On Wednesday, UPS and the University of Virginia announced that in part because of costs linked to the Affordable Care, both will stop providing health care coverage to employees' spouses who can obtain insurance through their own employer, the Washington Times reports (Howell, Washington Times, 8/21).
UPS Move Will Affect 15,000 Spouses
UPS said the change applied only to the company's nonunion employees and would affect about 15,000 of the approximately 33,000 nonunionized employee spouses to which it provides coverage. The change will not affect children, spouses who cannot obtain their own coverage or UPS' 250,000 union employees.
Under the new policy, affected employees will be required during the annual enrollment to provide information about their spouses' eligibility for employer-based coverage. Employees who falsify information will be penalized for violating the company's code of ethics. Violations can result in discipline, loss of health coverage and potential employment termination, but will at the very least require an employee "to repay all claims you paid for your wife's medical expenses," according to an UPS spokesperson (Martin et al., Wall Street Journal, 8/21).
According to a UPS spokesperson, the decision will save the company about $60 million annually (Washington Times, 8/21).
In a memo to employees, the company said that increasing health care costs for the coverage of chronic and other health conditions, "combined with the costs associated with the [ACA], have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost." The company expects an 11.25% increase in health coverage costs in 2014 over 2013, more than the standard 6% to 7% increase for nonunion employees, according to the memo.
The company said in the memo that the ACA-related costs are primarily related to required medical research fees and the cost of covering employees who had previously opted out of coverage. Under the ACA, individuals beginning in 2014 are required to purchase coverage or pay a fine.
UPS said that change "is consistent with the way many large employers are responding to the costs associated with the" ACA, adding that 35% of companies UPS analyzed intend to similarly limit their spousal coverage (Wall Street Journal, 8/21).
According to survey conducted by consulting firm Mercer, only 6% of companies with 500 or more employees have enacted similar restrictions in 2012, although that is twice as many that did so in 2008. Another 6% impose a surcharge for spouses who could obtain their own employer-sponsored coverage, according to the survey. Meanwhile, a Towers Watson survey found that about 33% of companies expect to enact spousal coverage restrictions by 2015 (Greenhouse, New York Times, 8/21).
In its announcement, UVA cited the ACA, and said that the law would increase the university's health costs by $7.3 million in 2014 and could impose further costs when taxes applicable to generous coverage plans -- known as the "Cadillac tax" -- kick in, The Hill's "Healthwatch" reports.
UVA said the change will not affect coverage for children or for spouses unable to obtain employer-sponsored insurance (Baker, "Healthwatch," The Hill, 8/21).
The university also will charge employees an additional $40 per month on their premiums if they do not take part in at least two of UVA's wellness programs.
House GOP Lawmakers Comment
In response to the announcements, Republican lawmakers on the House Ways and Means Committee said, "American families who are already grappling with higher health care costs under the law are also coming face-to-face with the stark reality that they will lose the coverage they have and like."
Similarly, the GOP members of the House Energy and Commerce Committee said Wednesday, "It turns out if you are on your spouse's health care plan, and you like it, you may not be able to keep it as the new health care law kicks in" (Washington Times, 8/21).