Large Employers Are Bringing An End To ‘Cadillac’ Health Plans

Large employers are stopping their most generous plans for health cover like the ‘Cadillac’ plans due to high taxes under the federal health insurance laws. Bankers at J P Morgan Chase, professors at Harvard University etc. find that companies are increasing deductibles and co-payments. As the tax will be effective in 2018, employers are taking steps to avoid a 40% surcharge.“I don’t think there’s any employer that’s planning on paying that tax,” Steve Wojcik, vice president of public policy for the National Business Group on Health, which represents large employers, said in a phone interview.

“It doesn’t help the company, it doesn’t help the employees, it doesn’t help the shareholders,” he said. “It doesn’t really help anybody except the federal government.”

The tax on Cadillac plans — named after the luxury vehicle to denote their lavishness — is one reason the growth in health care premiums has slowed since the Patient Protection and Affordable Care Act took effect in 2010.

Among employers with 200 or more workers, 51 percent had employees paying one-quarter or more of their premiums for family coverage last year, according to Kaiser’s report in September. That portion has been gradually increasing since 2011, when it was 42 percent.

The tax “is having the effect that was intended, which is the cost of these plans is being reduced,” Christopher Condeluci, a former Senate Republican aide who helped design it, said in a phone interview. “Sadly, the way in which they’re being reduced is they’re shifting more costs onto the employees.”

Deductibles have more than doubled in all but six states since 2003, the report said. “Workers are paying more but getting less protective benefits,” the report’s authors said.

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JPMorgan expanded its wellness program for 2015, requiring workers to complete a biometric screening and an online questionnaire in exchange for $200 in a savings account for medical expenses. Employees who don’t comply will pay $500 extra for their insurance premiums.

JPMorgan employees pay about 25 percent of the health costs and the company covers the rest.

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George Washington University in Washington, D.C., has eliminated its most generous health plan because it would have been subject to the tax.

“Primarily as a result of this significant future tax liability, GW will no longer be offering this plan after 2014,” the university said. Employees can select from three health plans, including a new one that carries a deductible of at least $1,500, almost twice as much as the next-highest plan.

“GW, like all employers, has the challenge of maintaining competitive benefits plans while balancing increases in the cost of medical care,” the university’s executive vice president and treasurer, Lou Katz, said in a September blog post.

Harvard requires employees to pay in-network deductibles for the first time this year, sharing in the cost of care, which will help the university reduce the premiums paid by workers.

“There are people here who believe the Cadillac tax is really important. But it doesn’t come until 2018,” Chernew said. “My belief is that in 2018 we were not at substantial risk of bumping into the Cadillac tax substantially. As time goes on, we were more and more likely to be affected.”

President Barack Obama, who signed the Affordable Care Act, won’t be around to collect the Cadillac tax.

“There’s a lot of time between now and then; we don’t know,” Chernew said. “For most employers, they’re going with the assumption now that this is the law, and in order to avoid this pretty drastic tax we need to take action now.”

Source: Alex Wayne and John Lauerman

Source-Medindia