The latest analysis of the so-called “Cadillac tax” on rich medical plans projects one in four employers offering health benefits “could be affected” by the regulation in 2018 if they don’t make changes to their benefit structures.
The Cadillac tax was created as part of the Affordable Care Act largely as a way to help fund benefits to the uninsured under the law. Starting in 2018, employers pay a 40% tax on costs of health plans that are above $10,200 per individual and $27,500 for family coverage.
The Kaiser Family Foundation, which looked at a sampling of nearly 2,000 employers that range in size from more than 5,000 workers to fewer than five employees, said the tax could impact even more employers as their costs rise. Kaiser researchers said nearly one-third, or 30%, of employers could be affected by 2023, rising to 42% of employers in 2028 “if their plans remain unchanged and health benefit costs increase at expected rates.”
To avoid the Cadillac tax, employers are raising co-payments and deductibles and shedding coverage in certain areas. They are also introducing more restrictive lists of doctors and hospitals in hopes to shed higher cost medical care providers.
“For the most part these changes will result in employees paying for a greater share of their healthcare out-of-pocket,” Gary Claxton and Larry Levitt of the Kaiser Foundation wrote in their brief on the Cadillac tax.
Inside Obamacare: The Fix For America’s Ailing Health Care System explores the ways the Affordable Care Act will impact your health care.
Kaiser’s analysis casts a somewhat wider net of employers than a similar analysis of the Cadillac tax earlier this month that focused mostly on large U.S. employers by the National Business Group on Health, which said nearly half of U.S. employers have at least one health plan they offer that will trigger the Cadillac tax. The National Business Group is an association of 425 large U.S. employers that includes
Both studies indicate a sense of urgency if employers are to avoid the tax.
“The potential of facing a healthcare plan tax assessment as soon as 2018 is encouraging employers to assess their current health benefits and consider cost reductions to avoid triggering the tax,” Kaiser’s Claxton and Levitt said. “Some employers announced that they made changes in 2014 in anticipation of the (tax), and more are likely to do so as the implementation date gets closer. By making modifications now, employers can phase-in changes to avoid a bigger disruption later on.”
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