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Number of employers hit by Cadillac tax expected to grow over years


An analysis released Tuesday projected that 26% of employers offering health care benefits could trigger the Cadillac tax in 2018 unless they make changes to their plans.

According to the Kaiser Family Foundation, the number of employers likely to trigger the 40% excise tax on high-cost health plans will grow to 30% in 2023 and 42% in 2028 if plans are left unchanged and health benefit costs rise at expected rates.

Under the heath care reform law, the 40% excise tax, which is to be imposed annually starting in 2018,applies to the portion of group health care plan premiums exceeding $10,200 for single coverage and $27,500 for family coverage.

Under the health care reform law, the excise tax trigger will be hiked annually to match the increase in the consumer price index.

Kaiser's estimates, which are based on its annual survey of about 2,000 employers with three or more employees, focus on the threshold for single coverage.

The estimates take into account health insurance premium costs plus employer contributions to health savings accounts and health reimbursement arrangements, as well as employee contributions to flexible spending accounts, all of which are included in the total cost of the health plan, according to the Internal Revenue Service.

For small firms with three to 199 workers, Kaiser's analysis showed that 25% will trigger the Cadillac tax in 2018. Twenty-nine percent will reach the threshold in 2023 and 41% will in 2028.

And for employers with 200 or more workers, Kaiser's estimates increase significantly, as larger employers are more likely to offer FSAs than small firms, and that adds to the cost of the health plan, the foundation said in the analysis.

According to the analysis, 46% of large firms will hit the Cadillac tax threshold in 2018, 56% will reach it in 2023, and 68% are likely to trigger the tax in 2028.

Those projections for large firms are lower than the results of a survey of 140 of the largest U.S. employers released Aug. 12 by the National Business Group on Health. NBGH found that 48% of employers said if no action is taken, at least one of their health plans will trigger the excise tax in 2018.

The NBGH survey also showed that by 2020, 72% of employers predict one of their plans will reach the threshold, while their plan with the highest enrollment will be only a year behind. By 2026, 94% predict they will trigger the tax, NBGH said.

Both organizations' surveys agreed that nearly all employers will eventually be affected by the excise tax if premiums continue to grow faster than inflation.

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