UPS To Drop Insurance Coverage For 15,000 Employee Spouses, Blames ObamaCare
United Parcel Service of America, Inc., has decided to drop thousands of employees’ spouses from its medical insurance plans, according to a corporate memo sent to all employees. In a bid to save the company $60 million per year, 15,000 spouses will lose coverage beginning in 2014.
The 19-page UPS memo released Wednesday states the decision to cut coverage was based on the ever-controversial Affordable Care Act. Commonly known as ObamaCare, this act will require large employers to offer basic and affordable health insurance to all employees and their dependent children beginning in 2014. That means that many working spouses currently covered by UPS will gain access to health insurance through their own employees. Like numerous other large companies, UPS made the decision to cut these spouses from its own policies.
Although the move affects only non-union U.S. workers and their families, it will still impact nearly half of the 33,000 employee spouses currently receiving health coverage through UPS.
The implications for spouses are great, and many individuals will need to start putting aside more money for health care costs. The basic plan under UPS comes with an in-network family deductible of $500, significantly less than the national average of $733. So when spouses start enrolling for coverage elsewhere, they’ll likely see their costs increase.
UPS, on the other hand, will only see a marginal cost difference. The international powerhouse states the insurance cuts will save $60 million a year, barely 1 percent of the company’s $54.1 billion in revenue in 2012.
UPS isn’t alone in its decision; according to a survey by Towers Watson, 12 percent of large employers will bar workers’ spouses from coverage if the spouses have access to comparable coverage elsewhere. This number will be a large jump from only 4 percent of spouses not covered this year.
Still, it’s far from a new concept to cut family benefits in order to save money. Companies have used varying tactics to reduce their costs. The city of Anarcortes, Wash., for example, doles out bonuses for spouses who seek coverage elsewhere. Xerox has gone the opposite way, charging employees an annual penalty when working spouses use Xerox health insurance. The penalty is currently $1,000 but will rise to $1,500 next year.
Xerox’s tactic is far from unique; currently 20 percent of large employers charge a penalty for spouses who choose not to enroll in insurance offered at their own workplaces. Next year, this number will rise to 33 percent.
With so many changes going into effect in 2014, it’s easy to see the connection to ObamaCare. But is the new policy really to blame, or are corporations like UPS simply looking for a scapegoat? In reality, it’s probably a little bit of both. In its attempt to make health care more accessible for all Americans, ObamaCare has incidentally made it easier to drop spousal coverage. On the other hand, big companies are always searching for ways to cut costs, and cutting or keeping spousal coverage is a decision each company has made on its own.