You’ve read about the “Cadillac” health tax slated to take effect in 2018. The Affordable Care Act’s tax on high cost employer health insurance tax will impose a 40% non-deductible tax on benefits that exceed a government set threshold. The expected threshold for this tax is $10,200 in health benefits for individual coverage and $27,500 for a family for 2018 and will increase with inflation going forward. How do you calculate if this tax will apply to you? Is there anything to worry about now?
With open enrollment approaching, you’re about to find out. According to a recent Kaiser Family Foundation study, an estimated 26% of employers that offer health plans would begin to pay the 40% tax in 2018 on at least one of their plans if they don’t make changes. Many employers are beginning to amend their plans with an eye towards to limiting (if not avoiding) their potential excise tax liability.
There are other benefit plans that will also, when added to health insurance premiums, trigger the excise tax. Perhaps the most at risk benefit is the flexible spending account; a benefit which is offered by most large employers to fund qualified unreimbursed medical expenses. Both employee and employer contributions are limited to $2550, and although many employer don’t contribute to FSAs, this could push some employees over the threshold. Employers may limit contributions, or do away with FSAs altogether.
Other changes employers are considering? Fewer available benefits for working spouses. Some employers don’t offer health insurance at all where spouses are eligible to participate in their own employer sponsored health insurance. If health insurance is available to working spouses, there could be a surcharge assessed should working spouses enroll.
You may see smaller increases in premiums and deductibles for both individual and family coverage.
At face value, that might not seem like a reduction in an employee benefit. However, that smaller than average increase may entail narrower physician and hospital networks and other possible reduction in services.
There are a number of anti-Cadillac tax groups. Among them, anti-tax Republicans, insurers, labor groups and school districts. We’ll see what happens this fall.
For additional information, contact EAB HealthWorks.