UPS drops health benefits for 15,000 spouses. An Obamacare bellwether?

One of the basic pledges President Obama has made regarding his health-care reforms is that “if you like the plan you have, you can keep it.” It’s also a pledge that could come back to bite, politically.

The latest sign of that is the news, made public this week, that shipping company UPS will no longer make health insurance benefits available to some 15,000 employee spouses. In announcing the change, the company referred to "Obamacare" as a reason it is having to battle to contain health-care costs.

This news comes alongside other signs that employers – the largest source of health insurance for Americans – aren’t finding it easy to continue with health coverage as usual.

Delta Airlines has voiced its own recent complaint about Obamacare’s effect on its health costs. And other news reports chronicle employers who are paring hours for some workers, saying the reason is to curb their health costs under the law.

In the case of UPS, the 15,000 spouses are husbands or wives whose employers also offer health benefits. This appears to be a case in which they like the plan they have (they’ve opted for the UPS plan rather than their employer plan) and can’t keep it.

Most UPS employees – those who are unionized or whose spouses don’t have another employer-sponsored health plan available – aren’t seeing a reduction in benefits.

And for the 15,000 who are affected, it’s a bit simplistic to say their options are narrowing solely because of Obamacare.

UPS didn’t say the law was the only factor behind its decision. And some health-care experts argue that businesses are using Obama’s Affordable Care Act (ACA) as a convenient excuse for continuing a long-term trend: straining to control the relentless rise in the cost of health benefits.

It’s certainly true that health costs were rising – and employers angling to tame them – long before a Democratic-controlled Congress in 2010 passed the ACA, with provisions designed to go into effect gradually over the course of a decade.

But some health-policy analysts say the law is imposing real costs on employers. After all, the act is designed primarily with the goal of expanding the share of Americans who have insurance, rather than with cost containment. Some provisions in the law promise to help control health-care spending, but other elements could push costs higher.

A July analysis by the consulting firm Mercer detailed the challenge, from the viewpoint of employers.

“Last year they slowed benefit cost growth to its lowest level in 15 years, but in 2014 they have the new fees and the likelihood of new enrollment to contend with [due to the ACA] on top of normal medical inflation,” said Mercer chief executive officer Julio Portalatin.

The Mercer analysis focused on the recent decision by the Obama administration to delay a core provision in the law – a requirement that employers must pay a penalty if they don’t offer coverage to all employees working 30 or more hours per week.

Even with those penalties off the table for a year, the law will result in fees, changes in benefit-plan design, and increases in enrollment that will raise health-plan costs by 2 to 3 percent next year, according to the Mercer analysis. 

At the heart of the ACA are the mandate on employers who have 50 full-time workers to offer health benefits (now delayed until 2015) and a mandate that individuals obtain health insurance (or pay a tax penalty) starting in 2014.

Millions of uninsured Americans are expected to gain health benefits because of those steps, which the law couples with an expansion of Medicaid and subsidies to help low-income households buy insurance.

Seeking to counter the view that the law is causing America’s part-time workforce to expand, the Obama administration says a large majority of the nation’s new jobs are full time.

According to a Mercer survey, about one-third of employers don’t extend coverage to all employees who work at least 30 hours a week. Many of those employers had made plans to extend that coverage in 2014, before the White House announced the delay in penalties for not doing so.

It remains to be seen how many employers will push ahead with an expansion of coverage next year.

What’s clearest is that health-care costs remain a huge concern to families and employers alike.

“Limiting plan eligibility is one way to manage ongoing health-care costs, now and into the future, so that we can continue to provide affordable coverage for our employees,” UPS said in a memo to employees, which has been quoted in news reports this week.

Already, many employers levy a surcharge on benefits for spouses who have access to other coverage plans through their own employers.

For employers with 5,000 or more workers, about 14 percent imposed such a surcharge as of last year, and 4 percent denied coverage entirely for spouses with other coverage options from their own employers, according to a Mercer survey.