For Immediate Release


One in Five Benefit Plans Will Trigger ACA’s “Cadillac” Tax by 2020 Truven Health Analytics Study Finds

Employers Will Incur Big Costs for Richest Plans


Ann Arbor, MI, Oct. 28, 2014 — Twenty percent of benefit plans will trigger the “Cadillac” tax provision under the Affordable Care Act (ACA) by the year 2020, according to a new study from Truven Health AnalyticsTM.

Beginning in 2018, the ACA requires employers to pay a 40 percent tax on the net cost of high-cost health plans. Plans with costs that total more than $10, 200 for employee only coverage and $27, 500 for family coverage will be subject to this penalty, the so-called “Cadillac” tax.

According to the Truven Health study, which analyzed recent MarketScan® claims data* for over 13 million active employees and early retirees in nearly 2, 600 self-funded plans to identify real-world healthcare spending trends, 15 percent of active employee plans are projected to incur the tax upon its activation in 2018, a rate that is expected to increase to 19 percent by 2020. Truven Health researchers 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.

“It’s critical to effective planning for budgeting, collective bargaining and benefit strategy that employers begin now to gain a solid understanding of which plans are likely to incur the tax and when each plan’s costs may be likely to cross the excise thresholds, ” said Chris Justice, senior director of practice leadership. “By implementing a combination of benefit plan changes, premium contributions, and health risk interventions, you can mitigate the impact of this new tax in 2018 and beyond.”

The study also finds that early retiree plans are projected to incur tax at a much higher rate than active employee plans. Truven researchers found that 81 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 percent by 2020. That would result in an annual per employee per year (PEPY) tax amount of $1, 069, or 6.8 percent of total PEPY costs for plans incurring the tax.

Truven Health has conducted similar studies for industry groups such as health system, university and public employers; these analyses revealed that nearly 40 percent of active employee plans for health system employers and over 25 percent of active employee plans for university employers in this study are projected to incur the “Cadillac” tax by 2020.

*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.

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About Truven Health Analytics, part of the IBM Watson Health Business

Truven Health Analytics an IBM Company, delivers the answers that clients need to help them improve healthcare quality and access while reducing costs. We provide market-leading performance improvement solutions built on data integrity, advanced analytics, and domain expertise. For more than 40 years, our insights and solutions have been providing hospitals and clinicians, employers and health plans, state and federal government agencies, life sciences companies, and policymakers the facts they need to help them make confident decisions that directly affect the health and well-being of people and organizations in the U.S. and around the world.

Truven Health Analytics owns some of the most trusted brands in healthcare, such as MarketScan®, 100 Top Hospitals®, Advantage Suite®, Micromedex®, Simpler®, ActionOI® and JWA. Truven Health has its principal offices in Ann Arbor, Mich.; Chicago; and Denver. For more information, please visit http://truvenhealth.com.



MEDIA CONTACTS:

Brian Erni
For Truven Health Analytics
J. Roderick, Inc. Public Relations
brian@jroderick.com
631.584.2200