Excluding Dependents With Other Coverage

[Christine Roberts]

An insured group health plan wants to exclude dependent spouses if they are eligible for coverage under their own employers' plans. Dependent children can be covered regardless of other plans. Alternatively, allow all dependent spouses to participate but impose a higher charge on spouses who have alternative coverage available. Excluding any discrimination issues based on marital or family status, is this a problem? I am aware of the case law against "escape clauses" applicble in the coordination of benefits ("COB") area and am wondering if the concept extends from the participant to beneficiary level.

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[Guest Charlie Stevens]

I have seen a number of employers adopt this arrangement. It is not illegal. There have been cases in which this practice has been alleged to discriminate based on marital status and most courts have found that they do not. The most difficult aspect of this arrangement is how to police it. It looks better on the drawing board than in its actual execution.

[Christine Roberts]

How about if this is done through a cafeteria plan; i.e. employees who forgo group health coverage because they have group coverage through a spouse's job receive less than 100% of the available cash benefit (but receive the amount if it is all allocated towards nontax benefits). See my post on the Cafeteria plan board.