Health Reform May Push Employers Into Offering Voluntary Benefits

Employers are feeling the increased impact of the Patient Protection and Affordable Care Act (ACA) on various aspects of their employee benefits programs, according to recent research from financial services provider Prudential. In fact, the study, Health Care Reform: Full Steam Ahead, found that 49 percent of employers report that they are extremely or very likely to make a high-deductible health plan (HDHP) their only health insurance option in the near future. Prudential notes that while employers might have to scale back on employee benefits due to cost considerations, providing voluntary benefits can be a good way to continue to offer attractive employee benefits packages.

Excise tax. In 2018, the ACA will impose a 40 percent excise tax on employer-sponsored health coverage that exceeds a threshold amount, otherwise known as “Cadillac” health plans. The tax will be imposed with respect to coverage for a tax period if: (1) an employee is covered under an applicable employer-sponsored plan; and (2) there is any “excess benefit” with respect to the coverage. An excess benefit is defined as the sum of the monthly excess amounts during a tax period. A monthly excess amount is the excess of: (a) the aggregate cost of the applicable employer-sponsored coverage of the employee for the month, over (b) an amount equal to 1/12 of the annual limitation for the calendar year in which the month occurs.

One strategy for employers who wish to avoid the excise tax is to add an HDHP as their only plan option. These plans are typically lower cost than regular PPO or HMO coverage. “Although employers anticipate scaling back benefit offerings due to cost considerations, there’s great opportunity for them to offer voluntary benefits in order to continue providing attractive benefits to their employees,” said Vishal Jain, vice president of strategy, planning and business insights at Prudential. “The ACAcould very well usher in a new era for and emphasis on voluntary benefits. More employers are utilizing them for recruiting and retaining talent and employees increasingly view them as a cost-effective way to protect their families’ financial futures.”

Other findings. Prudential also found that 73 percent of employers said that the ACA is having an impact on benefits service and support and 69 percent reported that there is an impact on benefits communications. “With a shifting benefits landscape, carriers are now focused on being a trusted resource for employers while offering a full spectrum of services such as enrollment communications, benefits education, record keeping, and administrative services,” Jain said.

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