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Survey: One in four large employers at risk for ‘Cadillac’ tax

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The good news from a new survey by Mercer is that average per-employee health benefit costs in the United States increased by just 3.8 percent in 2015, slightly less than in 2014 and the third consecutive increase below 4 percent.


The bad news is that nearly one-quarter of large employers — 23 percent — are at risk of hitting the “Cadillac” tax penalty threshold based on their current premiums in 2018. That excise tax of 40 percent, which will be imposed on employers whose plan benefits exceed certain thresholds, is expected to impact 45 percent of large employers by 2022 due to cost indexing.  


According to the National Survey of Employer-Sponsored Health Plans conducted annually by Mercer, total health benefit costs averaged $11,635 per employee in 2015. These costs include both employer and employee contributions for medical, dental and other health coverage, for all covered employees and dependents.


Small employers were hit with higher increases than large employers. Cost rose by 5.9 percent on average among employers with 10 to 499 workers, but by just 2.9 percent among those with 500 or more employees.


Employers predict that in 2016, their health benefits cost per employee will rise by 4.3 percent on average, even after making changes to reduce costs.


“Employers are moving on several fronts to hold down health cost growth,” said Julio Portalatin, president and CEO of Mercer, in a release.


“In the best scenarios, they’re addressing workforce health, restructuring provider reimbursement to reward value, and putting the consumer front and center by providing more options and more support,” he said. “In other cases, the pressure to avoid the excise tax is leading to some cost-shifting, plain and simple.”


High-deductible consumer-directed health plans remain a key tactic for minimizing excise tax exposure. Fully one-fourth of all covered employees are now enrolled in such plans, which include an employee account — either a health savings account, the most common type, or a health
reimbursement account.


“When CDHPs were first introduced, the concept made intuitive sense, but we didn’t have the tools we have now to help employees actually become better health care consumers,” said Jim Green, Mercer’s consulting lead in Des Moines. “I think we’re finally turning the corner.”


A key difference is that more consumers now have real, and financially substantive, “shopping” choices for health care, he said.


“You can pay $40 for a telemedicine visit, $70 to stop in at a retail clinic or $125 for an office visit,” Green said.