DALLAS (AP) — United Parcel Service, Inc. (NYSE:UPS) plans to drop health-insurance benefits for working spouses of nonunion employees if they can get coverage elsewhere. It blames the change partly on the new health care law.
United Parcel Service, Inc. (NYSE:UPS) estimates that 15,000 of the 33,000 spouses it covers will be dropped. The change is scheduled to take effect Jan. 1 for spouses of U.S. employees.
The worldwide parcel-delivery company says it’s just going with the crowd. UPS cited a benefits consultant’s survey that found more companies are planning on restricting benefits for working spouses.
United Parcel Service, Inc. (NYSE:UPS) said it was making the change because of rising health care costs and the 2010 law championed by President Barack Obama. The company said that it considered letting employees pay extra to cover their working spouses but decided that would be difficult to do.
“Since the Affordable Care Act requires employers to provide affordable coverage, we believe your spouse should be covered by their own employer — just as United Parcel Service, Inc. (NYSE:UPS) has a responsibility to offer coverage to you,” the company said in a memo to employees.
According to benefits consultant Mercer LLC, relatively few large companies exclude coverage for spouses who have the option of other employer coverage.
Mercer said that in 2012, just 6% of companies with 500 or more employees excluded such spouses, although that was double the percentage in 2008. It said another 6% levied a surcharge to cover those spouses.
“Employers are thinking about it because (health insurance) costs are continuing to go up,” said Mercer partner Joan Smyth. “They’re trying to walk a fine line between being fair to their employees but also being fiscally responsible.”
Smyth said employers are waiting to see whether spouses can find coverage from public insurance exchanges to be created under the health law. Other provisions of the law, such as a per-participant fee to subsidize premiums for high-cost people in the individual-policy market, encourage employers to reduce the number of people they cover, she said.
Paul Fronstin, a senior research associate at the Employee Benefit Research Institute, said that the percentage of employers booting working spouses off plans is still small; it’s more common to simply add a surcharge for insuring them.
“But trends start with small numbers,” he said. “There’s a herd mentality. When you have a big employer like United Parcel Service, Inc. (NYSE:UPS) do this, it’s easier for other employers to do the same thing.”
In explaining the change to employees, UPS cited a survey by consultant Towers Watson. That firm surveyed 583 employers and reported growing interest in reducing coverage for working spouses. It said 4% already exclude spouses who can get coverage through their own employer and another 8% plan that in 2014. Many more — 20% now and rising to 33% next year — impose a surcharge for covering that same working spouse.
Andy McGowan, a United Parcel Service, Inc. (NYSE:UPS) spokesman, said the change was part of the company’s effort to keep health-insurance premiums at or below current levels for a “significant” number of employees. He said the company’s premiums have risen sharply in recent years.
UPS told employees that spouses will no longer be eligible for physical and mental health benefits and prescription-drug coverage. “However, you may enroll her in dental, vision and supplemental benefits such as life insurance” even if the spouse’s employer provides those, UPS told workers. It added that spouses eligible for Medicare won’t be excluded from coverage.
The change also won’t affect UPS‘ union workers, many of them represented by the Teamsters. Their health benefits are spelled out in labor contracts.
The new policy will produce one benefit for the nonunion employees: Those whose spouses lose UPS coverage will see their share of their insurance decline. The company said it could be almost $1,600 for some workers.
The United Parcel Service, Inc. (NYSE:UPS) change was first reported by Kaiser Health News and USATODAY.
The article UPS to End Health Insurance Coverage for Spouses of Some Employees originally appeared on Fool.com and is written by Associated Press.
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