More than one-third of the nation’s employers surveyed (36 percent) are already focusing on possible changes to health-care benefits as they anticipate the upcoming excise tax, which takes effect in 2018. That’s according to a survey entitled “Health Care Reform: The Road to Implementation” that Mercer conducted in May 2013. Mercer is a New York […]
More than one-third of the nation’s employers surveyed (36 percent) are already focusing on possible changes to health-care benefits as they anticipate the upcoming excise tax, which takes effect in 2018.
That’s according to a survey entitled “Health Care Reform: The Road to Implementation” that Mercer conducted in May 2013. Mercer is a New York City–based human resource and financial-services consulting firm.
Often referred to as the Cadillac tax, the excise tax is a 40 percent levy on the cost of medical coverage above thresholds that the Affordable Care Act (ACA) sets.
Under the terms of the ACA, so-called “Cadillac” health-insurance plans worth more than $10,200 for individuals or $27,500 for families face a 40 percent excise tax starting in 2018.
“It’s 40 percent on the amounts over [those totals], so it would be the excess benefit over that dollar cap,” says Thomas Flynn, principal with Mercer based in its Pittsford office.
The numbers are different for retirees or those in high-risk professions, including $11,850 for single coverage and $30,950 for family coverage, he adds.
The tax will be permanent and apply to both fully insured and self-funded employer plans, according to the website of Minnetonka, Minn.–based UnitedHealthcare, which operates an Upstate office in DeWitt.
The upcoming excise tax on high-cost health plans is proposed to both slow the rate of growth of health costs and finance the expansion of health coverage.
“If they’re [subscribers are] willing to keep the plan, then we’re [the federal government] going to put a penalty that’s really going to make them think not just twice but maybe five times about not changing it,” Flynn says.
The seeks to shift consumers’ belief that if they have to pay more expenses themselves, through higher deductibles and out-of-pocket expenses, they’ll avoid unnecessary or overly costly procedures.
The federal government is saying if the nation wants to start controlling health-care costs, then consumers “have to stop being insulated from costs,” Flynn says
“These high-cost plans are normally the ones where that exists, either totally or with the majority of services rendered,” Flynn says.
Application of the health-care excise tax is based on cost of the premiums, or the premium equivalents under a self-funded plan, he notes.
It’s applied based on what the employee pays, flexible-spending account contributions, and health-reimbursement account and health-savings account dollars that are part of the plan, he says.
“This tax looks at the full complete cost of the plan,” Flynn adds.
The Mercer survey also included statistics about what steps employers are taking to avoid the tax in 2018.
More than half have introduced a consumer-driven health plan (CDHP) or taken steps to increase enrollment in an existing CDHP; 48 percent plan to add or expand health-management programs; and 28 percent indicated they would drop a higher-cost health plan, the survey found.
When employers look at all the costs of health-care reform, they’re starting to ask consultants such as Flynn about what other costs are “out there.”
“The excise tax is certainly one of those ones that people want to get out in front of just for those reasons,” Flynn says.
Contact Reinhardt at ereinhardt@cnybj.com