Dive Brief:
- Obamacare's looming "Cadillac tax" on high-cost health plans threatens to hit 1 in 4 U.S. employers when it takes effect in 2018, and will impact 42% of all employers by 2028, according to new research from the Kaiser Family Foundation (KFF).
- KFF estimates suggest that a meaningful percentage of employers would need to make changes in their health benefits to avoid the the excise tax in 2018, and that this percentage grows significantly over time unless employers are able to keep heath plan cost increases at low levels.
- To the extent that health plan premiums continue to grow faster than inflation – a likely scenario – the share of employers affected by the Cadillac Tax will grow and eventually reach 100 percent, the KFF report says.
Dive Insight:
The potential complexity of the tax may cause employers to simplify their health benefit offerings, says KFF. For example, the potential complications associated with allocating the tax burden and managing reimbursements to insurers (and potentially other services providers) may encourage employers to simplify their benefit arrangements and reduce the number of options that employees have and the number of coverage providers involved, states the report.
Another outcome, the report says, is that the significant tax rate, which would likely be borne by the employer (either directly or through reimbursing tax paid by coverage providers), may cause employers to limit employee choice even among core health insurance offerings, including currently popular employee perks such as flexible spending accounts and health savings accounts.
KFF expects employers to make modifications to their health benefit plans over the next several years to avoid or delay hitting the threshold for the tax. While some will need to move more quickly than others, the tax will be an important contrast for a large share of employers within the next decade, the report says.
