The anxiously awaited CBO score of the AHCA – reflecting the last round of changes made to the bill before it was passed – was released yesterday afternoon. The nonpartisan scorekeeping office forecast the AHCA would cut the federal deficit by $119 billion over the next 10 years, down from $150 billion in the prior score. From a process perspective, the bill still easily passed the test to save at least $2 billion to qualify for consideration under a reconciliation process that is filibuster-proof by requiring only 51 votes in the Senate, not the typical 60-vote threshold.
What else changed in the report? There was a very small decrease in the projected number of uninsured, which had been 24 million over ten years and was revised to 23 million. That’s not much of a ROI for the additional $38 billion aimed at keeping people covered. The largest savings stem from reductions in Medicaid funding and from the replacing ACA’s subsidies for individual health insurance with new tax credits for individual/non-group health insurance.
Of particular interest to employers are the waivers that could be granted to states starting in 2020 allowing them more flexibility on age rating and essential health benefits. In scoring the bill, the CBO and JCT examined three general approaches states could take to implement H.R. 1628 and estimate that about half the population resides in states that would not request waivers regarding the EHBs or community rating; about one-third of the population resides in states that would make moderate changes to market regulations, and about one-sixth of the population resides in states that would obtain waivers involving both the EHBs and community rating. There’s a table showing the estimated impact on premiums by age group in states that would and wouldn’t obtain waivers in this Vox article, and the story isn’t good for older Americans. It’s not yet clear how, or whether, state waivers – which are targeted for individual and small group coverage – would affect employer-sponsored plans.
Politico summed it up best, “…the report highlights the central dilemma that Republicans are grappling with now — how to write a health care bill that preserves peoples’ coverage at a reasonable price, without resorting to government mandates and billions in federal spending. And it drops that problem right on the Senate’s doorstep.”
Last night’s vote was about change, but what will Donald Trump’s presidency mean for healthcare benefits? The ACA will almost certainly change, although it is unclear if we will see full repeal or a major overhaul. With that said, Republicans won’t want to risk the backlash of kicking 25 million constituents off their plans. The task at hand is to “fix” the parts of the ACA that are ineffective. At this point, here’s what we think we know:
- The popular features of the ACA will likely remain, such as expanded eligibility for dependent children to age 26; the ban on pre-existing condition limits; and the closed gap in Medicare prescription coverage
- Repeal of the excise tax could become a reality -- but would a cap on the employee tax exclusion take its place?
- We’ll see a laser focus on how to create new, competitive markets for individuals who don’t get coverage through their employer or public programs, with Trump favoring individual tax preferences
Recent Mercer survey results found employers divided on repealing and replacing the ACA, with clear variation by employer size. While a majority of small employers favors repeal and replace (65% of those with 10-499 employees), that falls to just 36% of those with 20,000 or more employees. Our interpretation is that it is not the “repeal” as much as it is the “replace” that makes employer support uncertain. Given a Trump presidency and a Republican-controlled Congress, here are key issues for employers as they consider the impact on their health program strategies:
- Many employers welcome the promise of repeal of certain ACA requirements, especially the excise tax, the employer mandate, and reporting. But be prepared; it could take time -- a year or two -- for all the transitions to take place. These changes may need to be part of a larger plan for covering the 25 million uninsured who went to the public plans and Medicaid.
- Enrollment in high-deductible health plans continues to grow and there is keen interest in expansion of HSAs. Legislation has been proposed to increase funding limits and allow funds to be used for OTC medications, telemedicine visits, and onsite clinic visits to support further growth.
- While the rise of consumer-directed health plans has been an effective cost-management strategy, it has put financial pressure on employees and their families, so employers need to keep pushing for greater health care price transparency.
- Employers will also need to double down on Rx strategies. Republicans are less likely to go after pharma to control drug prices, and projections are for an additional $25B annually in new drug spend.
- More states passed time-off/sick leave laws. At the same time, employers are working on a proposal to get the federal government to pass ERISA-like safe harbor rules to ease the administrative burden of compliance with state and local laws.
Employers have done a great job of holding health benefit cost growth mostly below 4% in the years after the passage of the ACA, and 2016’s increase of just 2.4% was one of the lowest we’ve seen in decades. The threat of the excise tax was certainly a factor, and some employers made benefit cuts they didn’t want in order to hold down cost. To keep health care cost growth at sustainable levels in the years ahead will mean changing the health care system for the better, to ensure people get the right care, in the right place, at the right time -- and error-free.
Employers provide health care coverage for more than half of the American people and are uniquely positioned to be a driving force for meaningful change in how care is accessed and delivered. It is important that your voice is heard as the new policy debates begin. But don’t wait for the government. All of us must keep working to drive cost-effective care and better outcomes for our employees and their families.
Well, it happened. House Republicans got the votes to send the AHCA on to the Senate. The bill will face tough challenges in the Senate, so this is far from a done deal. For now, it is business as usual under the ACA.
Highlights of what is in HR 1628
- The “Cadillac” tax remains, although delayed from 2020 to 2026
- Employer and individual mandate penalties eliminated for 2016 and later years
- Age-based tax credits starting in 2020. Credits phase out for those making more than $75,000 per year ($150,000 joint filers). No credits for those offered employer coverage
- Most other ACA taxes are repealed for years beginning after 2016
- HSA enhancements – Increase limits to max deductible/out-of-pocket limits for HDHPs (Based on Mercer estimates, $6,650 single/$13,300 family for 2018)
- No additional states can expand Medicaid after March 1, 2017 and Medicaid funding significantly changed with per enrollee capped payments, option for block grants
- Employer’s ACA reporting not repealed (this would need separate legislation or regulatory action); after 2019 offers of coverage would be reported via W-2
- Subject to certain requirements, states could opt out of essential health benefits, aspects of community rating and age banding requirements
- Most recent amendment provides additional $8B to help states pay for pre-existing condition claims
The Congressional Budget Office has not scored the version of the bill passed by the House. Earlier, they projected the number of uninsured would increase by 14M in 2018, 21M in 2020 and then 24M in 2026 relative to projections under the ACA. CBO has not released revised numbers to reflect the most recent changes. The combination of more people without coverage and cuts in Medicaid funding could potentially result in cost shifting to employer-sponsored plans. Another concern is that employers may have less ability to transition certain populations (early retirees, part-time employees) to individual coverage as a design option.
Important context of this bill in the process of becoming a law
The bill faces significant hurdles in the Senate. The Senate requirements for what qualifies for reconciliation legislation are expected to result in some trimming of provisions that don’t have an impact on the federal budget, and GOP senators will want to make other changes, including more generous tax credits and more time to unwind the ACA’s Medicaid expansion. A Senate-passed bill may be difficult to pass again in a conservative House – both chambers will need to agree on the final version before it can be sent to President Trump.
We will continue to track and provide updates.
The good news is that employer ACA reporting was delayed for 2014. The bad news is that your employees may be prompted for the new Form 1095 when they file their taxes for 2014. The Form 1040 will prompt filers to indicate whether they had health care coverage in 2014. While a recent press release from the Departments of Treasury and HHS states that, for many with employer-sponsored health insurance, indicating coverage status will be as easy as "checking the box," what makes it more complicated is the taxpayer documentation required in order to "check the box" and/or have on file in the event of an audit later.
Employer messaging with W-2 distribution could prevent employee calls to the payroll and benefits department during tax filing season. To start with, let employees know they may be asked for a 1095 and let them know this was a requirement the government delayed for employers until next year. Then you might suggest what they could use to document their coverage. Here are a few ideas:
- End-of-the-year payroll stub with health insurance deduction information.
- Health insurance ID card.
- Copy of the summary plan description (SPD).
- Enrollment confirmation statement from open enrollment for 2014 (you have yours, right?).
- Exchange Notice (if you completed Part B: Information About Health Coverage Offered by Your Employer)
You might also consider adding a similar message to the benefits and payroll pages on your online systems where employees might go in search of a 1095.
Advance preparation and communications could reduce calls and emails for HR staff, and help employees avoid additional stress during tax season.
Last week I promised you more information about a topic that’s rising to the top of the priority list for every employer — ACA reporting. Here’s an overview of the purpose and types of reporting, along with the action items employers should address between now and January 1.
The ACA reporting requirements, despite being an administrative burden to employers, answer three important questions for IRS enforcement.
- Did the employer offer the requisite coverage to satisfy the employer mandate?
- Did the taxpayer have the requisite coverage to satisfy the individual mandate?
- Was the taxpayer eligible for subsidized coverage?
Types of Reporting
Include all covered individuals enrolled in MEC.
Sent to each “responsible individual” who enrolls self or others in MEC.
Fully-insured plans: Insurer will provide MEC information on Forms 1094-B and 1095-B.
Include each full-time employee.
Sent to each employee who was full time for at least one month during reporting year.
Employer will provide ESR information on Forms 1094-C and 1095-C.
Next Steps for Employers
One of the most stifling issues for employers is locating and aggregating the necessary HR, payroll, and health plan data, which are often in disparate locations. Here are the immediate steps employers must address between now and January 1.
1. Make a list of the data to be reported.
The final rules and draft IRS forms have given us a good idea of what is required. But, we are still waiting on the final piece of the puzzle — the instructions. You’ll have to revisit your list and the steps below when the IRS releases the instructions.
2. Locate the data.
Many employers will find that the required HR, payroll, and health plan data must be captured from multiple vendors and systems. Using your list from step 1, identify who has the data that will be required to complete your reporting. Give special thought to the data you can’t locate. For example, many employers don’t have dependent social security numbers. Create and implement an action plan to get your missing data.
3. Ask how your vendors will support you.
Determine if your vendor partners will complete the MEC and/or ESR reporting or merely provide data reports. Our clients are seeing a mix of responses. To proceed to step 4, you’ll need to know what data each vendor will provide. If you work with a vendor that is committed to providing reporting services, get the specifics about the scope of their offering and proceed to the next step.
4. Decide who will aggregate the data.
According to the recent ERIC Survey of Large Employers on ACA Reporting, 28% of employers say that integrating data from two or more different systems is their greatest first-year challenge in meeting the ACA’s reporting requirements. You’ll need a plan to accept data feeds from the systems identified in step 2, aggregate the data, and populate the forms if you choose to do this internally. If you choose to outsource this function, you need to identify and begin implementation with that third party.
5. Begin tracking January 1, 2015!
Although the first ACA reporting deadline isn’t until Q1 2016, the forms require you to report data on a monthly basis. Tracking data as you go will be much easier than trying to pull 12 months of historical data in January 2016.
The recent US Supreme Court decision legalizing same-sex marriage seems likely to affect employer offerings of domestic partner (DP) coverage. Many employers that now offer DP benefits chose to do so because their employees did not have a legal right to marry their same-sex partners and thus could not qualify for dependent coverage. But more often than not, DP benefits are also extended to unmarried opposite-sex domestic partners, so a change in policy could affect those couples as well.
Offerings of DP coverage have been growing steadily. According to Mercer’s National Survey of Employer-Sponsored Health Plans, over the past five years offerings of domestic partner coverage have risen from 39% to 55% among large employers (500 or more employees). Among jumbo employers – those with 20,000 or more employees – 76% offer DP coverage. There is still a wide variation by geographic region, however. Fewer than half of all large employers in the South and Midwest provide DP benefits (46% and 45%, respectively), compared to solid majorities of large employers in the Northeast and West (60% and 78%, respectively).
With the issue of marriage equality decided by the Court, some employers are debating whether to stop offering domestic partner benefits, which would eliminate the administrative burdens associated with the offering. Mercer polled employers about their thinking on this issue during a webcast conducted about a week after the decision was announced. Of about 150 employers responding, 19% offer DP benefits to same-sex couples; 55% offer it to same-sex and opposite-sex couples, and 25% don’t provide it at all. When we asked those currently extending coverage to domestic partners if the decision will cause them to rethink this policy, 4% said they have already dropped DP coverage in states permitting same-sex marriage, and 15% said they will drop it for the next open enrollment period. While another 28% said are at least considering it, the majority – 53% – said they are not considering it.
Those that provide it to same-sex couples only are more likely to drop it – in fact, 8% say they have dropped it in states that had already legalized same-sex marriage. Another 23% say they will drop it for the next open enrollment period, while 23% are at least considering it. The rest (44%) say they are not considering it. Employers that offer DP to both same-sex and opposite-sex partners are moving more slowly. The majority of these employers – 62% – say they are not considering dropping it. Only 8% plan to drop it for the next open enrollment period, and few – just 4% – have already dropped it in states that legalized same-sex marriage. About a fourth says they would consider dropping it within the next 2-3 years.
The recent ruling will require employers to take some immediate steps to ensure compliance. For example, you’ll need to revisit your definition of “spouse” in plan documents to ensure it covers same-sex spouses and your eligibility rules. And if you offer domestic partner coverage, you may also want to take this opportunity to review your objectives for the program and weigh your employees’ needs and preferences. This decision should reflect your organizational culture and attraction/retention strategies. If you decide to drop DP coverage, couples will essentially be required to marry or lose coverage. For the couples who prefer not to marry – same-sex or opposite-sex – a change in policy could have far-reaching impact.
In light of the recent US Supreme Court decision in Obergefell v. Hodges legalizing same-sex marriage nationwide, employers should consider the following implications for benefit plans and employment policies:
- Revisit your definition of “spouse.” Make sure the definition covers same-sex spouses in plan documents, insurance policies, trust and service agreements, beneficiary forms, required notices, and employment policies.
- Review your eligibility rules. Fully insured and public sector self-funded health plans must offer coverage to same-sex spouses. Self-funded health plans aren’t prohibited from limiting coverage to opposite-sex spouses, but you may face litigation under federal employment discrimination law.
- Adjust payroll and state tax reporting. Imputed income should no longer be calculated for the value of same-sex spouse health coverage. The timing of this change is unclear. However, we have seen guidance from the states of Ohio and Nebraska.
- Reconsider domestic partner coverage. You should weigh the pros and cons of continuing to make available domestic partner coverage, given that same-sex couples now have the right to marry in all 50 states. While the complexity of tax withholding and reporting for domestic partner coverage may be an argument in favor of dropping domestic partner coverage, would this action be in keeping with your organizational culture? Would it have an impact on recruitment/retention strategies? If you do decide to end domestic partner benefits, consider carefully the end date — after which couples will essentially be required to marry or lose coverage. We recently shared employer data on domestic partner coverage now that same-sex marriage is legal everywhere.
- Determine if you need a plan amendment. You may need a mid-year plan amendment to allow employees to enroll their same-sex spouses prospectively based on the plan’s expanded eligibility. Eliminating domestic partner coverage would also require a plan amendment.
- Don’t forget retirement plans. Make sure retirement plans give same-sex spouses the same rights, obligations, and benefits as opposite-sex spouses.
Many employers believe the Obergefell ruling will boost efforts to recruit top talent, facilitate employees’ interstate transfers, and foster a culture of diversity and inclusion. You may find the timing right to launch an effort to promote greater diversity and inclusion in your organization.
Everyone is shifting into planning mode this month, thinking about open enrollment for 2016 benefits. Whether you are making major benefit plan changes, going out to bid for services, or keeping things status quo, here’s what you need to keep in mind relative to the ACA.
Reporting requirements. If you have not yet established processes for ACA reporting for 2015, you are not alone. Many employers are just now focusing on the requirements and looking for resources to support compliance. There are many third-party options available to help if your payroll or HRIS teams don't have the bandwidth. But it’s best to get started now.
Tracking hours. Stay on top of eligibility determinations for variable-hour employees in a measurement period. Now that we are in full ESR compliance mode, be sure that your tracking systems are working well and a process is in place to identify individuals who should be offered benefits at the end of your initial and standard measurement periods. This will be an extra step in planning for open enrollment.
Temporary Reinsurance Fee. Just as a reminder, the annual fee is $44 per covered life for 2015 ($33 payable in January 2016, $11 in December 2016). As you project costs for 2016, remember that the fee will reduce to $27 per covered life, payable in a lump sum or two installments of $21.60 and $5.40.
Excise tax. We were pleasantly surprised to get documentation from Treasury for review and comment (IRS Notice 2015-16). It is the first of two documents they intend to release, with the second coming in a few months. The real takeaway, as it relates to 2016 planning, is that 2018 is not that far away! It is a good idea to look at a projection for 2018, based on what we know today, to determine your risk for hitting the threshold (here’s a calculator you can use that takes your medical plan costs as a starting point). Many employers have been making changes in anticipation of the tax for several years.
Exchange subsidy notices. Now that open enrollment for the public exchange is wrapping up, you may receive a notice if one of your employees signed up for subsidized exchange coverage. If you have multiple locations, you should alert staff at each site that a notice could be sent to their location and let them know where to forward it. It is also a good idea to establish a process for reviewing the notice and deciding how to respond under the various possible scenarios, including communication with the employee and/or the exchange.
Summary of Benefit Coverage (SBC). Be sure to check for updated template language and include the SBC on your open enrollment communication check-list.
Yes, I know it feels like 2015 open enrollment just ended. But with ACA compliance, as with your health, an ounce of prevention is worth a pound of cure.
As you finalize medical plan designs for 2016, make sure you consider these five compliance elements of the Affordable Care Act (ACA).
1. Embed individual out-of-pocket (OOP) limits. The ACA’s annual in-network OOP statutory limit for self-only coverage ($6,850) applies to all individuals, whether enrolled in self-only coverage or another tier (e.g., family). Be sure to confirm your medical carrier’s capabilities to adjudicate this benefit design feature. The penalty for non-compliance is $100 per day per individual.
2. Offer MEC to 95% of full-time employees. Under the ACA employer mandate, large employers must offer minimum essential coverage (MEC) to “substantially all” full-time employees and their dependent children (not spouses/domestic partners). In 2016, the “substantially all” percentage increases from 70% to 95%. Employers could be subject to assessments if at least one full-time employee receives tax-subsidized public exchange coverage. The assessment is an annual payment of $2,160 for each full-time employee minus the first 30 full-time employees.
3. Update FPL affordability safe harbor (generally $93 per month). The IRS established three affordability safe harbors employers may use to show coverage is affordable — Federal Poverty Level (FPL), W-2 wages, and rate-of-pay. For plan years beginning on or after July 22, 2015, the FPL safe harbor is $93 per month based on the 2015 FPL of $11,770 (higher in Alaska and Hawaii). The potential assessment for non-compliance is the lesser annual payment of:
- $3,240 for each full-time employee receiving tax-subsidized public exchange coverage
- $2,160 for each full-time employee minus the first 30 full-time employees
4. Consider treatment of opt-out credits in affordability calculations. A recent IRS FAQ regarding HIPAA’s health status nondiscrimination rules states that the required contribution of any employee eligible for a cashable opt-out (in this case, targeted “unhealthy” employees) would be the premium contribution plus the opt-out amount — raising the required employee contribution by the amount of the cashable opt-out. It’s unclear if this same analysis applies when calculating the affordability of coverage under the ACA’s play-or-pay requirements, individual mandate, and eligibility standards for public exchange subsidies. Employers with opt-out designs should review their plan’s affordability with their legal advisors. The potential assessment is same as for #3 above.
5. Prepare for play-or-pay and MEC reporting. The IRS will use the information from Forms 1094 and 1095 filings to confirm subsidy entitlement and assess payments under the individual coverage mandate and the employer shared-responsibility provisions. The first year for which the reporting is required is 2015, due in early 2016. Rules allow for a 30-day deadline extension for both furnishing the individual statements and filing the IRS transmittal, but each requires timely employer action. Employers filing late or inaccurate Forms 1094 and 1095 are subject to penalties of $250 per return, up to a $3 million maximum.
The ACA reporting deadlines for minimum essential coverage and employer shared responsibility occur in the first quarter of 2016. Individual statements (Form 1095-Cs) have a Monday, February 1, 2016, deadline and the IRS electronic transmittal due date (Form 1094-C) is Thursday, March 31, 2016.
Several months ago, about half of the employers we surveyed did not yet have a plan for how they would comply with the reporting requirements. Some may initially have thought they would handle the work in-house but now have decided to seek outside assistance from one of the many third-party vendors that offer reporting solutions. However, we have been hearing that because of demand and the lengthy implementation that the work requires, some vendors can no longer commit to meeting the reporting deadlines. They are offering to send the 1095-Cs at a later date in February or in March.
Is this feasible? And if so, what are the risks? In fact, the rules clearly allow for an extension for both deadlines (as described in the 2015 reporting instructions):
- 1095-Cs. Per 26 CFR §301.6056-1(g)(1)(ii), you may apply to the IRS in writing for a 30-day extension. A simple letter to the IRS requesting the extension and providing the reasons it is needed can serve as an application. While the IRS has authority to provide procedures for automatic extensions, we are not aware of any plans to do so. The 2015 reporting instructions contain more information on the content of this letter.
- 1094-Cs. Per 26 CFR §301.6056-1(e), referencing 26 CFR §1.6081-8, the IRS will grant an automatic 30-day extension upon an employer’s filing of Form 8809. You can submit a request for a second 30-day extension if submitted before the initial extension period ends but the second extension is not automatic.
For the 1095-C, the obvious risk is that the IRS will not grant the extension. Also, employers should consider employee reaction to a delay. Recall that the 1095-C may be required in order to complete personal income tax filing. (See lines 46 and 61 of Form 1040).
Seeking an extension, though, may become the best choice for employers who do not choose a reporting solution soon. If you haven’t finalized plans for reporting, act now!
- Review the alternative reporting options — i.e., qualifying offer, qualifying offer transition relief, and 98% offer. These options can make reporting somewhat simpler, particularly for fully insured plans.
- Evaluate resources available to see if handling the reporting in-house is feasible. Even though the requirements are pretty complex, a third of employers we surveyed thought it was.
- Consider the pros and cons of filing for an extension.
While it’s far from clear where the incoming administration and Congress will land on the “replace” part of “repeal and replace” with regard to the Affordable Care Act, they are signaling interest in promoting the use of health savings accounts by expanding eligibility and allowing funds to be used for more purposes. High-deductible HSA-eligible plans already feature in many employer health benefit programs. In 2016, 21% of all covered employees were enrolled in an HSA-eligible plan. Enrollment has been rising over the past decade as employers -- especially large employers (500+ employees) -- have added HSA-eligible plan choices to their health programs. The threat of the excise tax was a big motivator for employers to move employees into lower-cost plans; while the excise tax may go by the wayside, there is now discussion of capping the individual tax exclusion for employer-provided health coverage, which could still drive cost pressure on employer-sponsored health plans.
It is relatively uncommon for a large employer to offer an HSA-eligible plan as the only plan. Many are concerned that these plans might not be a good fit for all employees in their population. In fact, among employers that have offered an HSA as a choice for at least three years, average enrollment has only reached 38% of covered employees -- even though employee paycheck deductions for these plans are significantly lower. Among large employers, for employee-only coverage in an HSA-eligible plan, employees contribute $84 per month on average, compared to $132 for PPO coverage. For family coverage, the difference is $321 vs. $467. In addition, 75% of large employers offering HSA-eligible plans make a contribution to the employees’ HSA -- typically $500 for an individual.
While per-employee cost for these plans is 22% less, on average, than cost for a traditional PPO, some employers question whether the savings are due largely to selection -- the tendency of younger, presumably healthier employees to choose the HSA plan over a richer PPO or HMO. It is true that when the HSA plan is offered as a full replacement, the average HSA cost is higher than when it is offered as a choice. But perhaps the more meaningful comparison is total health cost per employee -- the cost for all enrolled employees across all medical and dental plans. Among large employers offering an HSA-eligible plan as a choice, total health benefit cost averages $12,529; among those offering a full-replacement HSA, it averages $10,732. Plan design and other factors may account for this difference in cost, but not selection. Studies have shown that the higher cost-sharing levels in an HSA-eligible plan are associated with lower utilization of health services. It has not been demonstrated if, or how, this lower utilization affects the health of enrollees.
Changes in health policy may well have employers reconsidering a full-replacement strategy. And while many employers that already offer these plans also provide financial planning resources, transparency tools, and resources such as telemedicine to help mitigate employees’ growing financial risk, the fact remains that for employees without sufficient savings and significant health expenses, a high-deductible plan can result in financial hardship. On the other hand, for many employees, the HSA is an extremely efficient way to save for future health expenses, and may become even more so under the new administration. The key to making the decision to offer an HSA alone or as a choice is understanding employee needs and preferences, as well as the new resources that are available to help make HSAs work better for everyone.
Time flies. We can finally see the light at the end of the tunnel for ACA compliance. But the last ACA requirement poses the biggest challenges for most employers, and that’s (drum roll) the excise tax slated to go into effect in 2018. Since today is the deadline for the second round of comment letters to the IRS, we thought it would be timely to kick off a series of posts on this important topic. What will follow over the coming days are pieces written by Mercer colleagues with a broad range of expertise, focusing on tax-avoidance strategies and how the excise tax may affect other HR and business objectives.
So how big of a deal is the excise tax for employers? In a webcast that we hosted last week, we posed several questions to employers in an exit survey. Roughly half (52%) of the 100 attendees who took the poll told us they will need to make changes to their current medical plans to avoid the tax in 2018. And remember that health benefit cost rises faster than the excise tax threshold, so even employers that can get by in 2018 will probably need to make changes at some point to avoid the tax.
We asked another question that has important implications for policymakers as well as employers: When employers make changes to their plans that save money, what will they do with the savings? Government projections for revenue stemming from the excise tax are based on the assumption that employers will return a good portion of the savings to employees in their paychecks. Our poll suggests otherwise. Only 5% of respondents said they planned to increase employee compensation. Granted, about half of the respondents had not made changes yet, but even if you double those planning to increase compensation, you only get to about 10%. Employers with savings were more inclined to add health-related benefits not subject to the tax, or to add to the 401(k) match. While we make no claims that this “quick and dirty” survey is at all representative, the results line up with what a lot of us have been hearing from our clients.
One thing we know for sure, employers want the excise tax repealed. Here at Mercer, we are doing our part to support your interests. We joined the Alliance to Fight the 40, a broad-based coalition comprising public- and private-sector employer organizations, unions, health care companies, businesses, and other stakeholders that support employer-sponsored health coverage. In addition, we are frequently invited to Capitol Hill and various branches of the government — HHS, DOL, and Treasury/IRS — to share our survey data and represent employers’ perspectives. And, in the event that repeal efforts fail, we are active in the effort to shape the regulations on the excise tax that would make it more friendly to employers and their workers. Mercer has responded to both of the Treasury’s requests for comments on the tax.
To get this series started, Geoff Manville will provide an “inside the beltway” view of what is happening with the repeal efforts, and Beth Umland will share some interesting data on why we don’t really think it is a “Cadillac” tax. You will be able to identify the pieces in this series by the picture above. For those of you who have not been to Washington, DC, since your high-school field trip here, the picture is of the Treasury Building, right next door to the White House. Enjoy the series!