2003-09-17 -- Companies drop families from employees' health plans
Family values under the profit system:

Wall Street Journal,  September 9, 2003

Company Health Plans Try to Drop Families.
Employees With Spouses, Kids Face Surcharges
As Employers Search for New Cost Controls

By VANESSA FUHRMANS  Staff Reporter of THE WALL STREET JOURNAL

(See Corrections & Amplifications item below.)

As employees re-enroll in company benefit plans this fall, many will
have to contend again with higher premiums and out-of-pocket charges.
But those paying the family rate may get walloped even worse.

Overwhelmed by double-digit rates of increase in health-care costs, a
number of major employers are realizing that the bulk of those
expenses don't come from employees themselves but from their spouses
and children. So they are looking for ways to make families foot more
of the bill -- or drive them elsewhere.

Some companies are sharply raising the premium for family members.
Others are adopting "incentives" to nudge working spouses off their
health plans. And a small but growing number of employers are going so
far as to refuse to cover spouses who work for companies with similar
health plans.

The tentative contract agreement that Verizon Communications Inc. and
its unions reached last week includes a $40 monthly fee for employees
whose working spouses decline comparable health-care coverage at their
own company. Boeing Co. already charges workers an extra $100 a month
if their working spouse or domestic partner chooses Boeing's health
plan rather than that of their own employer. In January, General
Electric Co. will start charging more for large families than small
ones, an approach that numerous other employers have already taken.
Next year, the State Teachers Retirement System of Ohio, which pays
benefits to more than 100,000 retired teachers and their families,
will stop subsidizing the premiums of spouses or other dependents.

Driving the effort are the numbers, which are striking. Large
companies that have relatively generous family heath benefits can find
that as much as 70% of their health bill covers spouses' and
children's expenses, according to Tom Beauregard of Hewitt Associates,
an employee-benefits consulting firm. "More employers are looking at
how many dependents are on their plans and whether they can control
costs by driving some of them elsewhere," he says.

The tactics appear to be working. In a survey to be released Tuesday,
the Kaiser Family Foundation found that 33% of workers elected to take
family health coverage through their company this year -- down from
39% just two years ago. The percentage of companies that fully
subsidize family medical premiums dropped to 15% in 2003 from 27% in
2001, according to the foundation, an independent health-care research
organization.

Labor unions are fighting the measures. But eager to preserve the most
generous health benefits possible for workers themselves, a number
have ended up ceding to management's efforts to target working
spouses. Though Verizon's unions agreed to the surcharge on working
spouses, they won a pledge from the company to continue to pay 100% of
employees' health-insurance premiums. The United Food and Commercial
Workers Union in northeastern Ohio agreed this year to a contract
provision that requires working spouses to take health-care coverage
at their own company if it's available. The policy applies to
employees at Giant Eagle, CVS, Rite Aid and other chains with
contracts with the union. In exchange, the union says it has won
contracts that preserve the health-care benefits of employees.

Many such policies regarding working spouses include conditions that
prevent a spouse from being forced onto a worse health plan. In many
cases, a spouse has to be a full-time employee somewhere else, earn at
least a certain amount or have equal or better benefits at his or her
own company in order to be subject to the policy. The Verizon
surcharge, for example, doesn't apply for spouses who earn less than
$25,000 annually or who would be forced to pay more than $900 a year
for coverage through their own employer.

In a recent survey by Hewitt of more than 540 companies, 31% said they
would consider at some point requiring working spouses to take their
own employers' plans, and 6% are already doing it. Employers say
legality isn't an issue, but they do say such policies can be
difficult to enforce. Employers say they can legally require employees
to sign a statement that they're truthfully disclosing their spouse's
health-care options. If an employee is found lying, that could be
grounds for terminating a policy, or even job.

A more common move is "tiering" family plans -- so that employees with
large families pay more than those with just one or two kids. At GE,
employees currently pay the same monthly amount for families of all
sizes. As of January, though, an employee who earns $45,000 must pay
$14.84 per week in 2004 to cover a family of three or more versus
$11.78 to cover a family of two. (Currently, that employee would pay
$8.71 a week to cover a family of any size.) Roughly 70% of firms in
the Fortune 500 charge employees with larger families more, a company
spokesman says.

If the myriad premium schedules are too much to crunch, many employers
provide help in recalculating benefits or offer online services
through their employee-benefit managers. As premiums, co-pays and
deductibles rise, so do the benefits of flexible-spending accounts, a
benefit offered by many employers that allows workers to set aside
pretax dollars to use for out-of-pocket medical expenses.

Even small changes in a company's family or spousal benefits are
reason to recalculate whether it's wise for couples to split up or
stay together on benefits plans, and whose plan should cover the kids.
Jennifer Overstreet and her husband, Richard, both work in Newnan,
Ga., at Excel Corp., a meat-processing company. Two years ago, Ms.
Overstreet found it cheaper to go on a separate plan with their
six-year-old son, since Richard is a smoker and has to pay a higher
premium. But after the birth of a daughter last year, they reworked
the numbers and discovered they would save $30 a month in premiums if
the whole family came under the same plan.

--Ruth Simon contributed to this article.

Write to Vanessa Fuhrmans at vanessa.fuhrmans@wsj.com

Corrections & Amplifications:

Contracts between the United Food and Commercial Workers Union and CVS
and Rite Aid drugstores in northeastern Ohio don't include a provision
that requires working spouses to take health-care coverage at their
own company if it is available. The policy applies to the union's
northeast Ohio contracts for food-industry employees. The article
above incorrectly stated that the provision also applies to employees
at the drugstore chains.