UPS's Obamacare Gambit: Dropping Spouses Out Of Spite

UPS explained that Obamacare is responsible for their new policy of denying working spouses of employees health care coverage.

UPS truck

UPS explained in a memo today that working spouses of employees are being denied health care because of Obamacare.  (Source:  Flickr: Michael Cereghino)

Two months ago, UPS announced that about 15,000 spouses of their employees would no longer be eligible for the company's health insurance plans starting in 2014, right when the Affordable Care Act, known better as Obamacare, takes effect.  Initially, the reason was unstated, but many suspected that Obamacare's large employer provision, which required health insurance for employees and their children but not their spouses, triggered the decision.  Now, in a memo to employees today, UPS explicitly points to Obamacare as the reason for the change in insurance policy.

The UPS memo explains in explicit detail whose spouses can or cannot be covered.  The main issue of contention is that these 15,000 spouses are working at an employer that can provide them health care benefits.  It is these spouses that UPS will categorically deny coverage to.  Spouses that are not working, or are working at an employer that does not provide them health care benefits, would still be eligible, despite Obamacare's exemption.

UPS says that they chose this to "save money" from the changes instigated by Obamacare, reportedly to the tune of $60 million.  However, there are a few things wrong with this.  First of all, it is a blanket rejection of coverage, not a case-by-case rejection.  While UPS may have a case for denying spouses coverage to save money on their end, and that there is a great risk of overlap from two spouses having separate health care plans that Obamacare seeks to address, it places the burden of coverage on the employee and their spouse rather than on the company, which makes things more difficult for them, and still does not completely address overlap.

A more practical solution for UPS would have been to approach each employee case-by-case, and present the option of either keeping current coverage for an additional fee at the cost of the spouse renouncing any health care claims at their company, or reject them outright.  That would save less money, but UPS would still save money through this method.  Yet, UPS argued that even adding such fees alone would make coverage "unaffordable," even though the employee and/or spouse is willing to afford the surcharge in the first place.

What makes UPS' blaming Obamacare even weaker is that they are not in dire straits in the least:  Last month, in their quarterly earnings report, UPS reported a drop in profits year-over-year of about $50 million, or 2 cents a share.  UPS called that drop "slight."  If UPS's current health care plan were to remain, and they had to spend $60 million, they would only lose a little more than 3% of their current profits of $1.74 billion, which is chump change.  In essence, UPS could take a hit in maintaining their current coverage without damaging their core business model or losing a significant amount of profits.

All one can see in UPS's reasoning is spite.  Not spite towards Obamacare specifically or the federal government at large, because the politics are weak, but spite towards their employees.  Their business model is not in the least bit threatened from Obamacare, and their profits will likely strengthen over the next six months due to the holiday season.  UPS could afford to lose some money, and yet they choose to not invest in their employees.  For UPS, profit for shareholders matters more than the well-being of their employees, and they will nick at the latter at every opportunity.