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Survey: Many Employers Planning Ahead for ‘Cadillac Tax’

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Sep 23rd 2015
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A new survey of large employers has found that a majority have already taken steps to prepare for the Affordable Care Act's 40 percent excise tax on high-cost health insurance plans, known as the “Cadillac tax,” that will go into effect in 2018.

Of the firms with 200 or more workers that participated in the 2015 Employer Health Benefits Survey, which was released on Sept. 23 by the Kaiser Family Foundation and the Health Research & Educational Trust, 53 percent said they have conducted an analysis to determine if any of the health plans they offer would exceed the Cadillac tax thresholds. Nineteen percent confirmed that their plan with the largest enrollment will exceed the threshold amount.

In addition, 13 percent of large companies offering health benefits said they have already made changes to their plans to avoid reaching the excise tax thresholds, and 8 percent have switched to a lower-cost health plan.

“Those changes likely will shift costs to workers, but exactly how and how much will vary for individual workers,” study lead author Gary Claxton, a Kaiser Family Foundation vice president and director of the Health Care Marketplace Project, said in a written statement.

According to a separate Kaiser Family Foundation analysis released last month, about one-quarter of employers that offer high-cost health plans could be hit with the Cadillac tax in 2018. And if health costs continue to skyrocket, even more employers are estimated to face the excise tax in later years: 30 percent in 2023 and 42 percent in 2028, the analysis states.

The Cadillac tax, which was intended to raise revenues to fund coverage expansion under the Affordable Care Act, is levied on health coverage plans that exceed cost thresholds. For individuals, that threshold is $10,200; for couples or families, $27,500. Those floors will increase annually. The tax is 40 percent of the difference between an employee's total health benefit cost in a year and the threshold amount that year.

The 2015 Employer Health Benefits Survey also captures some steps employers have taken to limit their provider networks as a way to reduce costs: 9 percent of firms offering health benefits said that one of their plans eliminated a hospital or a health system from their network, and 7 percent offer a “narrow network” plan, generally considered more limited than the standard HMO network.

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