why Do Businesses Drop Spousal Coverage?
It’s no secret that health costs continue to rise. In an attempt to keep costs from spiraling out of control, some companies have stopped offering spousal benefits—with cost as a primary motivating factor.
According to a 2014 study conducted by the Employee Benefit Research Institute, spousal benefits tend to come at a high price. On average, businesses that offer spousal coverage spend $1,179 more per year on an insured spouse versus an employee. In 23 percent of cases, this cost difference is due to the costs associated with female spouses, including pregnancy and childbirth.
As a result, a growing number of companies either reduce or eliminate their spousal coverage. Human resources consulting firm Towers Watson estimates that more than half of employers will “significantly” cut their contributions to spousal coverage by 2018. In 2013, UPS became one of the largest employers in the country to do away with spousal coverage entirely.
Cutting Spousal Benefits Could Cost Businesses Down the Road
Eliminating spousal coverage might save businesses money in the short term, but depriving employees of these benefits could end up costing businesses over time—particularly in the area of employee retention.
This is because research also shows that a significant number of employees consider spousal benefits crucial to their employment decisions. According to the MetLife 14th Annual U.S. Employee Benefit Trends Study, 89 percent of employees count health insurance among their must-have benefits.
How the Small Business HRA Can Help
As businesses maintain the delicate balancing act between giving employees the coverage they want and keeping costs in check, they can take advantage of health benefits options that let them hire and keep the best workers.
The Small Business Health Reimbursement Arrangement (HRA) allows employees to use funds to buy family coverage that covers spouses. It also lets businesses rein in costs without cutting benefits, making it an important employee retention tool for small businesses that find themselves vying for talent in an increasingly competitive marketplace.
Companies both large and small have stopped offering spousal benefits in recent years. By offering alternatives like the Small Business HRA, businesses can keep providing important benefits to families while controlling their own costs.
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