Employers have seen increased costs to their health care due to the Affordable Care Act (ACA) but according to latest surveys many feel the largest increases are yet to come.
Over one-third of employers expect the largest cost increases related to ACA implementation to take place in 2016 as new reporting, disclosure and notification requirements take effect. Employers are required to collect extensive amounts of data which can take hours and may require complex IT infrastructures to track.
At least 27 percent expect the largest increase to occur in 2018 when the looming excise tax (also known as the Cadillac tax) on high-value plans goes into effect. Regardless of whether premiums are paid by employers or employees, the nondeductible 40 percent excise tax will be levied on plans that cost in excess of the statutory thresholds (in 2018, $10,200 for self-only and $27,500 for family coverage).
Employers have expressed that they believe the top 3 compliance-related cost-drivers going forward will be:
- The excise tax on high-value plans.
- General administrative costs.
- Costs associated with reporting, disclosure and notification requirements.
One step employers are taking to help control ACA compliance related costs are high-deductible health plans (HDHPs).
- HDHPs – HDHPs have lower premiums than other health plans which can help employers avoid triggering the excise tax. Many employers have added or are considering adding a HDHP.
- HRAs and HSAs – Health reimbursement accounts (HRAs) are employer-funded, while health savings accounts (HSAs) can be funded by employers and employees. Both can help employees manage the financial burden posed by HDHPs.
- Full-replacement approach – To avoid the excise tax, employers may choose to adopt a “full-replacement” HDHP strategy, where HDHPs are the only plan options provided.
HDHPs are expected to gain in popularity as employers face the upcoming Cadillac tax. A recent survey found that just about 50 percent of the employers who participated are expected to trigger the excise tax in 2018. Out of those employers only 3 percent plan to actually pay the tax. Those employers looking to avoid paying the excise tax have already, or plan to, add a high-deductible health plan.
Employers can change the structure of their health care plans or shift some of the cost burden to their employees, but there is no indication that they will stop offering health care benefits anytime soon. Nearly all employers surveyed indicated that they will be continuing to offer health care coverage at least for the next five years citing that benefits are an essential for attracting and retaining high-quality employees.