Dive Brief:
- Even though employers are busy figuring out strategies to avoid the Affordable Care Act's looming 40% excise tax, most will eventually be affected due to the way the tax tracks price indices - even with the recent delay, according to Human Resource Executive (HRE).
- The tax currently is scheduled to go into effect in 2018, though the recently passed House budget agreement, supported by both parties, will delay the tax until 2020 once it is signed by President Obama.
- The article says many employers, in their desire to minimize the tax's impact, have made a real dent in lowering their healthcare costs and making their healthcare plans more efficient.
Dive Insight:
"The way in which the tax is structured means there's not much you can do to stave it off permanently," Steve Wojcik, vice president of public policy at the National Business Group on Health, told HRE. "Tinkering only buys you a certain amount of time."
The Cadillac tax impacts healthcare benefits valued at over $10,200 for individuals and $27,500 for families. It is connected to the consumer price index (CPI), rather than medical inflation. Given that medical inflation tends to rise much faster than the general CPI, this means that most healthcare-plan costs will end up surpassing the excise-tax thresholds, Wojcik said.
"Many employers have been using the Cadillac tax as a lever to make changes they've wanted to make since well before the ACA," he says.
The article points out that employer strategies to battle potential excise tax repercussions include more employee cost-sharing (mainly via high deductible health plans, or HDHPs), eliminating high-cost health plans, offering "transparency tools" for smarter healthcare shopping, and cutting back subsidies for spousal and family coverage. Mercer's Beth Umland, director of research for health and benefits, told HRE that employers realize increased cost-sharing can be a shock to employees, so they are adding tools to help employees better manage healthcare costs.