Aug. 30, 2013 at 9:14 AM ET
Some businesses are making a scapegoat of Obamacare, blaming the president's extensive health reform for cuts that hurt workers.
They argue that reform mandates have forced them to cut benefits or reduce eligibility, even as workers pay more for coverage.
But not all companies are playing the blame game or passing on higher costs to workers. Some big names, such as Starbucks and Wal-Mart, are trumpeting the benefits they offer employees.
Who's right? Some benefits experts say blaming Obamacare, or formally the Patient Protection and Affordable Care Act, is a straw man argument, that costs are rising anyway and companies run a risk in politicizing rising healthcare costs.
“It’s not as black and white as being able to say this is due to [reforms],” said Paul Fronstin, director of the health benefits research program at the Employee Benefits Research Institute. “I can certainly see it being a convenient excuse, even if it’s not the real reason.”
In an internal memo leaked last week, United Parcel Service said it would no longer provide health coverage for spouses of roughly 33,000 workers if the spouses were eligible for insurance through their own employer.
“Since the Affordable Care Act requires employers to provide affordable coverage, we believe your spouse should be covered by their own employer,” the UPS memo said.
Delta Air Lines, too, has pointed the finger at Obamacare, charging it will cost the company an extra $100 million in 2014. ln a letter to Obama administration officials, Robert Kight, Delta's senior vice president for global human resources, said part of that is normal medical inflation and the phase-out of an assistance program tied to the health care law. But a large proportion comes from various fees and costs associated with the implementation of the health care law, he wrote.
For example, an annual fee of $63 per "covered participant" would cost Delta -- with about 160,000 enrolled active and retired employees and their family members -- more than $10 million in 2014, Kight noted.
Business is not the only sector hit by the healthcare reform. The University of Virginia said it would no longer provide spousal coverage.
The university also blamed the cost of healthcare reform as a reason for its decision. “Provisions of the federal Affordable Care Act are projected to add $7.3 million to the cost of the University health plan in 2014 alone,” it said in a statement.
This escalation in costs predates the current administration by more than a decade, however, and new data show that the rate of increase has slowed, due in part to corporate wellness initiatives that could be undermined by providing less-generous benefits.
Ania Kransiewska, a senior director at the Corporate Executive Board Company, said she did not want to downplay the challenge companies have, but "we have seen this before UPS and before the Affordable Care Act.
"Costs were going up by such a high amount anyway… the Affordable Care Act costs are just icing on the cake," she said. "Most companies, even if they were to repeal this legislation tomorrow, would still have this cost problem.”
Amy Bergner, managing director of PricewaterhouseCoopers’ Human Resource Services Practice, said companies will pay more in premiums and surcharges, as well as higher administrative costs associated with enrolling workers and their dependents. “Many employers recognize that workforce management goes beyond this issue,” she said.
A recent Kaiser Family Foundation/Health Research & Educational Trust survey found that while healthcare costs are still climbing, the rate of increase has slowed to 4 percent, bringing the average premium of employer-provided insurance to $16,351 for family coverage.
Consulting company Towers Watson predicts companies will pay just over 5 percent more in healthcare costs next year, and it appears many employees are shouldering that increase themselves.
Companies also might wind up rethinking their decisions once the economy improves, said Gail Wilensky, a senior fellow at Project Hope and former head of Medicare under the President George H.W.Bush.
“All of this is easier for employers to a consider in an economy with a soft labor market. In a tight labor market where you’re having to bid for good workers... that might not be an option,” she said.
With the cyclical nature of the labor market in mind, some companies are using the conversation about healthcare as an opportunity to brag about their benefits or even expand employee coverage.
Wal-Mart Stores said it plans to offer benefits to employees’ domestic partners next year, and Starbucks CEO Howard Schultz pointed out that the coffee giant offers employees who work just 20 hours a week access to health insurance.
"I don't believe that...the health care law should be a reason or a motivation to cut benefits for either the employee or spouses," Schultz told CNN recently.
Convenience and gas station company Cumberland Gulf Group told its 3,200 part-time workers that if they wanted to work 32 hours or more a week, they would be reclassified as full-time workers and be eligible for benefits, including vacation and health insurance.
“This is going to be a differentiator for us in our recruitment process,” said Scott Thomson, vice president of total rewards and HR technology. “We’ll be able to access a higher quality of candidate and hang onto them longer.”
Thomson said the company expected about 1,200 workers to switch to full-time. He estimated about half of those were probably covered under a spouse’s or other health care plan, and the other half would probably join the company’s health insurance.
“It is an expense. We’re going to spend more money on healthcare than we’ve ever spent,” Thomson said, estimating that the cost would be in the millions of dollars. But he said it would be worth it to have lower turnover and better-trained workers.
“If we do that, the profitability will come along with it,” he said.