More and more employers are dropping spousal health insurance coverage in response to the extra burdens imposed by Obamacare. These trends illustrate how increasing numbers of people will become dependent on the program’s federal health exchanges. They also clearly counter Obama’s now-infamous claim that “if you like your coverage you can keep it.”
Larger companies have begun the process of “carving out” spouses, meaning that they refuse coverage to any spouse who is eligible for coverage provided by their own employer. This year, only 4% of companies engaged in the practice, but next year that figure is expected to rise to 12%. UPS and the University of Virginia are two of the most recent and high-profile companies to announce this change, with UPS’s change alone affecting over 15,000 families.
Some companies have merely disincentivize spousal coverage by charging an average of $100/month extra per insurable spouse. This is partially due to the fact that spouses cost an average of 50% more than the employed person, and partially to mitigate the effects of families shifting their coverage. The number of companies doing this is projected to rise from 20 to 33%. Combined, this brings the number of companies engaged in such practices up from 24% in 2013 to 45% in 2014.
This number will almost certainly rise, though. While families overwhelmingly prefer to be on the same plan – which, among other things, guarantees their ability to use the same doctors – Obamacare raises the cost of ensuring both employees and their spouses. If the cost to employees exceeds a certain number, however, the business would face a crippling 40% “Cadillac Tax.”
Essentially, Obamacare will make it prohibitively more expensive for employers to insure spouses. Since families prefer to be on the same plan, however, if given the option both spouses would likely switch to the other employer’s plan. This will place a bigger burden on companies who do not institute such policies, and this could force those companies to respond by adopting them.
In addition, once the individual mandate is in place, employers may not provide for any spouses, employed or unemployed, because the alternative of federal healthcare exchanges exists. This would force increasing numbers of people onto the federal system (unless they decide it is financially better to opt out of any insurance and pay the fine instead). Individuals cannot refuse employer-offered insurance in favor of federal exchanges, though, so this shifting would have to be instigated by the employer.
Harry Reid has openly stated that Obamacare would lead to a single-payer system, and it’s not difficult to see how this is the case. Federal healthcare exchanges can also be overwhelmed, especially if large numbers of young, healthy people decide to pay the fine instead of purchasing healthcare. Ultimately, Obamacare will not be economically sustainable for employers, individuals or the government, and when this proves to be the case, the federal government will surely push for more involvement rather than stepping back.
