Healthcare Costs Hold Steady Due to Cadillac Tax StrategiesIn a recent survey, employers projected that health benefit costs would be raised by 4.3 percent per employee in 2016, which takes into consideration cost reduction changes they are enacting. If there were no changes made to current plans, they estimate costs could rise by an average of 6.3 percent.
Businesses are looking to control health benefit costs because of the Affordable Care Act’s (ACA) “Cadillac” tax, a 40 percent non-deductible excise tax on employer-sponsored health coverage that offers high-cost benefits. The goal of the tax is to help reduce excess healthcare spending by both employees and employers, while helping finance the expansion of health care coverage through the ACA. The tax will take effect in 2018.
The survey was completed by the National Survey of Employer-Sponsored Health Plans and included more than 2,400 participants. Reports showed that total health benefits per employee in 2015 averaged $11,635, which included both employer and employee contributions.
Small employers saw a bigger increase than larger companies with the average cost rising 5.9 percent for small businesses (10-499 employees) and 2.9 percent for companies with 500 employees or more.
“Employers are moving on several fronts to hold down health cost growth,” said Julio A. Portalatin, President and CEO of Mercer.
“In the best scenarios, they’re addressing workforce health, restructuring provider reimbursement to reward value, and putting the consumer front and center by providing more options and more support. In other cases, the pressure to avoid the excise tax is leading to some cost-shifting, plain and simple.”
Small employers also indicated they would likely not drop their health care plans, which could leave employees in a lurch, forcing them to apply for public health insurance through the Affordable Care Act. In 2015, approximately 7 percent of larger employers said they planned to drop healthcare plans, which is down from 15 percent in 2014.
There are definitely added financial burdens for employers to provide quality health care, yet if companies do not provide an option, it can be a very costly business decision – especially when it comes to employee turnover and driving away highly qualified job candidates to the company.