Companies Embrace Health Plan Consumerism Strategies To Comply With ACA, Avoid “Cadillac Tax”

Many employers are beginning to scale back their medical plan designs in an effort to avoid the “Cadillac tax” required by the Patient Protection and Affordable Care Act (ACA) in 2018, according to the fifth annual Medical Plan Trends Report issued by Highroads and CEB. The result is an increasing share of cost for employees, including an increase in high-deductible plans, a greater number of plans with coinsurance charges, higher out-of-pocket maximums, and increases in emergency room copayments.

“The employer-sponsored medical plan landscape continues to shift in response to the ACA and, as a result, it’s more important than ever for employers to effectively communicate plan changes to their employees,” said Cynthia Weidner, vice president of client development at HighRoads. “It’s evident that companies are embracing typical health plan consumerism strategies that encourage a more thoughtful, cost-effective use of medical benefits by exposing plan participants to more of the upfront costs. With plan designs changing and the emergence of new options including both public and private exchanges, benefits management professionals should be armed with the information employees need to make informed decisions on plan choices and efficient benefits usage.”

Excise tax. In 2018 the ACA will impose a 40 percent excise tax (also called the “Cadillac tax”) if the value of the health insurance benefits exceed the threshold for a plan that costs more than $10,200 for an individual and $27,500 for a family (indexed for inflation). HighRoads and CEB found that companies are starting to evolve their benefits plans to prepare for this requirement.

The report found:

• Two-thirds of 2014 medical plans have individual, in-network out-of-pocket maximums of $2,500 or more. This is up from 58 percent of plans in 2013, and 49 percent in 2012.

• Forty-two percent of plans charge coinsurance for office visits, up from 35 percent in 2013.

• Emergency room (ER) visit copayments have increased by roughly $3 per year since 2009, with a 2014 average of $113 per visit.

• The percentage of plans with high deductibles grew by 2 percent in 2014 from 23 percent to 25 percent.

Other trends. In addition to trends related to greater plan participant cost sharing, the report noted some positive trends that can be attributed to the ACA. These include:

• More generous coverage for mental health. The average copayment for an inpatient mental health visit dropped by 3 percent from 2013 to 2014.

• Greater free preventive coverage. In fact, nearly all 2014 plans cover 100 percent of patient costs for in-network cancer screenings, immunizations, and other preventive services.

“Our research shows that the changing face of health care plan design will continue to evolve as employers work to meet ACA requirements while avoiding added tax penalties by 2018,” said Laura Arpin, associate director at the Corporate Executive Board. “But, employers must recognize how these changes may be reflected in the health care behaviors of their plan participants. Without strategic communication processes in place on the best practices for utilizing health plan benefits, plan participants may be more apt to delay necessary care due to the uncertainty of its actual cost. By making sure plan participants have cost information, employers can reduce the likelihood of their employees and employee families delaying or rationing care by as much as 50 percent.”

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