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Cadillac tax driving private health insurance exchange enrollment

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LAS VEGAS — Several factors are driving employers to private health insurance exchanges, one of the biggest being the 40% excise tax on high cost health care plans set to go into effect in 2018, said Jay Kirschbaum, St. Louis-based senior vice president and practice leader in Willis North America Inc.'s national legal and research group.

In theory, the Cadillac tax applies only to very expensive plans, but in reality, it's “the rank and file that are going to be affected by this,” Mr. Kirschbaum said during a session Monday at the Society for Human Resource Management Inc.'s annual conference in Las Vegas.

“Things are going to change. We are going to have to drive change in our medical plans,” to control costs, he said.

Some employers may stop offering benefits, meaning their employees may move to the public exchanges, he said, but those employees who aren't eligible for federal subsidies will face large out-of-pocket costs for potentially less value, Mr. Kirschbaum said.

For example, the Affordable Care Act's least expensive bronze plans still have deductibles that may reach $4,000 to $6,000, he said.

Some employers provide high-deductible plans in that range but “ameliorate that deductible” with a health savings account or a health reimbursement account, he said, but “that's not available on the public exchange.”

Still, the majority of employers “expect and want to continue to offer benefits to their employees … and not just because it's mandated or required, but because it's the right thing to do,” said Rob Harkins, Willis' Boston-based practice leader for private exchanges.

“It's a value proposition that you want to continue to do for your employees,” he said.

Private exchanges, though not a “silver bullet” for tackling all costs, may offer opportunities to control annual increases by establishing a set dollar amount for employees to spend on benefits, Mr. Harkins said.

According to research by Accenture P.L.C., about 6 million people currently shop for benefits through a private health insurance exchange. By 2018, Accenture predicts 40 million people will get health benefits through a private exchange.

Private exchanges will help with the extensive IRS reporting requirements for full-time employee health coverage by providing a “vehicle that could take all your benefits and put it into one neat package, and give you the employer the ability to (create) the report that you need to submit to the government,” Mr. Harkins said.

When deciding which exchange to use, employers should look at the structure of the platforms, which insurance providers the exchanges use, whether they allow fully insured or self-insured plans or both, and whether they have any limitations on plan design, Mr. Harkins said.

If a platform is built by an exchange provider, make sure it's in line with what you hope to offer employees. If not, look for a more customizable platform, he said.