UPS to cut employees’ working spouses from its health plans

August 26, 2013

Saul Loeb/AFP/Getty Images

United Parcel Service is planning to end health care coverage for thousands of its employees' working spouses.

The decision is expected to affect approximately 15,000 of the package delivery giant's 33,000 spouses currently covered under its plan for nonunionized workers, according to a company memo first reported by USA Today and Kaiser Health Service Wednesday. Spouses who don't have access to employer-based coverage elsewhere will continue to be covered. In the memo, UPS attributed the change, at least in part, to 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."

UPS may be one of the most high-profile companies yet to make such a change, but it isn't the only one--and it likely won't be the last. According to benefits consulting firm Mercer, 6 percent of companies now exclude spouses who can get health care through their own employers from coverage, up from 3 percent in 2008. That number is likely to grow. A March 2013 survey by another benefits consulting firm, Towers Watson, and the National Business Group on Health found that another 8 percent of large employers plan to exclude spouses who have similar coverage elsewhere starting in 2014, on top of the 4 percent they found that already do.

But while some companies are forcing working spouses out of their insurance plans, others are just giving them a slight push. The same March report found that 20 percent of respondents currently charge an extra fee to employees who enroll their working spouses, while another 13 percent are planning such a surcharge in 2014. That's likely because employers have long preferred to make employees pay more as costs increase rather than take benefit options away.

It's conventional management wisdom, after all, that removing perks or benefits--or at least the option of them--risks employee backlash. As one Wharton management professor put it during the recession: Employees can come to feel that perks are something they "own." (A call to UPS to ask about plan details and the decision's impact on morale was not returned.)

That's why Barry Schilmeister, a principal with Mercer's health and benefits consulting practice, doesn't think there will be an immediate groundswell in the next couple of years of companies requiring employed spouses to go elsewhere for their coverage. For one, he says, it's potentially a big administrative headache to stay on top of changes in spousal employment. (According to the UPS memo, employees will be asked to certify the eligibility of their dependents, and any working spouses that lose coverage during the year will be able to add themselves back to the UPS plan.)

"Employers generally are slow to remove choice entirely," Schilmeister says. "They’d rather continue to offer a choice but make the financial burden heavier: You can have what you want but you might have to pay for it."

Jena McGregor is a columnist for On Leadership.

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Jena McGregor writes a daily column analyzing leadership in the news for the Washington Post’s On Leadership section.
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Jena McGregor · August 26, 2013