Health Coverage Gets Leaner and Meaner
A recent survey of 420 midsize and large companies conducted by the benefits consultant Towers Watson finds that employers remain committed to providing health-care benefits -- but that the generous coverage of yore is on its way out. Nearly all of the employers surveyed--98 percent--said they plan to keep their active medical plans for 2014 and 2015. However, a majority of them expect to make moderate to significant changes in their benefit programs by 2016, in response to rising healthcare costs plus new financial and administrative burdens specifically related to Obamacare.
For one thing, about 60 percent of employers believe they will need to fund plans less generously to avoid triggering an excise tax on so-called “Cadillac plans”-;those with an aggregate value of more than $10,200 for individual coverage and $27,500 for family coverage--that is due to take effect in 2018. Only 30 percent of employers have confidence that public health exchanges will be a viable alternative to employer-sponsored plans in 2015. But nearly three-quarters of the companies say they are considering using private exchanges as a way to outsource plan management and control costs.
Employers also hope to reduce overall health costs by increasing the use of incentives tied to wellness and health improvement. And they are focusing on reducing premium subsidies for spouses and dependents, or excluding spouses from their plans entirely.
Just last week, United Parcel Service told its non-union employees that their spouses would no longer qualify for company-sponsored health insurance if they could get coverage through their own jobs. The decision is expected to affect roughly 15,000 of the company’s 33,000 spouses currently covered under its plan. UPS blamed the change, in part, on the Affordable Care Act, saying that “the change is consistent with the way many large employers are responding to the costs associated with the Health Care Reform legislation.”
In fact, big companies have been souring on covering spouses for some time now. “We’ve seen spousal surcharges for about 10 years,” says Helen Darling, president of the National Business Group on Health. “I don’t think they have anything to do with the Affordable Care Act.”
Rather, as employer health premiums have surged--nearly tripling since 1999, according to the Kaiser Family Foundation--large employers that cover 80 percent or so of employee premiums have decided to subsidize coverage for spouses and dependents less generously. “Because covering employees alone has gotten so expensive, employers are saying, if you’re married or in a domestic partnership, and work for someone else, we don’t think we should pay for their coverage,” Darling says. A March 2013 survey by Towers Watson and the National Business Group on Health found that 4 percent of businesses now exclude spouses who can get coverage elsewhere--but another 8 percent plan to do so starting in 2014.
It’s hard to let Obamacare off the hook entirely. For one thing, the ACA’s requirement that employer plans cover dependents up to age 26 has increased premium payments for many businesses. (The ACA doesn’t require coverage of spouses.) Darling also says that a fee on employer health plans--$63 annually per covered life, to help finance transitional reinsurance programs in the states’ individual markets--provides an additional disincentive for employers to let working spouses stay on their plans.
Not everyone’s buying that. Two days after the UPS announcement, Starbucks CEO Howard Schultz told Reuters that his company “will continue maintaining benefits for partners and won’t use the new law as excuse to cut benefits or lower benefits for its workers.” With the news that premium increases appear to be moderating--a recent Kaiser Family Foundation survey found that the average annual family premium for an employer-sponsored plan rose only 4 percent in 2013, to $16,351--perhaps other big employers will decide not to let fear of Obamacare get the best of them, either.
On the other hand, if your company falls short of Starbucks’s scale, there could be significant savings in letting your employees’ significant others fend for themselves.