According a May 2015 press release by the International Foundation of Employee Benefit Plans (IFEBP), the Affordable Care Act (ACA) has brought increased health care costs to many employers, especially small employers. However, a recent IFEBP survey, "2015 Employer-Sponsored Health Care: ACA's Impact," finds that the majority of organizations believe that the largest cost increases are yet to come.
According to the survey, which was conducted in March 2015, one-third (33 percent) of employers expect the greatest cost increase from ACA implementation to take place in 2016.
Just over one-fourth (27 percent) expect the largest cost increase to take place in 2018, when the "Cadillac" tax is scheduled to take effect. The "Cadillac" tax is an excise tax designed to reduce health care usage and costs by encouraging employers to offer plans that are cost-effective and engage employees in sharing the cost of care. It is a 40 percent tax on employers that provide high-cost health benefits to their employees.
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Twenty percent of respondents state that the impending "Cadillac" tax will be their top cost driver in the future; followed by general administrative costs (19 percent); and costs associated with reporting, disclosure and notification requirements (13 percent).
The survey found that just over half of employers are on pace to trigger the "Cadillac" tax in 2018, but only three percent actually plan to pay the tax. Of those looking to avoid the tax, 53 percent have added, or plan to add, a high-deductible health plan
And, according to the press release, the unknown outcome of the pending ACA Supreme Court case, King v. Burwell, adds to employers' uncertainties about the future. Nine in ten organizations say they are following the discussion around this case. The King v. Burwell case is a court challenge by individuals who do not wish to comply with the minimum coverage provision of the ACA. If the plaintiffs are successful, the Obama Administration rule granting certain premium tax credits to those who obtain insurance through federal health care exchanges will be struck down. (A ruling by the Supreme Court on this pivotal case is expected in late June or early July of this year, and will be covered on this site.)
While 71 percent of employers think that the costliest years are yet to come, that doesn't mean they aren't already feeling the financial impact. Eighty-two percent of survey respondents reported that the law is already increasing their organizations' costs this year, with most projecting a one to six percent increase.
"Employers need to devote significant time and energy to maintain compliance with the law," said Julie Stich, director of research for IFEBP. "The extensive amounts of data that employers are required to collect can take hours of manpower and even require complex IT infrastructures. The process has meant a cost increase for many, especially smaller, organizations."
However, despite the fact that three in five respondents feel the ACA has had a negative impact on their organizations, nearly all employers (96 percent) anticipate that they will be continuing to offer health care coverage five years from now.
"Health care benefits are seen as essential for attracting future talent and retaining current high-quality employees," said Stich. "Employers may change the structure of their health care plans, or shift some of the cost burdens to their employees, but it doesn't appear that they will stop offering health care benefits anytime soon."
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