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Firms cut back medical coverage

Faced with soaring costs, many employers are discouraging workers from adding spouses or children to their insurance plans.

October 06, 2003|Daniel Costello | Special to The Times

People like Elaine Linn of Folsom, Calif., say they're nearing the breaking point. Linn, a 32-year-old employee with Perry's public relations firm, decided to move her two children to her husband's school district plan after she realized that she would have to pay nearly $250 a month in additional costs under her company's new policy. She pays $70 a month for their coverage under the new arrangement.

However, Linn says the switch has been complicated by that fact that her husband's plan is more restrictive than her own. This summer, when she tried to refill a prescription for her year-old son, who has Down syndrome, she was told the medication wasn't on an approved list.

Although she finally got the prescription filled, it took five weeks to resolve the issue. "It was a nightmare," she says.

Some consumer advocates fear what will happen to those who can't simply switch coverage to a spouse's plan.

So far, the cutbacks in family benefits appear to be taking hold the most in industries with relatively low unemployment rates, such as engineering, and in smaller companies that have been absorbing the biggest health-premium increases -- as much as 40% a year -- because their smaller size means they lack the clout to negotiate lower rates.

Some larger companies have begun to scale back employee benefits, but experts say most big employers are moving toward the trend more slowly.

Larger unions are also likely to be spared, at least for the time being. In fact, in recent contract negotiations, the United Auto Workers forfeited wage increases to maintain nearly cost-free health care.

Under a landmark health bill passed by the Legislature last month -- and awaiting Gov. Gray Davis' signature -- businesses with 200 or more workers in California would have to provide medical insurance to their employees' dependents, starting in 2006.

There is at least some good news for employees: Many companies are increasing the amount of money allowed in flex-spending accounts, which let employees set aside part of their income tax-free for health costs. And not all spouses are paying extra cash if they skip their own health plans. Most aren't penalized if their company's plan doesn't offer equal or better benefits.

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