Effective January 1, 2014, the United Parcel Service (UPS) will no longer cover employees’ spouses under the company’s health insurance benefits. UPS cited several measures that ultimately raise its cost of insuring spouses, a number of which find their roots in provisions laid out by Obamacare.
Roughly 15,000 spouses of UPS employees will lose their coverage if their own employer also offers health insurance programs to its employees. Unemployed spouses won’t lose coverage, according to a memo that UPS sent to all of its employees and released to Kaiser Health. Rising medical costs, “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost,” the memo stated.
Among the factors influencing the company’s decision were several resulting from Obamacare provisions. Because of the act’s annual and lifetime coverage limits, along with mandated parental coverage until the age of 26, UPS expects fewer employees to opt out and enroll — thereby raising costs for the company, which expects the move to save an extra $60 million a year, according to company spokesman Andy McGowan.
Many analysts downplay UPS’s decision to drop spousal coverage from insurance benefits, according to Kaiser, arguing that this simply marks the beginning of many companies eventually deciding to follow the same path. Four percent of large employers surveyed by consultants Towers Watson this year exclude spouse coverage from their benefits. Roughly eight percent had plans to implement the practice in 2014.
“They are simply saying to the spouse outright, ‘If you have coverage somewhere else you are not eligible here,’” Edward Fensholt, a senior vice president at Lockton Companies, a large insurance broker, told Kaiser. “We don’t see a lot of that out there, but more than we used to.”
The memo explains that children, stepchildren, and spouses whose employers don’t offer coverage will still be eligible for insurance. For spouses whose own employer offers coverage on health insurance but not prescription drugs, UPS says it will not cover prescription drug cost for the spouse.
The memo also elaborates on the company’s decision not to offer increased premiums to employees with spouses covered elsewhere, noting that “implementing either was a difficult decision to make. Since the Affordable Care Act requires employers to provide affordable coverage, we believe your spouse should be covered by your employer — just as UPS has a responsibility to provide coverage to you, our employee.”
UPS, who made $807 million profit off a revenue of $54.1 billion last year, said it will share part of the added savings with employees — if their spouses leave the plan — in the form of reduced premiums.
Under Obamacare, employers will be required to pay a $63 reinsurance fee per insured employee, a component of the act that the Department of Health and Human Services (HHS) says will generate $20 billion by 2016. HHS hopes the fee will make the transition to the new plan smoother for people who are sick and currently uninsured. While minor, UPS says the fee factored into their overall decision.