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Employers Altering Health Plans Ahead of 2018 Tax, Survey Finds

By Kerry Young, CQ Roll Call

September 22, 2015 -- Some employers already are making changes to the health plans they offer ahead of the looming Cadillac tax, which is slated to start in 2018, according to a wide-ranging annual survey of medical insurance coverage.

Thirteen percent of large firms that offer health benefits reported making changes to their plans to avoid reaching the tax thresholds set in the 2010 health law, said the Kaiser Family Foundation and Health Research & Educational Trust in a summary of their 17th annual survey on medical benefits.

The excise tax was intended to curb subsidies above a certain amount in order to control what some policy experts consider overly generous benefits. The first year's threshold is $10,200 for self coverage and $27,500 for family coverage. 

In its survey, Kaiser found that 8 percent of large firms, or those with more than 200 workers, said they switched to a lower-cost plan. Other changes tied to the tax were plans to limit the number of doctors and other health providers that patients could use.

"Those changes likely will shift costs to workers, but exactly how and how much will vary for individual workers," said study lead author Gary Claxton, a Kaiser Family Foundation vice president and director of the Health Care Marketplace Project, in a statement.

The tax remains one of the more contentious provisions of the 2010 health law and efforts are underway to repeal it. In addition to strong GOP opposition that's common to many of the health law's provisions, the so-called Cadillac tax also is unpopular with unions and other groups that traditionally have strong links to Democrats. Rep. Joe Courtney, D-Conn., has drawn 14 Republicans and 135 Democrats as backers of his repeal bill (HR 2050). Another repeal measure (S 2045) by Sen. Dean Heller, R-Nev., has one Democratic and 14 Republican cosponsors.

Drew Altman, the president and chief executive officer of the nonpartisan Kaiser Family Foundation, said on a call with reporters that it's unclear exactly what will happen with the Cadillac tax.

"It may be modified. It may go into effect," Altman said. "We don't know."

The debate over the Cadillac tax is part of a possible pivot toward a serious discussion of the drivers of health costs. With the Obama administration having scored legal victories in defending the 2010 law, Altman predicted lawmakers may move to a closer examination of the factors underlying increases in the cost of medical care.

"Many politicians will be looking for a less partisan post-ACA agenda," Altman said, citing rising deductibles and drug costs as topics likely to dominate future debates.

Looking at the most recent survey results, Altman and foundation researchers on the Tuesday call noted that relatively good news about slower growth in premiums likely has been overshadowed for many consumers. Single and family premiums for employer-sponsored health insurance increased an average of 4 percent in 2015. Since 2005, premiums have grown an average of 5 percent each year, compared to 11 percent annually between 1999 and 2005.

But consumers are paying more out of their pockets for medical care through deductibles.

The researchers said that charting only the increase in deductible amounts over time doesn't convey the full impact because of a rapid expansion in the use of this cost-shifting measure by companies. The number of people facing deductibles grew from 55 percent of covered workers in 2006 to 81 percent in 2015. After accounting for the increased prevalence in their calculations, researchers found that the average deductible for all covered workers in 2015 is $1,077, up 67 percent from $646 in 2010 and 255 percent from $303 in 2006.

Wages also have grown more slowly than costs such as deductibles.

"If wages were keeping up with the growth in cost-sharing it wouldn't be as big a deal for people, but the pain level is significant," Altman said. "It really affects family budgets because their wages aren't rising at the same time."

Other key findings from the Kaiser/Health Research & Educational Trust poll include:

  • The average annual premium for single coverage is $6,251, of which workers on average pay $1,071. The average family premium is $17,545, with workers on average contributing $4,955.
  • About 81 percent of covered workers are in plans with a general annual deductible, which average $1,318 for single coverage this year. Workers in smaller firms, with three to 199 workers, faced an average deductible of $1,836 this year, while those at larger firms, those with at least 200 workers, had an $1,105 average deductible.

The survey included responses from 1,997 firms that employ at least three workers.

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