Though employers won’t have to pay the “Cadillac tax” on rich medical plans until 2018, they are mitigating potential financial hits from it by spending more on wellness and shifting workers to high deductible plans so employees think twice about using expensive care, a new analysis indicates.
The Cadillac tax was created as part of the Affordable Care Act largely as a way to help fund subsidized 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.
Nearly half of large U.S. employers have at least one health plan they offer to their workers that is considered a Cadillac plan that will “trigger” the special excise tax if the impacted companies don't find a way to curb health costs, according to the National Business Group on Health, an association of 425 large U.S. employers including
“The only way to minimize or delay the Cadillac tax is to slow the growth of the total premium,” Brian Marcotte, president and CEO of National Business Group on Health said in an interview.
More employers will face a "Cadillac tax" if they don't "bend the cost curve" before 2018, the... [+]
Strategies to reduce costs by employers, including more cost-sharing that shifts more of the premium onto workers, are keeping health inflation at about 5% heading into 2016, which is in line with this year and two years ago, the business group said.
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To stay below the Cadillac tax thresholds and keep overall employee costs in check, employers are spending large amounts of money on wellness programs and other efforts to curtail worker use of more expensive inpatient care.
Employers continue to push high-deductible “consumer directed health plans” which are generally tied to a health savings account that makes workers think twice about purchasing a more expensive brand name drug or using unnecessary health services or procedures. Nearly 90% of employers offering a consumer-directed health plan in the NBGH survey pair a high-deductible health plan with a health savings account.
And employers are providing their workers with a greater contribution to the account. An employee will receive a “median of $750, an increase from a median $600 reported last year,” the business group’s 24-page analysis shows.
At least three in four of those responding to the survey are increasing the use of consumer directed health plans. Another 70% are expanding various wellness programs, NBGH said.
“Employers only have two more years to bend the cost curve before the excise tax goes into effect in 2018,” Marcotte said in a statement. “And while employers are pursuing several strategies to keep their plans under the excise tax threshold, they estimate their actions will only delay the impact by two to three years.”
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