Default banner
Thought Leadership

Avoid Triggering Cadillac Tax

December 1, 2015
While some organizations are randomly making adjustments to their health plan benefits, others are taking a more strategic and deliberate approach.
Patricia Ingerick

Employers across America are doing their best to navigate the turbulence caused by the Affordable Care Act, fully aware of the larger storm of pending taxes looming on the horizon. While some organizations are randomly making adjustments to their health plan benefits, others are taking a more strategic and deliberate approach. They are using innovative technologies to simultaneously gain control of their employee health benefit costs, avoid triggering the excise tax (Cadillac Tax), and provide benefits that attract and retain top talent. Although the so-called Cadillac Tax – a tax on healthcare benefits that are considered to be premium plans -- won’t take effect until 2020, our research indicates that employers are making changes now to avoid triggering the tax. 

That’s because the tax is substantial – 40% on every dollar that exceeds government-set limits for health plans which are expected to be $10,200 for an individual plan in 2018 and $27,500 for family plans. The tax also is non-refundable, rendering the actual cost even higher. In order to move below these limits, organizations are currently scaling back the “richness” of employee benefit offerings; passing increased costs on to employees in the form of cost-sharing through higher premiums, deductibles, and co-pays; switching to the public marketplace; and even resorting to discontinuing employee benefits. As 2018 nears, more employers will follow suit..

There is a better way

Savvy employers are utilizing technology that allows them to ‘see’ opportunities to take control of their benefit plans and associated costs. The same technology used in the most successful hospital, physician, and health plan systems is being deployed in an innovative way for businesses to view and analyze their unique employee “populations”. While maintaining HIPAA-compliant, individual privacy, employers tap into real-time data in order to learn such things as:

  • Drivers of cost and utilization
  • Opportunities for greater use of preventive services
  • Insights regarding use of brand-name prescriptions
  • Prevalence of  chronic conditions in the employee population

Empowered with this information, employers are:

  • Encouraging employees to seek out preventive services in order to facilitate early detection and to avoid emergency care, which is expensive and traumatic
  • Implementing efficient pharmacy benefits that incent employees to use generics and mail order refill programs
  • Establishing wellness programs, linked to incentives, that teach and motivate people to better manage chronic conditions such as diabetes

The vast majority of employers believe that offering benefits is the right thing to do for their employees, and they are seeking ways to keep doing just that. They need to resist the urge to toss overboard the perceived “fringe” elements of current plans – it will dissolve the very reason benefits are offered in the first place – and instead use analytics solutions such as Geneia’s Care Engager® to help them make strategic benefit decisions to gain control and satisfy employees. Employers know that a great benefit plan helps to attract and retain top talent, and ensures consistent high performance, satisfaction, and productivity through the good health of employees.