Under ACA, employees accustomed to high-cost, high-benefit “Cadillac” health insurance plans will find it costing more to get around, but in a cheaper ride.
In direct contradiction to the many promises made by President Obama during the debate on the Affordable Care Act, the fact is that many employees are not going to be able to keep their current health care plan even if they are happy with it. In fact, under the ACA’s rules, many employers will be severely penalized for offering plans that offer too many benefits at too low a cost to employees. These so-called “Cadillac” plans are, under the rules of the ACA, a very bad thing and any company that offers such plans must be punished! It seems strange to me that an administration that has promoted itself so heavily as a friend of the worker should want to impose rules that practically force companies to offer lower benefits to their employees and that force employees to incur much higher out-of-pocket costs. Go figure.
Ok, so what constitutes a Cadillac plan and how many employees will be affected by this very anti-employee provision of the ACA?
A Cadillac health insurance plan, simply stated, is a plan with premiums exceeding $10,200 for individuals or $27,500 for a family (not including vision and dental benefits). Employers who offer such plans will be required to pay an “excise” tax on these plans starting in 2018. While this tax was aimed at punishing high-flying executives and their fat cat benefits, the reality is that a lot of average, everyday workers are going to feel the pain of this provision. I recently read the story of Abbey Bruce, a nursing assistant in Olympia, Wash. Her employer stopped offering the traditional plan that she and her husband Casey, who has cystic fibrosis, had chosen. Because of the changes, starting this year, they have a combined deductible of $2,300, compared with just $500 before. And while she was eligible for a $1,400 hospital contribution to a savings account linked to the plan, the couple is now responsible for $6,600 a year in medical expenses, in contrast to a $3,000 limit on medical bills and $2,000 limit on pharmacy costs last year. Because of the increased costs Abbey has had to drop out of school and take on additional jobs to pay for her husband’s medicine. This is hardly the “you can keep your current plan if you like it” promise that was oft repeated throughout the ACA debate.
According to Bradley Herring, a health economist at John Hopkins Bloomberg School of Public Health, as many as 75 percent of existing employee plans could be affected by the Cadillac tax over the next decade. Supporters of Obamacare will surely be quick to point out that there is a way to avoid the tax short of cutting benefits — and that is to rein in costs. The reality, however, is that despite the promise that medical costs would be cut under the plan – all indications are that costs will INCREASE and not decrease under the ACA (this has even been supported by comments made by the Obama administration). In some cases those increases will be steep ones.
So, what can be done to avoid the tax and subjecting employees to the harsh financial realities of the ACA? There are a few things but none of them are quick or easy, and they primarily focus on wellness initiatives. In future blog posts I’ll discuss these options and provide some guidance for both employees and employers on how to lessen the impact of the inevitable rise in costs that employees will be forced to bear under the ACA.
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