As healthcare costs continue to rise, many large employers are reevaluating their group health plan offerings. A common cost-saving strategy is to exclude spousal coverage. But does this decision expose employers to penalties under the Affordable Care Act (ACA)? Let’s break down what the 2025 ACA employer shared responsibility rules say about spousal coverage, and how FSAs, HRAs, and HSAs fit into the compliance picture.
ACA Employer Shared Responsibility: The Basics
Under the ACA, Applicable Large Employers (ALEs)—those with 50 or more full-time employees—must offer minimum essential coverage to at least 95% of their full-time employees and their dependents to avoid penalties
- Dependents are defined as biological and adopted children under age 26.
- Spouses are not considered dependents under ACA rules, so employers are not required to offer coverage to spouses to avoid penalties.
Spousal Coverage and ACA Penalties
If an employer excludes spouses from its health plan:
- No penalty applies, even if the spouse obtains subsidized coverage through the Exchange.
- Penalties are only triggered if a full-time employee receives a premium tax credit due to the employer failing to offer affordable, minimum-value coverage.
2025 ACA Penalty Amounts
- 4980H(a) Penalty: $2,900 per full-time employee (minus the first 30), if coverage is not offered to 95% of full-time employees and their dependents.
- 4980H(b) Penalty: $4,350 per full-time employee who receives subsidized Exchange coverage because the offered coverage was unaffordable or did not meet minimum value.
How FSAs, HRAs, and HSAs Impact ACA Compliance
While FSAs (Flexible Spending Accounts), HRAs (Health Reimbursement Arrangements), and HSAs (Health Savings Accounts) are not substitutes for minimum essential coverage, they can play a supporting role in ACA compliance:
1. FSAs (Flexible Spending Accounts)
- FSAs are employee-funded accounts used for out-of-pocket medical expenses.
- They do not count as minimum essential coverage but can help reduce employees’ healthcare costs.
- Employers offering limited-purpose FSAs alongside HDHPs (High Deductible Health Plans) must ensure the HDHP meets ACA affordability and minimum value standards.
2. HRAs (Health Reimbursement Arrangements)
- ICHRA (Individual Coverage HRA) can be used by employers to reimburse employees for individual market premiums.
- If structured properly, an ICHRA can satisfy ACA employer mandate requirements, provided the reimbursement amount is sufficient to make individual coverage affordable.
3. HSAs (Health Savings Accounts)
- HSAs are paired with HDHPs and are employee-owned.
- While HSAs themselves don’t satisfy ACA requirements, the HDHP must meet minimum value and affordability standards.
- Employer contributions to HSAs can help reduce the net cost of coverage, improving affordability calculations.
Excluding spouses from your group health plan does not violate ACA rules and will not result in employer shared responsibility penalties, even if those spouses seek subsidized coverage elsewhere. However, employers must ensure that full-time employees and their dependent children are offered affordable, minimum-value coverage.
FSAs, HRAs, and HSAs can enhance your benefits strategy and support ACA compliance, but they must be used in conjunction with a compliant health plan—not as a replacement.
Source: Thomson Reuters