Firms cut back family coverage

By Julie Appleby
USA Today

Along with increases in costs and co-payments, many workers will find another change in next year's health benefits: closer scrutiny of whether a spouse has health coverage.

Many employers already charge workers more for family coverage. But now, employers are considering additional steps as health insurance costs rise at their fastest clip in a decade. Those include increasing the percentage of the premium that workers pay for family coverage or requiring working spouses to sign up for coverage with their own employers.

Benefit analysts say more large employers will incorporate such changes next year, often in reaction to similar efforts already taken by small firms.

"Employers are thinking in terms of defensive strategy," says Ken Sperling of benefits firm Hewitt Associates. "You don't want to be the insurer of choice for people who don't work for you."

Some employers are already making changes:

• Verizon union employees in the Northeast will pay a $40-a-month surcharge for spouses or domestic partners who turn down comparable coverage from their own employers.
• University of California next year will charge employees who cover two-adult households double the premium paid by single-employee households.
• IBM next year will drop the monthly paycheck deduction for one of its health plans. In exchange, workers face $500 annual deductibles for singles or $1,500 for families, plus 20 percent co-payments on doctor and hospital care. Or they can choose among HMOs with smaller co-pays but monthly premiums.

Some companies are simply passing on a larger percentage of the premium cost to workers with families. Nationally, workers pay an average of 27 percent of the premium of a family plan, which has not changed in recent years, even as total premium costs have risen rapidly. Next year, benefit consultants predict that more employers will raise that percentage.

"They're passing along more of the cost to both single workers and families, but they're passing along a higher proportion for families," says George Ketchel of Marsh benefits consultants.

That's because spouses and dependents add greatly to the cost of an employer's health plan. Since 2000, the average premium for a family plan rose by nearly 41 percent to $9,068, says a survey released last month by the Kaiser Family Foundation. During that same period, the average cost of an individual worker's plan grew 37 percent to $3,383.

Even if employers require their workers to pay a higher percentage for family coverage, the firm's total tab is still higher than coverage for individuals. "That's been true for as long as we've had coverage," Sperling says. "But the numbers have now gotten so big that employers are re-evaluating."