Clock Ticking For Congress To Protect Health Coverage For 178 Million Americans
Congress Must Act Before the End of the Year to Address the "Cadillac Tax"
WASHINGTON, Nov. 13, 2017 /PRNewswire-USNewswire/ -- Today the Alliance to Fight the 40 | Don't Tax My Health Care, a broad-based coalition committed to repealing the 40 percent "Cadillac Tax" on employer-sponsored health benefits issued the following statement urging swift Congressional action to address the 40% "Cadillac Tax" that threatens to reduce health care coverage and drive up costs on 178 million Americans:
"The clock is ticking and Congress must act now to address the 'Cadillac Tax'. Although the tax does not become effective until 2020, it is already having a negative impact. Employers typically plan their benefits 18 to 24 months ahead of implementation. That means, employers are making decisions right now on plan designs for 2020," said James A. Klein, president of the American Benefits Council.
"Repealing the 'Cadillac Tax' has strong bipartisan support in the Senate and House, and we urge Congress to address this tax before the end of the year."
Why the "Cadillac Tax" Must Be Addressed Now
Congress must act now to address the looming 40% "Cadillac Tax" on employer-sponsored health plans. Although the 40% tax is slated for 2020, employers are making changes to their health plans today.
- As part of the benefits planning process, many employers work with insurers and benefits firms to build health benefits packages for employees 18-24 months in advance, which means employers are making changes to plans that will raise health care costs for working families now.
- Employers try to make gradual changes to avoid sudden cost-increases for employees. This means employers are already making changes to health coverage, which include reducing benefits, eliminating health plan choices, narrowing networks, decreasing health savings account contributions, eliminating spousal coverage, wellness plans and on-site medical clinics, and increasing deductibles for employees.
Benefit Design Changes Underway to Avoid the Tax
Recent studies1 2 indicate that significant numbers of employers are already modifying their plan designs to avoid paying the 40% tax. One report found that 62% of employers who determined they would be affected by the tax were planning to make significant changes to their health plans three years prior to the tax taking effect. Since the effective date was delayed until 2020, that means plan changes are being made now for the implementation date which is a mere two years away. Projected changes include 33% of employers who plan to increase out-of-pocket costs and 31% who plan to limit FSA, HSA, and/or HRA contributions, among other benefit cutbacks.
Immediate Consequences of Waiting to Repeal the "Cadillac Tax"
- Increased out-of-pocket expenses: Increasing out-of-pocket costs for employees is the main way to decrease the cost of the plan, upon which the "Cadillac Tax" is calculated. Increased cost-sharing will force workers to pay more for their health care without enhancing the value of the coverage.
- Eliminating programs employers use to control costs and keep workers healthy: Plan features designed to promote better health and reduce costs – such as employee assistance plans, on-site health clinics, and flexible spending accounts – are counted toward the thresholds that trigger the tax and may be some of the first benefits to go.
- Potential cost increases for the federal government: Employer-sponsored insurance is more cost-effective than government health insurance programs. Waiting longer to repeal or further delay the tax could result in more employees choosing options that are more expensive for the federal government as private employer-sponsored insurance becomes less affordable.
1 American Health Policy Institute, "ACA Excise Tax: Cutting Family Budgets, Not Health Care Budgets," October 2015, http://www.americanhealthpolicy.org/Content/documents/resources/AHPI_Excise_Tax_October_2015.pdf
2 Aon Hewitt, "New Aon Hewitt Survey Shows Majority of Companies Taking Immediate Steps to Minimize Exposure to Excise Tax," October 16, 2014, http://ir.aon.com/about-aon/investor-relations/investor-news/news-release-details/2014/New-Aon-Hewitt-Survey-Shows-Majority-of-Companies-Taking-Immediate-Steps-to-Minimize-Exposure-to-Excise-Tax/default.aspx
Contact: Tara Bradshaw
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