The Excise Tax, or “Cadillac Tax,” will impact 38 percent of large employers and 17 percent of American businesses across the board. This is according to a report from the American Health Policy Institute. That means the possibility that one or more of your groups’ health care plans will trigger the Excise Tax is a serious reality.
The fact of the matter is that the cost of health care steadily increases year after year. Regional health care cost differences are also a factor. So, how can you help your employer groups, especially those who are in danger of dishing out hundreds or even thousands of dollars due to penalties stemming from the Excise or Cadillac Tax? Here are some things that employers are doing to prepare for the Excise Tax in 2018:
This tax, set to hit in another two years, is causing companies to take stock of the different health care plans they offer and identify ones that would trigger the tax. Once they identify these expensive plans, they are eliminating them. In fact, 30 percent of employers are discontinuing high cost plans in response to the imminent Cadillac Tax. So, help your groups to do an audit, identify expensive health plans and replace them with more cost-friendly options before 2018.
This will probably look like health plans with higher employee contributions or higher deductibles. Granted, initially, this may not seem very attractive to employees but when you consider what it will cost both the employer and ultimately, the employees if their employer is fined, this is a fair option. So much so, that 42 percent of employers are implementing more cost sharing where health care cost is concerned. The key to get buy-in from employees is for their employers to do a good job explaining high deductible plans and how they benefit employees and their families. This is where you can help as their trusted benefits adviser, by providing tools HR needs to make the transition from an old plan to a new one. You’ll play a key role in helping your clients outline the benefits of a new plan design.
Employees want to be healthy and employers want their employees healthy. So, it’s an easy sell when employers give employees incentives to stay well. As a result, about 53 percent of employers are taking steps to expand wellness programs and offer greater rewards to employees who take advantage of them. Many dental carriers and medical carriers already have wellness programs as a part of their plans, making it easier for your groups to offer or administer these programs.
Many times, dental and vision plans are bundled together. However, in their paired state, they may trigger the tax. In that instance, to avoid triggering the tax, employers are separating these benefits and offering them as individual benefits. Worried about unbundling causing more work for you and your clients? You can still enjoy the administrative time savings by leveraging a private exchange to do the heavy billing and back-end lifting for you.
Your groups depend on you to keep your finger on the pulse of what’s going on in the health care industry. As their benefits adviser, you make them aware of current industry trends and changes that impact them, such as the Excise Tax. So, encourage your clients to take stock of expensive health care plans. The good news is that the earlier they start the better. Of course, it’s a great plus that their expert adviser is also able to provide them with viable solutions to help them avoid the financial consequences of triggering the tax.
The information in this blog is based on Solstice's review of the publicly available materials and is not intended to provide legal advice. While we make every effort to present and update accurate information, interpretations can vary. The overviews provided here are intended as an educational tool only and should not be relied upon as legal or compliance advice. For legal advice, please contact your attorney.
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