As the tax on Cadillac insurance plans looms closer under the Patient Protection and Affordable Care Act large employers are increasingly putting an end to their most generous health care coverage.
By introducing higher deductibles and co-payments, rising premiums and the imposition of wellness programs that carry penalties for people who don’t comply, companies are shifting more costs to workers.
The tax had been envisioned as a tool to slow the nation’s growing health-care costs but has shown an increase in higher out-of-pocket health care costs for workers. To make sure they don’t have to pay the 40 percent surcharge on health insurance spending that exceeds $27,500 for a family or $10,200 for an individual, employers are already preparing even though the tax doesn’t take effect until 2018.
Slowing growth in premiums
The slowing of the growth in health care premiums since the PPACA took effect in 2010 can be contributed to the tax on Cadillac plans.
In 2014 the average family premium rose 3 percent to $16,834 and single premiums held at $6,025. With an average of $6,244 for single coverage, companies who have a large percentage of high-wage workers paid more.
In companies with 200 or more employees, workers paid one-quarter or more of their premiums for family coverage last year in 51 percent of those employers. That portion has been increasing gradually, up from 42 percent in 2011.
Employers most susceptible to the tax are those who have traditionally offered generous benefits to lure top professional talent and those who have conceded to demands from labor unions for better health benefits. Companies are imposing new requirements on workers and are reducing health benefits in response.
Companies are expanding their wellness programs for 2015 with some requiring workers to complete a biometric screening and an online questionnaire in exchange for money for medical expenses being placed in a savings account. Those employees who don’t comply will pay extra for their insurance premiums. Some believe that workers spouses have higher claims, on average, and are also raising insurance premiums for them as well.
Employers not dropping coverage in 2015
Most health plan sponsors aren’t making major changes to their employee coverage for 2015.
The challenge of maintaining competitive benefits plans while balancing the increased cost of medical care is something all employers face.
The number of employers offering only a high-deductible plan was expected to increase by 50 percent for 2015, according to an August study from the National Business Group on Health. Thirty-two percent planned to offer such “consumer-directed health plans”, up from 22 percent in 2014.
With some companies requiring employees to pay in-network deductibles for the first time this year, sharing in the cost of care, some employees view the changes as a pay cut.
The tax’s debut in 2018 is still a long way away and there is hope among some employers that the tax may be delayed or repealed and in order to avoid this tax are taking action now.
Paypro can assist your organization in Benefits Administration and answer any compliance questions you might have. Visit our Employee Benefits Solutions’ page by clicking here for more information.