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Employers adjust plans to limit rising costs, favor many ACA coverage elements
If the Affordable Care Act's (ACA's) "Cadillac tax" on high-value employer health care plans takes effect, or if Congress enacts legislation that limits the current tax exclusion for employer-sponsored health plans, the added cost would be passed along to employees, most employers say.
Currently, premiums that employers pay for health insurance are exempt from federal and payroll taxes, and employee premiums are not considered taxable income.
The Society for Human Resource Management's (SHRM's)
Health Care Reform—2017 Update report, published June 13, is based on a February poll of 918 HR professionals responsible for benefits or compensation or with a job title of manager or above.
In 2017, health care costs increased at 79 percent of respondents' organizations, the survey showed. These employers reported an average 11 percent increase in plan costs. However, that "average" masks a wide range in the actual increases that employers experienced:
Two-thirds (67 percent) of respondents said that taxing employer and employee insurance contributions would further raise health plan premiums, and 60 percent expected it would increase out-of-pocket health care costs for employees.
(Click on graphic to view in a separate window.)
The findings suggest that changing the tax treatment of employer-sponsored health care "could have an adverse impact on the health care coverage offered by employers," said Evren Esen, SHRM's director of workforce analytics.
To curtail rising costs, over one-half (55 percent) of respondents' organizations changed their health care coverage in 2017, the survey showed. Of those:
[SHRM members-only toolkit:
Managing Health Care Costs]
Cadillac Tax Still Looms
As Congress debates a possible ACA replacement bill, a central point of debate has been the ACA's
Cadillac tax—an excise tax of 40 percent imposed on high-value benefits above certain thresholds ($10,200 for individual coverage and $27,500 for family coverage), now set to take effect in 2020. The survey found that:
Plans Likely to Keep Key ACA Provisions
Eighty-three percent of respondents said it was important to keep the ACA provision allowing individuals with pre-existing conditions to enroll in health coverage on an equal basis with other enrollees, known as community rating. Respondents also cited preventive care coverage with no cost-sharing, no lifetime limits and benefits for dependent children up to age 26 among the most important aspects of the ACA—although these coverage provisions, along with access for those with pre-existing conditions, tend to push premiums higher, insurance analysts say.
Biggest ACA Challenges
When asked about the main challenges in complying with the ACA, HR professionals cited annual reporting requirements, followed closely by complexity of the law and the time investment needed to implement the law and stay compliant.
To meet compliance challenges, 66 percent of organizations outsourced at least some of their ACA information reporting requirements.
"Most organizations—72 percent—use an insurance broker as a resource for the ACA," Esen noted. "This was slightly fewer than we found in 2015 and 2013. But compared with 2015, more organizations are using consultants, up to 38 percent from 31 percent."
Two-thirds of organizations with a seasonal workforce reported additional challenges complying with the ACA. They cited their most common difficulties as:
Health Care Reform Resources for Employers
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