AP: Small businesses look at axing family coverage when ObamaCare hits

As the ObamaCare mandates approach — even those purportedly postponed — employers are looking for ways to get around the ballooning costs of insurance for their employees.  Larger employers can spread the costs out better and negotiate lower rates, but smaller businesses have fewer options for retaining their benefits.  The Associated Press reports that many smaller businesses may abandon paid dependent coverage, forcing employees to bear the whole cost, especially for spouses:


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. …

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.”

The ACA requires businesses with 50 or more employees provide coverage to their workers — but family coverage is a different matter.  The mandate requires that employers offer insurance coverage for dependent children (now through age 26, which may be a driver of the increase as well), but does not require employers to cover the cost of that insurance.  Spouses don’t even get that much; the law does not require employers to include them at all, even at the full cost to the employee.  That will send them into the individual exchanges, if employers have to restrict their expenditures enough — and that means more federal outlays for subsidies, and a quicker pace to the barrels of red ink that ObamaCare will produce.


So far, the argument goes that market forces for labor will force employes of all sizes under the mandate to offer health insurance, but that’s a matter of faith rather than reason.  Smaller businesses already have trouble competing against larger businesses on benefits packages. They make up for it with better workplace environments, more satisfying work, upward mobility opportunities, or simply a way to pad the resumé for better jobs in the future.

The bottom line works in this regard, too — and if a few businesses gain an advantage on costs (which then gives them a competitive advantage on price for their products and services), their competition will soon follow, and unpaid dependent coverage will become the norm rather than the exception for all but the largest companies.  For that matter, the fines for non-coverage of employees will exceed the costs of coverage, so the entire exercise will become a waiting period to see how quickly the dam breaks rather than if. Dependent coverage may simply be the first major crack.

At least one group of employees won’t have to worry about this.  Why not?  Well, they work for the people who imposed this mess on the rest of us, so they get a pass:

The White House on Wednesday released the legal details behind its ObamaCare bailout for Members of Congress and their staffs, and if anything this rescue is worse than last week’s leaks suggested: Illegal dispensations for the ruling class, different rules for the hoi polloi.

Thanks to an amendment from Iowa Senator Chuck Grassley that Democrats enacted in 2010, the Affordable Care Act says that “the only health plans that the Federal Government may make available” to Congress are the ones offered on the ObamaCare insurance exchanges. But Members and many aides have been flipping out because they won’t qualify for ObamaCare subsidies and they’ll lose employer contributions they now receive under the Federal Employees Health Benefits Program, or FEHBP, which picks up about three-quarters of the average premium.

At President Obama’s personal request, the Office of Personnel Management decreed that the Members don’t have to get off the gravy train after all. The eat-your-own-cooking provision begins with the phrase “Notwithstanding any other provision of law.” The feds now interpret that clause as a loophole to mean that the Affordable Care Act did not change the 1959 law that created the FEHBP.

Since Members and staff still technically meet the definition of federal employees qualified for the FEHBP, the Administration says they’re still entitled to enroll in the FEHBP concurrently with the exchanges. The feds then “clarify”—their euphemism—that the regulatory meaning of health benefits in the FEHBP can be ObamaCare plans. Voila, taxpayers will continue to chip in $4,900 for individual and $10,000 for family coverage.


Normally, the WSJ explains, Congress includes the “Not withstanding” language to declare a bill’s primacy over existing legislation.  This takes the curious, and self-serving, position that Congress meant to pass a bill that has no effect in relation to the FEHBP, even though Grassley’s amendment plainly meant the opposite.  It would be interesting to see how a federal court would rule on this interpretation, but I’m not sure who has standing to sue in this case.  Perhaps, oh, 300 million other taxpayers who just got relegated to second-class status by the White House?  Or maybe just the children?

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David Strom 6:40 PM | April 18, 2024