Will Cutting Spousal Benefits Help/Hurt Kroger?
Kroger is cutting medical coverage for the spouses of employees in the Indianapolis area. The move, which will affect 11,200 workers, will go into effect with the New Year.
The company, which has blamed the move on rising healthcare costs, has said it will provide a one-time payment of $1,000 to affected workers next February. By making the move, Kroger has said it will be able to better fund pay increases, health benefits for part-timers working at least 20 hours a week and employee pensions.
The United Food and Commercial Workers union made the deal with Kroger knowing that spouses of employees will be covered through health exchanges created under the Affordable Care Act.
According to a Cincinnati Enquirer report, only four percent of employers denied medical coverage to spouses last year. The number is expected to hit 12 percent in 2014.
Discussion Questions
Will the elimination of spousal healthcare coverage become commonplace in grocery retailing? Do you think the move will help or hurt Kroger in attracting and retaining talent in the Indianapolis area?
The elimination of benefits is commonplace now in many businesses. That’s the purpose of the Affordable Healthcare Act, to get people onto the exchanges. It should have no effect on attracting or retaining talent, since Kroger most likely offers better benefits compared to its competitors. If more people are required to purchase health insurance on their own, total pay is what will be important.
This will neither help nor hurt Kroger as this will be the standard for all businesses in the next 12 months as Obamacare becomes thoroughly deployed. It is the reality in the long run that employer paid health benefits will disappear entirely. It is either the intended or unintended consequence of Obamacare.
There is also the possibility and likelihood that full-time employment in the retail and service industries will all but disappear. So, will Kroger take the hit? If any, it would only be in the short term as every other company is or is preparing to do the same thing.
Oddly, the companies are in most cases taking the blame rather than the blame being placed squarely where it belongs, on the “Affordable Health Care Act.”
In my state, a report was released this week indicating that the cost of benefits has risen 120% this year. It is no coincidence.
This will be a growing trend. The U.S. health insurance system that is so tied to employment is ludicrous. It makes our companies uncompetitive in the world and has no logic or reason in a business/employee relationship.
I think there is another trend we are going to see. Companies will opt to pay the $2,000 penalty per employee for not insuring their workers and saving the $8,000 to $12,000 per employee they currently pay for the insurance. The smart companies will share that savings with employees. The employees can then get the insurance they want and need from the exchanges.
It is called a win/win.
“The employees can then get the insurance they want and need from the exchanges.”
I would agree with your analysis Gene, but with one caveat—the sentence above perhaps should have started with “in theory.” And perhaps excluded the words “…they want…”.
Forgive my quibble and allow me to explain.
What the current system of employer paid, insurance company brokered health benefits has done is create an expectation of prepaid health CARE—not health insurance. For years, employees expected their plans to cover any and everything, and employers touted providing those plans as a valuable benefit.
The problem that grew over time is this. Consumers of health care became totally disconnected and unconcerned about what they were being “charged” for that care—because they weren’t paying it. It was “prepaid” through their insurance coverage.
The biggest unintended consequence of the AHA won’t be that all employees are eventually shoveled into the exchanges. (Sorry Scanner, but I think that one is wholly intended.) It will be that consumers realize how much the “system” has been compensating the health care industry—and what a big cut the insurance companies get out of it.
Eliminating the insurance company middleman from the supply chain would be good for all. But using the AHA as the mechanism for achieving that will result in a single payer system—not the free market relationship the exchanges are billed as. And the consequences will be a very different health care experience for the average American.
When a company such as Kroger feels it has to eliminate spousal healthcare coverage due to new costs, it’s very disappointing. A trend has started and Kroger is testing the water in Indianapolis. I believe that Kroger now knows what the claws of the “Affordable Health Care” law are intended to do even though that bill with the funny name was passed before anyone really read it.
The future focus will be on the amount of pay, not so much the company’s benefit package; and Kroger has a relatively good pay package.
Sounds like the 85% of union employees whose spouses have their own employer health insurance threw the other 15% under the bus. Wonder what changes Kroger is considering for non-union employees.
Gene Hoffman will remember that Indianapolis was the scene of a debacle for Kroger when Marsh Supermarkets successfully sued them for predatory pricing there. This could be yet another Indy debacle for Kroger. As far as I can tell, the voice of the clerks union is yet to be heard on this matter.
Also, the issues of disability and workers compensation have not been adequately addressed by the AHA. When consulting in this field, I became intimately aware of the costly scam it frequently is. Doctors booking unnecessary appointments over and over again for supposedly injured workers in order to make their practices pay. And with insurance companies and third-party billing services continuing to siphon healthcare funds at a prodigious rate through this unclosed loophole, employees will more frequently use it to work a second job while collecting disability from their primary employer so they can cover their new health costs.
What’s next for Kroger in the healthcare field? Will they start down the path of screening the healthcare eligibility of employees based on smoking, caffeine consumption, pre-existing conditions, or body fat index?
It sends the message that the company isn’t all happy families and warm and fuzzy. They might as well cut dependent health insurance as well, since the kids don’t work there either!