Health plans dropping spouses; are children next?
A growing number of companies are looking to clamp down on rising health care costs by dumping coverage for their employees' working spouses.
Others are requiring their workers to pay extra money to cover a spouse who could get health insurance elsewhere. And some may even consider making employees pay the full cost of insuring their children.
The moves are viewed as low-hanging fruit for companies that are expecting higher costs next year under the Affordable Care Act, also known as Obamacare.
“We're seeing costs going up,” said J.T. Shilling, a benefits consultant who runs the Pittsburgh office of consulting firm Mercer. “Taxes, fees, more enrollment are driving up costs, and employers are looking for ways to reduce costs. And this is a pretty easy one.”
The higher charges and exclusions for spouses are part of a national trend that's hitting home in Western Pennsylvania.
Excela Health, the owner of three hospitals in Westmoreland County, told employees this month that it would no longer provide health coverage to spouses who are offered insurance from their own employer, starting Jan. 1.
“Many businesses are moving to employee-only coverage when a spouse's employer also provides benefits,” Excela spokeswoman Robin Jennings said.
More employers are taking a look at the strategy because Obamacare doesn't specify that family health plans cover spouses, said James McTiernan, health care consultant with Triad Gallagher, a Downtown benefits firm.
Although the law requires plans to cover children, it allows companies to pass along the full cost of so-called dependent coverage to the employee, McTiernan said.
“Some employers were in fact contemplating” whether to make workers pay for their children, he said. “It's one way to mitigate the cost.”
But, he cautioned, the few companies that considered the policy have delayed a decision until 2015, when the government will begin enforcing a requirement that employers with 50 or more workers provide health insurance or face a penalty.
Denying coverage for a working spouse who has access to other health insurance is an extreme example of how companies are trying cut costs, experts said. But many others, such as PNC Bank, are imposing a surcharge on their employees' spouses.
For several years, Downtown-based PNC has charged spouses an additional $125 a month to stay on PNC's health plan if they can get coverage elsewhere, spokeswoman Marcey Zwiebel said. She declined to say whether the move was in response to the health care law.
Nationally, a Mercer survey found that 18 percent of large employers had a working-spouse surcharge or a no-coverage policy for working spouses in 2012, up from 15 percent in 2011.
While most employers haven't gone to the extreme of dropping working spouses, “there's no question that employers for years have been concerned about who's covered under their plans,” said Lorin Lacy, a health care consultant for Downtown benefits firm Buck Consultants.
“I do think it's a trend that we will see grow. Every employer is struggling with, ‘How do we control these costs?' ” Lacy said. “Most of our clients have a philosophy that says, ‘We should be responsible for our own employees.' ”
But the money-saving strategies are not without risk for employers. Companies could face an employee backlash over what could be seen as a benefit cut, as well as the potential for the moves to hurt recruitment and retention.
“There's always a downside,” said James McTiernan, a health care consultant with Triad Gallagher, a Downtown benefits firm. “There's an employee relations downside.”
There's also a chance that one spouse might have to accept less coverage and a higher cost than the other. That's why experts recommend employers implement a surcharge, rather than excluding spouses.
“If it's a surcharge, it makes the employee have to shop for the best plan,” Shilling said.
Starting in January, the law will add fees and taxes that are expected to further drive up health costs for companies.
Total health benefit cost per employee in 2012 was $10,575 on average, up 3 percent from the prior year, according to Mercer. And costs were expected to rise 5 percent this year.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or firstname.lastname@example.org.
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