The excise tax remains a primary focus for employers as they plan their health care coverage strategy for 2016 and 2017, and many will be looking for assistance from their benefit adviser to address their concerns.
Starting in 2018, the Affordable Care Act will impose a 40% excise tax on high-cost group health care plans. The so-called Cadillac tax remains a top concern for employers, with two-thirds of employers (62%) say the 2018 excise tax will have a moderate to significant impact on their health care strategy, according to new research from Towers Watson.
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Industry experts say benefit advisers hoping to add value to their client relationship should have sound strategies to suggest for keeping health care plan costs down.
Employers continue to use several strategies to aggressively manage their plans to keep costs down. A third of employers (32%) are using spousal surcharges today, but that number is expected to almost double to 61% in the next three years, the Towers Watson 2015 emerging Trends in Health Care Survey shows.
More than half (53%) of the midsize to large employers surveyed by the brokerage say they plan to significantly reduce subsidies for spouses and dependents by 2018 and four in 10 employers say they may adopt a defined contribution arrangement by 2018.
Two precepts of the excise tax are important for every organization to factor in when considering the impact of the tax, Towers Watson says. They are:
- The excise tax is based on both employer and employee premium contributions, not just what the employer pays for coverage.
- Tax-advantaged health care accounts such as health flexible spending accounts, health reimbursement accounts and pretax contributions to a health savings account all need to be included in tax calculations. The tax is not determined by the value of the medical plan alone but rather the value of all affected health benefits elected by an employee or family.
Specialty Rx
Double-digit specialty pharmacy costs are one factor taking a toll on employers health care budgets and a majority (61%) of employers are adopting coverage and utilization restrictions in their specialty pharmacy strategy to address cost pressures.
More than a third of employers today are adopting a high-performance formulary that eliminates or reduces brand-name coverage or utilization in certain categories, with another 26% considering it by 2018, the survey found.
Thirty percent of employers are also implementing coverage changes to influence site of care for specialty pharmacy and that number could increase to 67% of employers by 2018, Towers Watson says.
Four in 10 (41%) employers are evaluating and addressing specialty pharmacy spend within the medical benefit and another 42% will do so by 2018.
