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UPS says it's eliminating health benefits for spouses of employees because of Obamacare. Are a lot of companies going to do this and does it make sense to make any legislative changes as a result of this?

  • one the largest employers in the United States and the world’s biggest parcel deliverer — plans to eliminate health benefits for approximately 15,000 working spouses of white-collar employees, according to the memo. The motivation behind this change is “the rising cost of health care in general” and the new expenses brought on by the Affordable Care Act in particular. UPS reasoned that many spouses in the U.S. workforce will have access to employer-sponsored insurance mandated by the health care reform. Despite the fact that Obamacare mandates that businesses with 50 or more employees provide health insurance for their workers and their dependents or pay a penalty, it will not require employers to cover spouses. The logic behind that provision is that husbands and wives will either be eligible to receive coverage from their own employer or be able to purchase affordable insurance via the individual exchanges.[1] [1] http://wallstcheatsheet.com/stocks/howard-schultz-obamacare-doesnt-worry-starbucks.html/?a=viewall

  • Answer:

    This is actually not unique to UPS and is something that is a growing trend. Some companies charge employees more to cover working spouses who have access to coverage with their employers. 20% of companies did this in 2013 according to the Towers Watson/NGBH Survey on Purchasing Value on Healthcare with an additional 13% considering this for 2014. (There is some bias in the survey data as it is only measuring data from larger employers) According to the same survey, 4% of companies in 2013 excluded working spouses from being covered with another 8% considering for 2014. So it is a growing trend and is following a similar trend line that the spousal surcharge did when it first came out. Companies will make whatever decisions they can to reduce their health care costs at this point as for larger companies, they pay for health benefits directly out of their general assets and it impacts their profitability numbers. For companies that have slimmer profit margins, this is likely to become quite prevalent whereas it won't in companies that have larger profit margins.

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It isn't the worst thing in the world that could happen. I won't write about this at length, but the third-party payment model of health care is at least partially to blame for skyrocketing American health care costs. If people have no concept of what their health insurance costs, or what their medicine/treatment would cost without insurance, they are not educated consumers and are not being "rational actors" in a free market. The more people that move into the ACA state exchanges, the better, in my opinion. People will have choices about what level of cost-sharing they want their plan to have, and the government will ensure that no one is priced out of health care based on their income. Growing health care costs have eaten up approximately 100% of the gain in workers' average compensation since 1980. Wages are stagnant, even though labor costs are rising. One can reasonably surmise that workers for whom health insurance is not a component of their total compensation will see their salaries increase at greater rates than workers who receive health benefits. Now, I don't think the intent of the enhanced employer mandate within the ACA was to have this happen. Obviously the requirement is designed to facilitate the opposite outcome, an increase in the percentage of businesses that offer health benefits. This is unfortunate and does not make economic sense. We should be severing the ties between work and health insurance, and pushing everyone into the exchanges. This would lower labor costs and still ensure that the amount individuals are paying for health care is proportionate to their income. Its fair, and its good economics.

Shane Bogusz

UPS is eliminating healthcare coverage for spouses (of UPS employees) who are eligible for healthcare coverage through their OWN employers.  Why?  To save money.  Not because Obamacare requires them to drop such members.  Not because Obamacare makes healthcare more expensive. But hey!  Why let facts get in the way of arguments...

Neel Kumar

From your citation: Most of these companies, which collectively employ 8.7 million people,  do not have firm, near-term plans to implement such a strategy. In fact,  more than 82 percent of respondents said the see subsidized health care  benefits as an “important part of their employee value proposition” in  2014. So, if the survey findings hold true, then 82% of such companies will not cut benefits to employees, and of those your article cited as being willing to cut benefits, most are...  well, Walmart was an example.  And, if Walmart is an example, it demonstrates the corporate mindset of such companies very well.  These companies have no loyalty to employees, and no plans to engender loyalty from employees.  Employees are expendable-  just like the goods they sell.

Jae Starr

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