UPS Cites Obamacare in Ending Spouse Health Coverage
The United Parcel Service company announced recently that it will no longer offer health care to the spouses of employees who have the option to get coverage through their own job.
The change, to be effective Jan. 1, is expected to affect about 15,000 employees. Employees whose spouses don’t work or aren’t offered insurance through their job will not be affected, nor will members of the Teamsters union.
The company indicated that a hike in expenses due to the implementation of the Affordable Care Act was part of the motive behind its action. Analysts expect that other companies could take similar paths.
“Since the Affordable Care Act requires employers to provide affordable coverage, we believe your spouse should be covered by their own employer — just as UPS has a responsibility to offer coverage to you, our employee,” UPS said in a company memo, according to Bloomberg News. “Limiting plan eligibility is one way to manage ongoing health care costs.”
When the bulk of the ACA, or Obamacare, is implemented next year, it is expected to provide insurance to as many as 33 million people who don’t currently have coverage.
Weed Out Coverage
The 2010 health care reform is certainly expected to have dramatic and maybe unpredictable effects on the insurance market. However, UPS’s move could be seen as a response to rising costs that might have happened with or without the overhaul.
“There a trend that’s been going on for years that’s little noticed where employers are trying to weed out double coverage,” says Alden J. Bianchi, practice group leader of Employee Benefits & Executive Compensation Practice at Mintz Levin. “Many employers will offer employees a bonus to opt onto their spouse’s plan.”
The company actually did not go as far as it could have, he points out, because it still offers health care to spouses who don’t have another way to get it. “If you look at the proposed regulations and employer responsibility rules, it says you can satisfy those rules by making an offer to the participant and their dependents,” Bianchi says. “They are streamlining the process in the aggregate. Spouses are getting coverage, but they are getting coverage from their own employer.”
Obamacare is expected to raise business expenses by 2 to 4 percent, although a provision that mandates that all companies with more than 50 employees offer insurance or face a penalty has been delayed until 2015.
A recent study found that employer health care expenses went up by 4 percent this year, which is a lower rise in costs than seen in recent years but expenses are still climbing faster than the pace of inflation.
“I always find it distressing that any time you see any increase in health care costs it’s always blamed on Obamacare,” Bianchi says. UPS did note rising health costs in general as another factor that contributed to its decision.
Whether other companies take similar steps is an open question and depends in large part on how hard the individual business has to compete for talent. “UPS has made a judgment that their employees won’t mind,” the attorney says. “I think that’s going to be a decision that is made employer by employer. I would be shocked if a large bank took that approach.”