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Companies push out spouses to cut the cost of health care

A handful of major employers are using a controversial new tactic to trim the costs of health care. They're eliminating benefits for employees' spouses who have the option of coverage elsewhere or they're making them pay more.

Media giant Gannett Co. is the latest employer to implement the policy, telling insured workers recently they have two choices in 2005: Drop your spouse from your plan or pay an extra $150 a month toward coverage.

The ultimatum applies only if the spouse is employed and eligible for comparable coverage through his or her employer. Nonworking spouses or those whose employers do not offer health benefits will not be liable for the surcharge. Coverage for dependents is not affected.

Tara Connell, spokeswoman for Gannett, which owns 101 daily newspapers and 21 television stations including Tampa Bay's 10, said the company was forced to make changes after seeing double-digit health care costs for the third year in a row. Like many large employers, Gannett is self-insured, meaning the company picks up all medical costs beyond what the employee contributes in premiums and co-pays.

"It was a pretty agonizing decision, but we had two options," she said. "We either affect the bottom line, which impacts the health of the company and the confidence of stockholders. Or we affect the morale and well-being of our employees. We have to balance these strongly competing goals."

Gannett isn't alone. For its unionized employees in the Northeast, Verizon now charges a $40 a month surcharge for employed spouses. The surcharge is not charged if the spouse's income is less than $25,000 a year or if the spouse's premium is $900 or more.

Knight-Ridder Inc., which publishes 31 daily newspapers nationwide, told employees late last year that it would no longer cover spouses who had benefit options elsewhere. That knocked more than 1,000 people off its health plans, which cover 18,000 employees.

Polk Laffoon, a spokesman for Knight-Ridder in San Jose, Calif., said the policy, implemented in January, resulted in significant savings for the newspaper chain.

"It's nothing to be feared," he said of the change. "Knight-Ridder may have provided a somewhat better plan than the spouse's employer and that's why employees didn't like the change. But times are tough all over."

Health care experts are divided over whether this latest cost-cutting strategy will become a widespread trend. But they understand the motivation behind the move.

"Large employers are worried that they're providing benefits to whole families while other employers aren't," said Gary Claxton, vice president of Kaiser Family Foundation, a nonprofit group that monitors changes in employer benefits. "That's not a new saw."

Like kids playing a high-stakes game of Old Maid, employers are looking to off-load medical expenses wherever possible. Most commonly, they're raising employees' premiums, co-pays and deductibles. But more companies are looking at possible incentives _ and disincentives like surcharges _ to limit the number of people covered by their plans.

For the first time this year, Kaiser included a question about such strategies in its annual employer benefit survey. Of firms offering health benefits, 17 percent said they give additional compensation to employees who decline the offer of health coverage. Though this approach can be seen as a backhanded way of encouraging employees to join spouses' plans, employers say that's not the intent.

Pinellas County has had such an incentive program for years, giving workers $98 a month if they go on a spouse's coverage. But Dave Blasewitz, the county's senior benefits specialist, said the impact has been minimal.

"Of 3,500 employees, less than 200 opt out," he said. "The incentive is really meant to contribute to the cost of other coverage."

Kaiser reported that 12 percent of the companies surveyed have programs similar to Gannett's, applying surcharges if a family member has access to coverage from another source.

Three percent of employers gave additional compensation to workers who chose single, rather than family coverage.

Companies that are not yet using such tactics were reluctant to admit to Kaiser that they may adopt them in the future. That may be due to their unpopularity, even with some benefit consultants. Joni Long, managing partner of Witner National in St. Petersburg, called spousal surcharges "tacky."

"I'm more of a "carrot' than a "stick' person," she said, referring to her preference for using incentives rather than penalties to keep medical costs down. "I don't think surcharges would bode well for employee relations."

Jo'el Rivera, compensation, benefits and systems manager at the St. Petersburg Times, said the newspaper's claims costs have been manageable for the past two years and it is not considering implementing a surcharge.

"A surcharge is a tough message to sell," he said.

Gannett is learning that lesson as employees gripe in the halls and e-mail the chain's McLean, Va., headquarters with questions about the new policy. The company has about 24,000 employees enrolled in its health plans; about half of those employees currently include their spouse in their coverage. The company has no estimates of how many employees will drop coverage for their spouses as a result of the change.

Connell, Gannett's spokeswoman, stressed that employees who drop their spouses next year will see their monthly premiums reduced because they will qualify for lower single or single-with-children rates.

"The differential is roughly what your spouse will pay if he goes to his company's health care plan, plus you won't have to pay the $150 surcharge. In some cases, it really is a very close to a wash," she said.

"We're not trying to be nasty people. But we have huge costs and something has to be done."

Kris Hundley can be reached at or (727) 892-2996.


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