Majority of employers focusing health benefit strategies on avoiding the Cadillac tax

The vast majority of employers (76 percent) are focusing their health benefits strategies on avoiding the Patient Protection and Affordable Care Act’s (ACA) (P.L. 111-148) Cadillac tax on high-cost health plans, according to recent research from the Midwest Business Group on Health (MBGH). The survey found that priorities for 2016-2017 are increasing employee engagement in health improvement programs (81 percent) and using preventive services (77 percent).

Cadillac tax. To help pay for the cost of health care reform, Section 9001 of the ACA created the Cadillac tax. Beginning in 2018, a non-deductible excise tax will be imposed on the cost of employer-sponsored health programs that exceed a certain value—an aggregate value of $10,200 for individual employee-only coverage and $27,500 for family coverage.

When survey respondents were asked about their expected Cadillac tax timeline, 47 percent indicated that they will reach it beyond 2019. MBGH noted that only 18 percent expect to reach it in 2018 when the tax is set to begin. The top strategies employers currently have in place to avoid the Cadillac tax include increasing the availability of wellness programs, offering high deductible health plans (HDHPs), adding or expanding incentives for employee wellness programs, and increasing employee cost-sharing. Employers indicated they also plan to optimize networks for best providers and reduce benefits.

“To ensure they are getting the most value for their health care dollars, employers are implementing a number of key strategies to manage their company’s health benefits and taking steps to encourage their employees to better manage their health,” said Larry Boress, MBGH president and CEO. “The business community continues to believe health care benefits are an investment in their human capital, and they’re seeking effective and innovative approaches to deal with their largest expense outside of payroll.”

Other findings. The survey also found the following:

Private exchanges. When asked about plans to offer private exchanges to their workers, 79 percent of employers indicated that they will not consider this strategy through 2016; however, the percent of employers who say they won’t consider this strategy decreases in 2017 and 2018 to 44 percent and 29 percent respectively.

HDHPs. Fifty-four percent of employers will offer HDHPs to employees. Employers still believe HMOs and PPOs will remain viable because they want to support employees that are in lower salary tiers.

Cost-sharing. A majority of employers (80 percent) are not yet sure if increasing cost share for employees will be higher or not by 2017, and 21 percent have indicated they plan to remain at 70/30, with only 6 percent moving to a higher cost share of 50/50.

Future of benefits. When asked if they plan to offer benefits in 2025, 60 percent said yes and 40 percent said they do not know. Employers noted that this will be influenced by peer company actions (75 percent), government mandates (71 percent), and labor market pressures (61 percent).

SOURCE: Midwest Business Group on Health press release, November 3, 2015.

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