Monday, December 7, 2009
A new survey by the Mercer Group suggests that the 'Cadillac tax' proposed in the Senate Democrats’ health care bill could trigger many employers to cut health care benefits. According to Kaiser Health News, "[t]wo-thirds of employers would raise deductibles, change insurers or scale back coverage to avoid the so-called Cadillac tax on high-cost benefits ...."
The excise tax —which is placed on insurers, but is expected to be passed along to employers — could hit up to 19 percent of medical packages offered by employers in 2013, the first year it goes into effect, according to a separate Mercer analysis of data from 3,000 firms. Whether an employer’s benefits are subject to the tax depends on the combined cost of all medical benefits, including health, dental, vision and other benefits, such as worker and employer contributions to flexible spending or health savings accounts. Workers and employers can put pre-tax money into health savings accounts, helping cover deductibles, for example. If the combined total of all benefits exceeds annual thresholds of $8,500 for individuals or $23,000 for families, the difference would be subject to a 40 percent excise tax.
The Mercer survey (.pdf) of 465 employers – a nonscientific sample – also found that of the 63 percent who would make changes to avoid the tax:
-- 75 percent would raise deductibles or copayments to bring down premium costs.
-- 40 percent would add a lower cost health plan as an alternative.
-- 19 percent would terminate employer contributions to health or flexible savings accounts.
While employers aren’t yet changing benefits in response to the proposal, analysts say, the excise tax is one of their main concerns.