With the Patient Protection and Affordable Care Act's "Cadillac Tax" looming, large employers are beginning to scale back the benefits they offer to employees, according to a Bloomberg report.
The Cadillac Tax is a 40 percent excise tax on the high-cost health plans some employers provide to their employees. Scheduled to take effect in 2018, the purpose of the tax is to reduce overall healthcare costs by encouraging employers to offer cost-effective health benefits. Under the PPACA, both fully insured and self-funded employer health plans will be subject to the tax. The tax proceeds are to be used to help fund further health coverage expansion.
To avoid the tax, companies are making a number of changes, including providing employees with health plans with higher deductibles and co-payments, according to the report. For instance, HarvardUniversity employees used to pay part of the insurance premium and low out-of-pocket costs for healthcare. Now, the employer-sponsored plan will require employees to pay deductibles of $250 per individual and $750 per family, in addition to co-payments. Harvard employees will also pay 10 percent of the cost of their healthcare services, up to $1,500 per individual and $4,500 per family.
Harvard isn't the only university making changes to its employee health plans. GeorgeWashingtonUniversity in WashingtonD.C., eliminated a health plan that would have been subject to the tax. Now, employees have three plans to choose from, including a high-deductible plan. A spokesperson from the university told Bloomberg the university "may need to make additional changes before 2018 to fully eliminate the potential tax liability."
The Cadillac Tax is affecting companies outside of the education sector as well. For instance, JPMorgan raised its employees' insurance premiums. It also raised premiums for employees' spouses "who have higher claims, on average," according to Bloomberg.
This year, JPMorgan is also requiring employees to complete a biometric screening and an online questionnaire as part of its wellness program. Employees who complete the wellness program requirements will be given $200 in a savings account for medical expenses, while those who don't comply will be required to pay $500 more for their insurance premiums, according to Bloomberg.
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