Big Bills May be on the Way for Employee Health Care

In the most recent Outlook Survey conducted by the National Association of Manufacturers (NAM), 74% of respondents named the cost of health insurance as their top business challenge.

And, it’s no wonder. Health insurance premiums in the manufacturing sector have increased from $6,549 for a family policy in 2000 to $16,538 in 2014.

Contributing to the angst are two components of the Affordable Care Act: the redefinition of small business, which will take effect Jan. 1, and the so-called Cadillac tax slated for 2018.

Redefining Small Business – Beginning Jan. 1, businesses with 51 to 100 employees will fall into the small-group category for health insurance purposes, a designation that likely will lead to higher premium costs.

Current small-group requirements apply to employers with 50 or fewer employees. When the small-group designation expands to employers with up to 100 employees, it will dramatically increase the number of employers required to offer one of the metal plans: platinum, gold, silver or bronze, the Pittsburgh Post-
Gazette reported. The plans include emergency services, hospitalization, mental health and substance abuse treatment, maternity and newborn care, and prescription drugs.

The price tag could be a shocker. Alissa Fox, a Senior Vice President of the Blue Cross and Blue Shield Association, told the New York Times that about two-thirds of midsize employees can expect substantial rate increases. Other insurance analysts have suggested premiums could increase by 35% to 73%.

Members of Congress from both parties recognize the risk and have called for changes in the Affordable Care Act. Groups such as NAM, the U.S. Chamber of Commerce, and the National Federation of Independent Businesses have sought such an effort from Congress, and the National Association of Insurance Commissioners has urged lawmakers to give states the option of defining “small group” for health insurance purposes.

This is the time for Congress to act, because this is the season for employers to decide health care plans for next year.

The Cadillac Tax – Employers in 2018 will face a 40% levy on their health

insurance plans if the cost exceeds a government-set threshold: $10,200 in benefits for an individual and $27,500 for a family policy.

Analysts anticipate the plan will lead to fewer employers offering employees the option for flexible spending accounts (FSA), which counts toward the threshold.

FSAs allow employees to set aside a portion of their incomes pre-tax to cover certain medical expenses. Employers can contribute to FSAs but rarely do. Workers and employers who contribute the maximum allowed by law to an FSA, which is $2,550 a year, are especially susceptible to exceeding the government threshold and being subject to the levy.

In the words of Jody Dietel, chief compliance officer at WageWorks Inc., a provider of flexible spending accounts and other benefit plans, the Cadillac plan has inadvertently targeted the Corolla crowd.

Lawmakers have introduced bills to repeal the tax, but an article in the Wall Street Journal suggests the effort will face resistance. An alternative plan would have to come up with ways to offset the more than $80 billion the levy is projected to raise for government coffers over 10 years. S