UPS drops spousal coverage, teachers get hours cut due to ObamaCare

posted at 9:21 am on August 21, 2013 by Ed Morrissey

Thanks to the delayed employer mandate in ObamaCare, we are now sixteen months away from enforcement of those statutes, even though they go into effect in four months.  Are employers taking a break from ObamaCare prep?  Not hardly.  Today we have three new stories about how the perverse incentives of the ACA will impact workers, starting with UPS, which has just announced that it will stop offering health-care coverage to spouses — and explicitly cites ObamaCare as the reason (via Jim Geraghty and Jeryl Bier):

United Parcel Service Inc. plans to remove thousands of spouses from its medical plan because they are eligible for coverage elsewhere. The Atlanta-based logistics company points to the Affordable Care Act, or Obamacare, as a big reason for the decision, reports Kaiser Health News.

The decision comes as many analysts are downplaying the Affordable Care Act’s effect on companies such as UPS, noting that the move reflects a long-term trend of shrinking corporate medical benefits, Kaiser Health News reports. But UPS repeatedly cites Obamacare to explain the decision, adding fuel to the debate over whether it erodes traditional employer coverage, Kaiser says.

Rising medical costs, “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost,” UPS said in a memo to employees.

As I pointed out a couple of weeks ago, the law requires employers to subsidize health-insurance costs for employees, but not for dependent children (meaning the employee has to pay full price), and they don’t have to cover spouses at all — even if the spouses don’t have their own jobs.  Under that scenario, employees with children and stay-at-home spouses are better off going into the exchanges and getting taxpayer-fueled subsidies to buy their own family insurance — even though a mass migration into those exchanges will create an avalanche of unforeseen cost to ObamaCare.  And sure enough, some workers have figured it out:

Just imagine saying this to your boss: “Don’t offer me health insurance benefits.”

Those apparently bizarre words might actually end up being uttered next year because of a quirk in Obamacare that could financially penalize a number of workers and their families.

That quirk means that for some people, it will be more economical to have an employer not offer health insurance subsidies for them and their families—and for the entire family to then instead be able to buy insurance with government subsidies on the Obamacare state health exchanges.

“For a lot of people, that may be a better deal,” said Jonathan Wu, co-founder of the price-comparison site ValuePenguin.com. “We’re talking like thousands of dollars.”

Wu refers to this as “weird”:

What Wu calls one of several “weird” unintended effects of the Affordable Care Act—effects that lead to some less-than-affordable outcomes—stems from a rule that was adopted by the Health and Human Services Department last winter and goes into effect in 2014.

Under the ACA, popularly known as Obamacare, a worker whose employer offers company-subsidized health insurance that costs the worker less than or equal to 9.5 percent of household income is considered to be receiving “affordable coverage.” …

But HHS has ruled that the affordability test will consider only the cost to workers of buying insurance from their company’s plan for themselves—not that of insuring their entire family.

The solution is to have the employer end health-care coverage so that workers then qualify for the exchanges. The business will have to pay a penalty, but that’s far below the cost of providing subsidized health insurance, so they win, too.  The only losers in this scenario are taxpayers who have to fork over billions more than anticipated in exchange subsidies.

The proper term isn’t “weird.” It’s “perverse incentives,” and we’ve been warning about them since ObamaCare was first proposed.

Not all workers have this much control over their health-insurance offerings, though.  Substitute teachers in Trenton, New Jersey won’t even get the opportunity to make that choice after the Hamilton school district limited their potential work schedules, specifically because of ObamaCare:

The Hamilton school district has told its substitute teachers they will be limited to working a maximum of four days a week in the coming school year because of the federal health reform law’s future requirement that full-time employees be provided with health insurance.

A memo mailed to the substitutes in late June said that the restriction resulted from a provision of the Patient Protection and Affordable Care Act that will require employers to provide affordable health insurance for full-time employees and their dependents. Full-time is defined as an average of 30 or more hours per week.

“This memorandum will serve as official notice that, as of the 2013-2014 school year, strict limits will be placed on the number of working hours of part-time/temporary employees,” read the letter signed by director of human resources Katherine Shilenok-Wright.

Hey, didn’t Obama say he would delay enforcement of that employer mandate?  Hamilton doesn’t want to wait around to find out:

The provision of the federal law was originally scheduled to go into effect in January 2014, and last month the federal government delayed enforcement until 2015, but the memo says the limits on substitute teachers’ hours will go into effect when school starts next month.

Once government sets the conditions for perverse incentives in the marketplace, it doesn’t take long for businesses and consumers to adjust to them.


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I wonder if employees would have standing to sue employers over lack of insurance.

besser tot als rot on August 21, 2013 at 11:21 AM

I foresee a great future in the red pills/blue pills stock market.

And I’m a granny. Uh-oh.

GrannyDee on August 21, 2013 at 11:34 AM

What do you think of your Messiah now Teamsters?

cajunpatriot on August 21, 2013 at 11:36 AM

All I know is I’m not subsidizing anybody. If our company has to do this, I guess I pay the fine and pray. One question–what health insurance is there to purchase for those living in states that have chosen freedom over slavery (ie states w/o exchanges)? I didn’t think it was legal for the federal govt to set up an exchange.

txhsmom on August 21, 2013 at 12:05 PM

But the cowardly GOP Establishment is too afraid to defund this monstrosity.

pdigaudio on August 21, 2013 at 12:07 PM

It’s almost as if this is by design to keep people attached to government services for their well-being. Just like how welfare pays more than a real job in many states. Of course, mentioning that this is by design will get you branded a racist yet again.

Oh well, I’ve been called worse.

njrob on August 21, 2013 at 12:11 PM

Obama-voting substitute teachers across the land read the memo…

“A memo … resulted from a provision of the Patient Protection and Affordable Care Act…”

…and sigh in collective relief that this horrific assault upon their insurance benefits was not caused by ObamaCare.

Tsar of Earth on August 21, 2013 at 12:36 PM

I kind of like the name “Affordable Care Act.” It reminds low information voters that they voted to elect these idiots after promising them low cost coverage and increased access.

blammm on August 21, 2013 at 9:47 AM

I have many names for this monstrosity such as the “Patient Prevention and unAffordable Obumuh couldn’t Care less Act of war on American freedom” but for short I just refer to it as the unAffordable less Care Act.

stukinIL4now on August 21, 2013 at 12:38 PM

They get what they voted for. Why no Chris Lane stories at Hot Air?

alanstern on August 21, 2013 at 12:55 PM

I wrote here about how the ACA is turning America into Part-Time Nation.

Welcome to the Great Stagnation.

LFRGary on August 21, 2013 at 12:57 PM

but for short I just refer to it as the unAffordable less Care Act.
stukinIL4now on August 21, 2013 at 12:38 PM

just call it what it is…obamacare…responsible for unemploying people who become wards of the state burdening the taxpayer and leaving us all with medicaid on steroids.

maybe we should all just become internet doctors and take care of ourselves, only showing up at the hospital when we need surgery and at the oncology clinic when we need our chemo.

gracie on August 21, 2013 at 1:00 PM

All I know is I’m not subsidizing anybody. If our company has to do this, I guess I pay the fine and pray. One question–what health insurance is there to purchase for those living in states that have chosen freedom over slavery (ie states w/o exchanges)? I didn’t think it was legal for the federal govt to set up an exchange.

txhsmom on August 21, 2013 at 12:05 PM

The Federal Government can, and is, setting up exchanges in those states, but they’re not going to get any takers. This entire liberal social engineering experiment is going to collapse. I’m sure the Democrats are huddling as I type trying to figure out how to blame racism and/or Republicans.

cajunpatriot on August 21, 2013 at 1:18 PM

Full repeal is the answer. Any Dem who voted for this mess needs to go. Putting the government between a doctor and patient is just wrong.

Amazingoly on August 21, 2013 at 2:10 PM

This is the goal. It’s moving toward universal health care and my generation will vote it in for fairness purposes.

mrscullen on August 21, 2013 at 2:24 PM

The Federal Government can, and is, setting up exchanges in those states, but they’re not going to get any takers. This entire liberal social engineering experiment is going to collapse. I’m sure the Democrats are huddling as I type trying to figure out how to blame racism and/or Republicans.

cajunpatriot on August 21, 2013 at 1:18 PM

I have no confidence that this will fall on itself. All is needed is Money $$$$ to prop this stupid thing up. And if you haven’t learned anything, money is STILL a commodity that the government can produce out of “thin air” to keep it.

Plus, I dont think there are any major programs that get ended, its perpetual! Exempt are: Defense and “shovel ready” job programs. /sarc

-west

mr_west on August 21, 2013 at 2:32 PM

Not so fast Johnnyreb. You may need that health insurance. I’m assuming you are on TriCare. Well, McCain and others keep trying to make you accept your employer’s health plan and get off of TriCare. It’s one of the schemes for balancing budgets on the backs of military retirees.

Happy Nomad on August 21, 2013 at 9:58 AM

If a civilian corporation tried that it would be breach of contract (changing terms of compensation after the service had been performed). The government giveth, the government taketh, blessed be the name of government.

I have respect for McCain’s military service; not his Congressional “service”.

Kevin K. on August 21, 2013 at 2:36 PM

Of course employers are not buying the delay in enforcement of Obama Doesn’t Care. Everyone knows that he has no authority to not enforce any law. One successful legal challenge and the employers are on the hook.

The proper opposition strategy is:

1. Force Obama to enforce every provision of Obama Doesn’t Care, on schedule.
2. Refuse any fix other than repeal and replace.

The backlash against this law would be so swift and so severe that the One would be Done, and so would his party.

The Rock on August 21, 2013 at 2:45 PM

Remember, the President is not authorized to delay implementation of the employer mandate by a year. Nothing prevents the government from deciding to enforce it against an employer after January 1. Don’t follow the law at your own peril.

MTinMN on August 21, 2013 at 3:48 PM

Gosh, this is so weird how more and more people are getting booted off of private insurance! Gee, I wonder why it’s happening? It’s just so… mysterious! — Liberals

John the Libertarian on August 21, 2013 at 5:56 PM

Fundamental Hope & Change!

Another Drew on August 21, 2013 at 6:34 PM

…..and yet the RODEO CLOWN gop leadership don’t care about this expansion of the Federal government that will end up with the government literally regulating what food we can eat, death panels to kill off the old people, and provide free medical benefits to baby machine illegals?

the gop deserves to itself be terminated by a political death panel.

They are just contemptable.

I admire the Democrats for their relentless advancement of their agenda!

I just wish limited government Conservatives were as committed.

PappyD61 on August 21, 2013 at 6:41 PM

The Rock on August 21, 2013 at 2:45 PM

i don’t disagree with you but if I were a U.S. legislator i just couldn’t hurt people and businesses like this and would do everything in my power to stop the pain before it happened…just like Cruz and Lee. it represents such disruption and uncertainty and what i perceive as a deterioration of a system that has kept my family and me alive and well.

gracie on August 21, 2013 at 6:46 PM

Of course there’s only one way to fix this, single payer. See how easy that is when the left intentionally destroys our health care system.

bgibbs1000 on August 21, 2013 at 8:00 PM

Single payer. ‘Nuff said.

Philly on August 21, 2013 at 9:52 PM

I admire the Democrats for their relentless advancement of their agenda!

I just wish limited government Conservatives were as committed.

PappyD61 on August 21, 2013 at 6:41 PM

Pappy, their aren’t many conservatives, but there are a lot of RINOs.

bw222 on August 21, 2013 at 10:02 PM

You knew this was coming.

http://www.youtube.com/watch?v=RVl_sjUrNQE

a5minmajor on August 21, 2013 at 10:48 PM

I think that there’s an even bigger loophole. If an employer offers insurance that is unaffordable, costing more than 9.5% of the employee’s income, then the employee is free to either use the exchanges, or remain uninsured without without paying the penalty tax. If the employee is a part-timer, then I think that both the employer and employee both get out of penalties.

If this is true, look for employers to both cut workers back to part time, and offer their part-timers an absurdly unaffordable policy, moving Obamacare right into the absurd category.

jms on August 21, 2013 at 10:56 PM

I think it safe to say Obama (was that de-legitimizing?) and his policies have had a detrimental effect on the nation. Time to dump his a55.

LizardLips on August 22, 2013 at 7:07 AM

Hamilton is a very popular place to live for government employees, situated as it is next to the state capital and county government HQ as well (all Democrat sinecures, despite a nominally GOP governor). Given that fact I’m sure the prevailing line among affected residents will go something like “Obama did this wonderful thing for us and Republicans have screwed it up.”

MTF on August 22, 2013 at 8:21 AM

Gonna give you a bizarre scenario.

You can have access to provide coverage to your child until age 26, but you cannot have access to coverage for your spouse, and even though everyone will have to pay for maternity coverage males females and the post menopausal, your female married mother of your child cannot be on your plan because they are not a qualified dependent for ObamaCare, although they are a dependent on your tax return.

I am ok with employers contributing only to the employee, but the insurance companies should offer this option to their customers, that has been the problem, people can’t get in a group or find a policy they can afford…and the ACA doesn’t fix that does it, such fools. I like being able to buy the insurance for my 25 year old, and at one time I could not find a policy to buy, and no one cares about this for a 25 year old except their parents, who will be on the hook if they become ill and end up sick at home with no job etc…it’s not about the kids, they think they are invincible.

Mrs. Sebelius and her ilk are out of their minds, and drive in single person tiny cars…when m family car gets you better gas mileage per person (6), and they call my car a gas guzzler. They hate married people and married families, they love the single mother who is not married and thinks the government is her sugardaddy, and only think of the world in those dysfunctional terms. They do want a world where there is no marriage and no two parent families.

The reason is: to have a two parent family…and to have a daddy, is unfair. Therefore it needs to be eradicated?

Fleuries on August 22, 2013 at 9:52 AM

Of course it’s affordable … it’s FREE!! Suckers!

mel23059 on August 22, 2013 at 10:46 AM

But seriously, of course it’s by design. Get employers out of the business of providing health insurance to their employees, and here comes Pappa Fed riding in on the white horse to save the day! And they get the added benefit of putting those evil health insurance companies out of business! Win-win for the statists! Oh, and it’s win-win-win because the statists are exempt.

mel23059 on August 22, 2013 at 10:49 AM

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