Published: August 22, 2013
For two-income couples, it's been one of the little financial perks of marriage: go on your husband's or wife's health insurance so you can avoid paying for two policies.
But with employers looking to cut costs as key provisions of the Affordable Care Act begin to take hold, the benefit is heading for the endangered list.
In one of the most far-reaching examples to date, UPS has told its workers that it is dropping coverage for about 15,000 of 33,000 spouses of nonunion employees in the U.S. - if those spouses are able to obtain insurance from their own employers. Spouses who can't secure coverage through a job will still be insured through UPS, the company said.
In a memo to employees, UPS said, "This change is consistent with the way many large employers are responding to the costs associated with the health care reform legislation."
UPS' move will save money, although the company wouldn't say how much.
The company's decision to exclude some spouses is unusual, health care industry executives said Wednesday. Instead, they said, it is far more common for an employer to charge a worker extra to keep a spouse on the employee's plan.
Xerox, for example, said it charges its workers $1,000 to carry an employed spouse, and that fee will rise to $1,500 next year.
UPS and Xerox are simply leading the way, according to a survey released Wednesday. The consulting firm Towers Watson said that 25 percent of employers surveyed have measures in place to prevent or discourage spouse coverage. That number is projected to increase to 32 percent next year, when the federal health care reform law takes effect. Another 23 percent said they are considering such action in 2015 or 2016. If they all did, more than half the companies will have moved to reduce or eliminate spouse coverage.
In its memo to employees, UPS said, "Implementing a premium increase to cover your spouse was an option we considered. 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. Limiting plan eligibility is one way to manage ongoing health care costs, now and into the future, so that we can continue to provide affordable coverage for our employees."
Some companies offer incentives, granting a bonus to employees if a spouse obtains his or her own coverage.
"What UPS is doing is definitely part of a growing trend while, to be sure, their approach is by no means widespread at this point," said David Bottoms, senior vice president of benefits for The Bottoms Group in Marietta, Ga.
Industry analysts characterized the employee benefit cut as low-hanging fruit that could be picked off without major backlash. The spouses can still get coverage, if at additional cost, through their own employer.
"It's a really good way to save money," said Steve Noury, the Atlanta-based national sales director for HMS Employer Solutions, which monitors the eligibility of dependents for corporate benefits.
The number of employers looking to cut the benefit is growing partly because of the health care law, he added. The "individual mandate" requiring all adults to have insurance takes effect Jan. 1. The insurance exchanges, for consumers who have to buy individual plans, open Oct. 1, with coverage taking effect Jan. 1.
"The bottom line is the Affordable Care Act is going to cost businesses money," he said. "Businesses figured they had to find ways to save money."
One example of the additional costs employers will face as a result of the act is the transitional reinsurance fee, experts said. Starting next year, employers will have to pay $63 for each person they cover - employees, spouses and dependents - to help defray the cost to insure high-risk people in the individual market.
Bottoms noted that because employers face such new taxes and fees for health care, "the portion of the benefits budget allocated to spouses is a particularly tempting target."
There are risks to employers, however.
"You have to be careful," said Jodie Braner, a benefit consultant with Hays Companies of Georgia and president-elect of the Georgia Associations of Health Underwriters. The savings that come from cutting back on spouse coverage has to offset the cost to administer the change, she said. And corporate leaders have to be mindful of the effect of such a change on their company's employees and culture.