Obamacare Fallout: Paid Coverage for Families of Employees

One casualty of the new health care law may be paid coverage for families of people who work for small businesses. 

Insurance companies have already warned small business customers that premiums could rise 20 percent or more in 2014 under the Affordable Care Act. That's making some owners consider not paying for coverage for workers' families, even though insurance is a benefit that helps companies attract and retain top talent. If more small business owners decide to stop paying for family coverage, it will accelerate a trend that started as the cost of health insurance soared in recent years.

Under the law, companies with 50 or more employees are required to provide affordable coverage for their workers. They also must offer health insurance to employees' dependents, but don't have to pay for it. And they aren't required to offer insurance at all to employees' spouses. 

Mike Shoop got a taste of what buying insurance will be like under the ACA when he shopped for a policy that will take effect Sept. 1. His insurer quoted premiums 8 percent higher than his current policy, and warned Shoop that he'd get an even larger increase a year from now. Shoop, who owns a debt collection company in Greeley, Colo., said he may have to cut back on insurance for his employees' families if rates keep soaring.

"We're very generous in what we pay," says Shoop, the owner of Professional Finance Co. "But like most companies, we're about at our maximum of the total dollars that we can spend on health care." 

Shoop pays between 70 percent and 90 percent of an employee's premium, and between 10 percent and 30 percent of family premiums, depending on how long a worker has been with the company. He declined to say how much he pays for health coverage. Shoop has 150 full-time and 20 part-time workers. 

Premiums have been soaring for years because of the rising cost of medical care. But the ACA also has requirements that may drive premiums higher, including a tax on insurance companies that is expected to be passed along to employers. Shoop's insurer has warned that the tax could send his premiums up more than 20 percent a year from now.

"It's going to be very significant," Shoop says. "We're really going to have to do a juggling act, and so are our employees." 

It's hard to know at this point how many owners will forgo family coverage, because much about the law is unknown. The government last this month gave employers an extra year, until Jan. 1, 2015, to comply with the health care law. The Internal Revenue Service has drafted regulations to implement the employer mandate, but they haven't taken effect. And premiums for 2014 haven't been set in most states.

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