Employers see two significant drivers of health care cost increases: the excise tax on high-cost plans and coverage extensions to young adult dependents.
The biggest cost driver, according to employers, is the excise tax cap on high-cost benefit plans. Nearly half (43 percent) of the employers surveyed believe they will be subject to the excise tax. Based on average annual cost projections, Towers Watson estimates that the tax cap will affect more than 60 percent of employers by its first year of implementation in 2018, with many more to follow soon after.
"To avoid significant tax penalties in 2018 and beyond, all employers will need to make structural program changes in the near term to moderate cost increases," says Mark Maselli. "While the excise tax is potentially the most expensive provision, there are others that will drive up employer costs." And one example is the requirement for employers that offer dependent coverage to extend coverage to employees' children up to age 26. Only 16 percent of survey respondents indicated that they would implement this coverage extension before the mandatory deadline, and 78 percent said they would wait until 2011.
