UPS Ends Health Benefits For Spouses, Blames Obamacare

Aug 22, 2013
Originally published on August 22, 2013 4:10 pm

Package delivery giant UPS — the nation’s fourth-largest employer — will no longer offer health coverage for the spouses of non-unionized workers whose spouses can get insurance at their own jobs.

UPS says the move is due in part to rising health care costs associated with the Affordable Care Act, also called Obamacare.

The move will affect coverage for the husbands and wives of about 15,000 employees and will save UPS $60 million per year.

Critics say the Affordable Care Act represents a negligible cost to big companies like UPS.

Jay Hancock of Kaiser Health News, who broke the story, joins Here & Now with details.


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From NPR and WBUR Boston, I'm Robin Young.


I'm Jeremy Hobson. It's HERE AND NOW. In a moment we'll have an in-depth conversation about the situation in Egypt with David Kirkpatrick of the New York Times.

YOUNG: But first UPS, the country's fourth-largest employer, is cutting health coverage for spouses of many employees if those spouses can get insurance at their own jobs. UPS says the changes will affect about 15,000 employees. It'll save $60 million a year. And the company cites rising costs due to Obamacare for the changes.

But many companies were already eyeing cutting coverage for working spouses before health care reform. Kaiser Health News reporter Jay Hancock broke this story. He joins us now. And Jay, begin with what UPS told you and its employees in a memo. Tell us briefly more about why the company decided to do this.

JAY HANCOCK: UPS put out a pretty lengthy memo to its employees, nearly 20 pages long, explaining why they were doing this. They clearly understood that it was a big deal and that employees were not going to be happy about it. And they went through a long FAQ about what was happening, and in that memo they mentioned several times the Affordable Care Act, saying this is going to raise their costs for offering health care coverage and that this was one part of the reason that they were taking this step to exclude spouses from the health plan if they had access to coverage at their employers.

YOUNG: They cited things like they'll have to cover kids under 26, can't cap care, can't turn people away. But you say this is going to be a big deal, and they knew it. Explain why, for people who don't understand this, maybe aren't married. We're reading that spousal benefits were created when women worked largely in the home. Now many are working and have insurance through other jobs. What will it mean to couples if, you know, if this happens to them? How much more, on average, might they have to pay for two individual plans instead of family?

HANCOCK: It depends on the plan at their employer. And employers' plans are all over the map, as we're seeing now, as we're approaching this 2014 date where the full ACA regulations are going to go into effect. The - what it costs for a single employee on a plan is about $4,000 or $5,000 a year. And depending on the employer that the spouse works for, it all depends on how much of that money the employer picks up and how much that the employer will share with the spouse.

But the trend that we're seeing is that more and more, there are greater out-of-pocket costs for consumers. Employers see their premiums continuing to go up, and they're sharing that cost increase with families. It's not unusual to see a family health plan now with a deductible of $1,000 or $2,000.

YOUNG: Well, but you're reporting that this is something that other companies and entities are really eyeing. The Hill reporting today that the University of Virginia, it will also end the benefit for working spouses. And you report some big companies are using bonuses or penalties to try to get the workers to change themselves.

HANCOCK: Companies have been trying to deal with insurance overlap for years. Obviously, women entered the workforce in a big way in the '60s and '70s, and there's been overlapping family coverage. Employees sort of tiptoed into it in the past. They would levy a surcharge if the spouse had access to other coverage but was on their plan.

Some employers actually offer a bonus. We talked to a city in Washington, Anacortes, Washington, that pays a bonus to employees if their spouses are not on the plan. So employers are looking at this in different ways. They're trying to put up incentives out there so that their costs don't go up as fast and that they don't upset employees as much as they might otherwise.

UPS is taking it a step farther, and it's not the only one. We talked to Towers Watson, a consulting firm, that indicated that indicated that eight percent of companies told them that they were planning on putting in what's called a spousal exclusion next year.

YOUNG: Well then you write about Xerox when you talk about surcharges. Xerox, you write, is charging employees who enroll their working spouses in their insurance $1,000 annual penalty. And that's going to rise to $1,500 next year. That must mean to those people who choose that, that's the amount of money, they would lose more than that if that spouse went to an individual plan.

HANCOCK: Exactly, and that's a calculation that they have to make. And as we noted in the story, UPS' health plan is a pretty good health plan, and it's likely that spouses on average will not have access to the kind of benefits that they do at UPS. And so I'm not surprised that there are some that are unhappy about that.

YOUNG: Well Jay, I'm going to give you - I'm unfortunately going to give you just about 30 seconds to answer this, and it could be a tough one. Is it really fair to blame Obamacare, or is this something companies have been wanting to do for a while?

HANCOCK: Companies have been downgrading health benefits for a long time. Obamacare is a convenient excuse. We talked to people that suggest that it was a small factor in the bigger scheme, but it's nevertheless part of what's going on. It is raising costs. UPS put it - said that they expect it to raise their costs four percent next year.

YOUNG: Kaiser Health News reporter Jay Hancock, thanks so much.

HANCOCK: Thanks for having me. Transcript provided by NPR, Copyright NPR.