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Health benefits leaders bracing for 'Cadillac tax'

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CHICAGO — The only way for employers to reduce their exposure to the “Cadillac tax” on high-value health care plans is to implement strategies to cut costs, though it's likely they will still be affected, according to panelists at the Midwest Business Group on Health 35th Annual Conference in Chicago.

Employers can also contact regulators and legislators to repeal or alter the 40% excise tax on health care premiums for those plans, Thomas Sondergeld, senior director of health and well-being for Walgreen Co., said during the discussion Wednesday.

“We need to get rid of this,” Deerfield, Illinois-based Mr. Sondergeld said. “This is a bane in our existence as benefits directors.”

Under the health care reform law, a 40% tax on group health care plan premiums that exceed a $10,200 threshold for individual coverage and $27,500 for family coverage beginning in 2018. Legislation to repeal the tax was introduced in the House of Representatives on Tuesday.

However, said panelists, employers should prepare now for the fast-approaching launch of the tax.

Mr. Sondergeld, who oversees the health benefits of 170,000 participants at Walgreens, said employers should study the regulations as they currently are, work with a consultant to fully understand the calculations the tax requires, and determine whether or not they will exceed the thresholds for coverage.

Employers who exceed the thresholds may take steps to lower costs by reducing benefits or fully replacing their health plan by moving to a private or public health exchange model, said Chicago-based Scott Thompson, president of the health care practice at The Benfield Group, a division of Arthur J. Gallagher & Co.

“I think it would be dreadful to have employer-driven health care removed off the table,” Mr. Thompson said. He added that the employer health care system is “still the only one in my opinion that looks at value,” while government health care focuses on cost per unit.

But fully replacing the employer-sponsored health plan could affect employee attraction and retention, Mr. Thompson said.

“If you pull your (benefits), what are you going to do to replace that? Because you are going to lose a lot of your top talent,” he said.

Mr. Sondergeld said another option is to make changes to the benefits plan, though that may end up being just as costly as the tax itself.

Still,he said, the “perfect panacea” would be to repeal the Cadillac tax.

“I strongly encourage you to wake up and look at what's happening to the law,” he said. Without a repeal, the tax will “put almost all of us at risk.”