Aug. 21 (Bloomberg) -- United Parcel Service Inc., one of the biggest U.S. employers, plans to drop health insurance coverage for about 15,000 working spouses of white-collar employees to curtail rising costs.
Many spouses in the U.S. workforce will have access to employer-provided insurance under President Barack Obama’s health care-system overhaul, and UPS will remove them from its coverage, according to a copy of a memo to employees first published online by Kaiser Health News. Spouses who don’t work or lack employer-provided benefits will still be eligible at Atlanta-based UPS, according to the memo.
In its memo, UPS said the coverage shift is a response to expenses from the 2010 Affordable Care Act and “the rising cost of health care in general.” U.S. businesses have been increasing premiums to cover working spouses for years, said Paul Fronstin, a director at the Washington-based Employee Benefit Research Institute. Still, he said the total exclusion by UPS may be a first for a company its size.
“Is it a harbinger of things to come? Possibly,” Fronstin said in a telephone interview. “Once a major employer like UPS takes a step, all of the others will at least start looking at it.”
UPS, the world’s largest package-delivery company, had about 399,000 employees at the end of 2012, according to a filing. Of 33,000 spouses on UPS’s health plan, about 15,000 are eligible for coverage through their own employers and won’t be covered by UPS starting next year, according to the memo. The insurance change doesn’t apply to 250,000 Teamsters union workers or to employees outside the U.S., according to the memo.
“Since the Affordable Care Act requires employers to provide affordable coverage, we believe your spouse should be covered by their own employer -- just as UPS has a responsibility to offer coverage to you, our employee,” UPS said in the memo. “Limiting plan eligibility is one way to manage ongoing health care costs.”
Andy McGowan, a UPS spokesman, wouldn’t discuss specifics of the memo. The company is changing benefits for “a limited number” of workers “to maintain premiums at or below current costs for the significant number of employees covered,” he said in an e-mail. UPS’s health-care costs have more than doubled in the past eight years, he said.
The policy on spouses is “consistent with the way many large employers are responding to the costs associated with the health-care reform legislation,” according to the memo. Children of white-collar employees will retain coverage, according to the memo.
Joanne Peters, a spokeswoman for the U.S. Health and Human Services Department, said she had no comment about UPS’s move.
“Since the Affordable Care Act became law, health care costs have been slowing and premiums are increasing by the lowest rates in years,” Peters said in an e-mail. “The law is changing the way we deliver care to keep costs down and produce better outcomes for patients.”
The 2010 law seeks to extend coverage to more of the nation’s 50 million uninsured and requires all Americans to obtain coverage next year. Employers with 50 or more full-time workers will have to provide health benefits, though the Obama administration announced last month that it was delaying that provision by a year at the request of business leaders.
Executives at UPS, the biggest employer of Teamsters union workers, have repeatedly said in recent years that they need to rein in health-care benefit costs.
UPS doesn’t break out how much it spends on health care for employees and retirees. Compensation and benefits costs totaled $33.1 billion last year, the company’s largest expense. Revenue was $54.1 billion.
Kaiser Health News is a nonprofit news organization focused on health-care policy.