It’s critical to effective planning for budgeting, collective bargaining, and benefit strategy that employers understand which plans — current and future — are likely to incur the tax and when each plan’s costs may be likely to cross the excise thresholds. The earlier employers can quantify the impact of the tax, the sooner plans can be put into place to mitigate or defray the expense.
According to Truven Health Analytics latest research
,* which analyzed recent MarketScan®
claims data* for more than 13 million active employees, non-Medicare retirees, and their families in more than 2,500 self-funded plans to identify real-world healthcare spending trends, 15% of active employee plans are projected to incur the tax upon its activation in 2018, and by 2020, more than 19% of plans are expected to incur the tax. We estimate the tax would result in a cost increase of up to $480 per employee per year (PEPY) for plans expected to incur the tax.
Our study also found that early retiree plans are projected to exceed the statutory thresholds at a much higher rate than active employee plans. Eighty-one percent of early retiree plans for U.S. employers are likely to incur the “Cadillac” tax, and this rate is projected to increase to 84% by 2020. For the plans that we’ve projected will be impacted by the “Cadillac” tax, there will be an annual increase of $1,609 PEPY, or 6.8% of total costs.
We conducted similar research for industry groups such as health systems, universities, and public employers, and these analyses revealed that nearly 40% of active employee plans for health systems and more than 25% of active employee plans for universities in this study are projected to incur the “Cadillac” tax by 2020.
By implementing a combination of benefit design changes, premium contribution alterations, and health risk interventions, you can mitigate the impact of this new tax in 2018 and beyond. Early awareness is key. For more information on the effects of the Cadillac Tax, read our research brief. And contact us to learn how our modeling tools can help.
Director, Practice Leadership
*The study was executed using data from the Truven Health MarketScan® Commercial Claims and Encounters Research Databases, which consists of medical and drug data from employers and health plans. It contains data for more than 59.9 million individuals annually, encompassing employees, their spouses, and dependents who are covered by employer-sponsored private health insurance.