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Voluntary benefits could hold key to health care reform excise tax

Voluntary benefits could hold key to health care reform excise tax

NATIONAL HARBOR, Maryland. — Some U.S. employers are beginning to use voluntary medical benefit plans to minimize the prospects of sharp health care cost increases in the coming years as a result of health care reform.

Effective for 2015, Chicago-based cement manufacturer Lafarge North America Inc. is fully replacing its existing “gold” and “silver” PPO health care plan with a high deductible health plan coupled with a suite of employer-paid voluntary medical benefits — including hospital indemnity, critical illness and group accident coverage plans — designed to offset the substantial transfer of plan costs to its employees.

“We needed a new way of thinking about how to continue offering high-quality benefits without having to face all of the legislative issues that are coming down the pike,” Philia Swam, Lafarge North America's director of health wellness and group benefits said Monday during a panel discussion at the 2014 Employer Healthcare and Benefits Congress in National Harbor, Maryland.

Ms. Swam, who was named to the honor roll in Business Insurance's 2011 Benefit Manager of the Year awards, said pairing high-deductible health care coverage with low- or no-cost voluntary medical benefits not only softens the net financial impact on employees and promotes deeper engagement in their medical care consumerism and health management, it substantially reduces the company's exposure to the so-called “Cadillac” tax that will be levied against many employers under the Patient Protection and Affordable Care Act.

Beginning in 2018, the Internal Revenue Service will impose a 40% excise tax on employer-sponsored health benefits costing more than $10,200 for individual coverage and $27,500 for family coverage.

However, Ms. Swam pointed out, the IRS currently does not include voluntary medical plans in its calculation of the taxable value of an employer's health care benefits.

“What this does is it lets us decrease the (taxable) value of our health plan, and then use the savings that we're seeing from the cost-shift to rebuild the overall value of the health plan for our employees,” Ms. Swam said during the panel discussion. “That core voluntary benefit policy that we're providing for everybody is the piece that helps fill in the care gap between the deductible and coinsurance under the high-deductible plan.”

As more employers transition to high-deductible plans as both a means of improving employees' health management and medical care use while shrinking their own exposure to the 2018 excise tax, other benefits experts on Monday's panel said they expect employers' use of voluntary medical plans to play a more substantial role in supplementing those efforts.

“We call it medical plan remodeling,” said David Ratcliffe, a Washington-based principal at Buck Consultants at Xerox. “Historically, voluntary benefits haven't been integrated or coordinated very well with the core medical plans, but we are starting to see more integration.”

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