Friday, July 24, 2015

Cadillac Tax Confuses and Frustrates Employers and Union Groups

This is from HM Stoploss News
In 2018, the [Cadillac] tax will be paid on dollar amounts exceeding $10,200 per employee for single coverage and $27,500 per employee for other-than-self-only coverage. ... 
Employers are responsible for calculating the total amount of the tax for each employee and notifying the IRS and each benefit provider who will pay the tax – the group health insurer if coverage is issued under an insured plan; a plan sponsor if the employer makes contributions to a Health Savings Account (HSA) or Archer Medical Savings Account (MSA) or the plan administrator for any other applicable coverage. 
What Coverage is Applicable?Applicable coverage means, for an employee, coverage under any group health plan including both fully insured and self-funded plans made available to the employee by an employer, which is excludable from the employee’s gross income. This includes:
  • Health Flexible Spending Accounts (FSAs)
  • Archer MSAs
  • HSAs
  • Government plans (except military plans)
  • Coverage for on-site medical clinics
  • Retiree coverage
  • Multiemployer plans
  • Coverage only for a specified disease or illness
  • Hospital indemnity or other fixed indemnity insurance if the payment for coverage or insurance is excluded from gross income or a deduction is allowed
Future guidance also is expected to mention that Health Reimbursement Accounts (HRAs) and executive physical programs are applicable coverage as well. 
What Does This Mean for Employers?The Cadillac Tax will negatively impact both fully insured and self-funded employers. Because the tax applies to the overall value of the health insurance benefits and comprises both employer- and employee-paid portions, a cost shift to employees will not be effective for employers who want to avoid paying the tax. Employers in geographic areas that are known for high health care costs will reach the excess dollar limits and experience the tax sooner than companies offering health insurance in lower cost regions. 
Future tax thresholds will be based on inflation, but because health care costs have increased historically at a greater rate than inflation, more employer plans will hit the tax threshold sooner every year. ... Unfortunately, it will be quite difficult for employers to avoid the tax while continuing to offer health plans that are compliant with ACA regulations for benefit design and cost-sharing requirements. As we get closer to the effective date of the tax implementation, more information will be available regarding the formula for determining the value of the plans. 
Employers know that offering health benefits can help attract and retain talented employees, so they remain reluctant to drop health insurance coverage, but it will be harder and harder to offer employee health benefits without hitting the Cadillac Tax thresholds....