Fiscal Times: Employers Are Speeding Up Health Benefit Cutbacks Before Obamacare

Friday, 16 Aug 2013 07:53 AM

By John Morgan

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Americans with so-called "Cadillac" employer-sponsored health plans may feel pinched soon because employers fear the impact of a fresh wave of government taxes on them, The Fiscal Times reported.

Under the Affordable Care Act, employers will have to pay an excise tax on plans that cost more than $10,200 for an individual or $27,500 for a family. An employer would have to pay a 40 percent tax on the cost each plan above those levels.

Consumers may think only those with these "Cadillac" health benefits face cutbacks under Obamacare, but the Times noted the definition of luxury health plans has been stretched to include less-expensive models.

Editor’s Note: Forbes Columnist: ‘Who the Hell Cleared This?’ (See Shocking Video)

"Most of us pay high premiums, and don't feel like we have a high-cost policy," said Cynthia Weidner, vice president of health and welfare consulting at High Roads.

"Everyone thinks, 'I don't have a Cadillac plan, my coverage stinks.'"

However, even average health plans appear to exceed the "Cadillac" threshold limit mandated by the Obamacare. The average plan costs $10,522, according to a Society of Human Resources Management estimate, which means employers will pay a 40 percent tax on the $322 difference — about $130 per employee.

Although the federal government will not begin imposing the taxes for five more years, the Times said some companies are already cutting back.

"Employers can't wait until 2018 and make one huge change to their plans. They're already starting making changes now, so that in 2018 it won't be as hard for employees," said Tracy Watts, a senior partner with health and benefits consultancy Mercer.

The Times said the Obamacare tax on healthcare benefits would also add another financial weight for state and local governments.

"It's an issue for every single employer, particularly for state and local governments," said J.D. Piro, senior vice president of Aon Hewitt's health and benefits legal team. "Governments tend to offer more expensive health benefits than private businesses, and workers often accept lower wages in exchange for those benefits."

A Mercer study found 59 percent of employers surveyed intend to take steps to lower the cost of their employee health plans before the Obamacare tax provision hits in 2018.

The Times said employers are raising deductibles, raising copayments and reducing prescription drug coverage "as much as possible" while still meeting the Obamacare mandates.

"It's ironic because the point of the Affordable Care Act was to expand coverage to the 30 million people who don't have it," Watts said. "But a byproduct of that is that the employer-sponsored plans just aren't going to be as good as they once were."

U.S. News & World Report noted that those expecting major price declines for healthcare coverage for older Americans under Obamacare may be disappointed.

HealthPocket, an online health plan information and ranking service, studied next year's health insurance rates in California, Connecticut, Ohio and Rhode Island. Insurers in those four states have already filed rates they propose under Obamacare.

U.S. News reported HealthPocket estimated premiums for a 60-year-old person would be higher in all four states in 2014.

Editor’s Note: Forbes Columnist: ‘Who the Hell Cleared This?’ (See Shocking Video)

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