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LAS VEGAS—Now that the Supreme Court has made it clear that the
Affordable Care Act (ACA) is here to stay, the health care landscape
will continue to change at a rapid pace. And it’s likely that private
health insurance exchanges will be a big part of that changing landscape
as employers look for new ways to hold down the cost of employee health
benefits, said the presenters at a June 29, 2015, concurrent session on
health care reform and public and private exchanges at the Society for
Human Resource Management (SHRM) 2015 Annual Conference &
Looming on the horizon is the ACA’s “Cadillac tax”—a potential 40
percent excise tax on the value of health insurance benefits exceeding
certain thresholds that is set to begin in 2018. “The excise tax is the
big issue,” said Jay M. Kirschbaum, senior vice president and national
legal and research group practice leader atWillis’ Human Capital
Practice National Legal & Research Group (NLRG) in St. Louis.
Employers will do whatever they can to avoid the hefty tax, he said.
Initially, the Cadillac tax wasn’t a concern to most employers. In
theory, it would have only applied to the gold-plated benefits provided
to corporate executives, Kirschbaum said. But now, as health care costs
continue to outpace inflation, the Cadillac tax will hurt rank-and-file
workers, too. “It applies to everybody,” he said. A more apt name for
the excise tax, he suggested, would be the “Chevy tax.”
So as 2018 approaches, employers will have to lower the value of
their employee health plans to avoid the tax. To that end, employers are
likely to turn increasingly to private exchanges, said Rob Harkins,
private exchanges practice leader at Willis in Boston. “We’re in the
midst of a transformation in our industry,” he said. “The concept of a
private exchange will be the norm.”
In 2014, about 6 million employees had insurance through a private
exchange, according to Deutsche Bank. By 2018, that number is expected
to increase to 50 million.
Private exchanges are essentially online marketplaces that provide
employees with a new and different insurance shopping experience,
Harkins said. These technology-based platforms not only offer employees
more insurance options but they control employer costs, as employers
provide a specific contribution to employees to purchase insurance on
While not a panacea, private exchanges offer several advantages:
In the coming years, as private exchanges and other innovations take
hold, employers will need to reset their expectations, as well as those
of their employees, about the stability of employee health care
benefits, Kirschbaum said. Change is going to be the norm for at least
several years. “It’s not going to look like it has in the past,” he
John Scorza is associate editor of HR Magazine.
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