The 2018 implementation of the so-called Cadillac tax is shaping employer health plans. But the excise tax, part of the funding mechanism of the Patient Protection and Affordable Care Act, doesn’t appear to be causing panic in the C-Suite.
An Aon Hewitt survey of 317 U.S. employers reports that “40 percent expect the excise tax to affect at least one of their current health plans in 2018 and 14 percent expect it to immediately impact the majority of their current health benefit plans.”
Overall, it seems Cadillacs just don’t get the attention they used to. Aon Hewitt found that “a quarter of employers … still have not yet determined the impact of the tax on their health plans, and more than one-third reported that their executive leadership and finance teams have limited or no knowledge of the implications of the tax for their organizations.”
If the trends spotted in this rather limited pool of respondents holds up over time, wellness programs may benefit from the excise tax, while voluntary benefits may take a hit. Here are some of the actions contemplated next year by companies where the excise tax impact has been evaluated:
- 33 percent are reducing the richness of their plan designs through higher out-of-pocket costs, including 10 percent that say they will eliminate high-cost, rich design options;
- 31 percent are increasing the use of wellness incentives in their plans;
- 14 percent are evaluating private exchange options for pre- and post-65 retirees, while 7 percent are considering private exchanges for active employees;
- 14 percent are significantly reducing spousal eligibility or subsidies through mandates or surcharges;
- 5 percent are implementing narrow/high performance provider networks.
Aon Hewitt also solicited projected plan design changes 10 years out. Here are some of the strategies employers shared in the survey:
- 37 percent may restructure coverage tiers to align with tax threshold ratios;
- 31 percent may limit FSA, HSA and/or HRA contributions counted against thresholds;
- 26 percent may limit buy-up options for employees;
- 16 percent may move to a private health exchange.