Employers Trim Health Costs By Cutting Coverage For Spouses
Thursday, September 19, 2013
When UPS told workers that it would no longer offer health coverage for spouses who had their own job-based insurance, it caused a big stir. But the shipping giant has plenty of company.
So many employers are trying to cut back on health coverage for spouses that it has become a trend. The practice began well before the Affordable Care Act passed, and the connection to the law, in some cases, isn't that direct.
About 12 percent of employers have this provision in their policies, says Tracy Watts, who heads the health care reform team at Mercer, a benefits consulting firm.
Mercer surveyed employers who have some sort of restriction on health coverage of spouses, and found that about half of those employers, or 6 percent, have imposed a surcharge for spouses who could get coverage at their own jobs.
"The other 6 percent exclude spouses who have coverage elsewhere," Watts says. That's the approach UPS is taking.
So is the University of Virginia. Susan Carkeek, the university's head of human resources, says the decision was mostly about simple arithmetic.
"When medical expenses go up, which they have for us, then we have two choices: We can either increase premiums, or we can reduce what we pay out in the way of benefits," Carkeek says.
Carkeek says the decision was tangentially related to the health law, because every company's health plan is going to pay some extra costs associated with new fees and other requirements next year. But the connection to the Affordable Care Act is slight.
"The tendency has been to attribute all these changes to the ACA, but we would have been facing all of these changes anyway," she says.
And why are employers targeting coverage of spouses in particular?
"Spouses cost more [than the employees]," Watts says. "They cost about $1,500 a year more."
It's not entirely clear why, but generally spouses covered on employer plans are either wives who are younger and have maternity claims, or husbands who are older and have chronic conditions.
"Women incur more claims when they are younger, and men tend to incur more claims when they are older," Watts says.
Employers have known this for a while, and the idea of charging workers more to cover their spouses is hardly new, says Julie Stone, a consultant with the benefits firm Towers Watson.
"A decade ago a number of employers were looking at spouse surcharges for employee spouses who declined coverage with their employer," she says.
Stone says the idea lost popularity for a while, but now it's making a comeback. She says there's actually a quirk in the health law that allows for it.
"Employers are not required to offer spouses coverage at all," Stone says. "They're required to offer dependent children, but not spouses."
But she says a wholesale dropping of coverage for spouses -- even if those spouses could now get coverage through the new health care exchanges -- isn't what seems to be happening.
"We're not seeing employers saying, 'I'm not going to change my plan rules, and I'm not going to cover spouses,' " she says. "The surcharge and the concept of a penalty for spouses who choose to opt out of their own employer coverage -- that's not related to the health care reform law at all."
The bottom line, say benefit experts, is that with health costs continuing to rise, employers are trying to make sure they're running their health benefits programs as leanly as possible. And, for some, that means, not paying the claims of other employers' workers.
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