Nearly Two-Thirds Of Businesses Changing Coverage To Avoid New Obamacare Tax

by , Western Journalism

A new survey finds that nearly two-thirds of businesses facing a new Obamacare tax will change their coverage to avoid it.

The survey, conducted by the International Foundation of Employee Benefit Plans, finds that 62 percent of the nearly 600 companies polled have already taken action or plan to take action to avoid the so-called “Cadillac tax.”

The tax on higher premium plans is set to take effect in 2018 and impacts those plans costing businesses over $10,200 for individual coverage and $27,500 for family coverage. For every dollar spent over that threshold, employers will be hit with an excise tax at a punishing 40 percent rate.

Only 2.5 percent of businesses that would be affected by the tax plan to pay it.

Robert W. Wood, writing for Forbes, notes:

The theory of the [Affordable Care Act] is that health insurance should be the great leveler. The [law] included the Cadillac tax as a tool to cut health care costs. It puts direct and forceful pressure on employers to offer less-generous health insurance plans.

Some of the steps businesses are taking to avoid the Cadillac tax include shifting to higher deductible plans (which has been a common trend under Obamacare generally), reducing benefits, or dropping the higher cost plans altogether.

One-quarter of the respondents opting for higher deductible plans are coupling the move with establishing tax-free Health Savings Accounts for their employees, while an additional 14 percent are considering do so.

The Cadillac tax is unpopular with many Democrats, labor unions, and Republicans alike. House Democrats introduced a bill last month to repeal it.

Regarding Obamacare overall, three-in-five respondents reported the law has had a negative impact on their organization; and among those who reported that their perception about the law has changed since its enactment, three quarters said it has become more negative.

Image Credit: International Foundation of Employment Benefits

Image Credit: International Foundation of Employee Benefit Plans

Businesses identified administrative (55.7 percent) and disclosure, reporting, and notification costs (37.5 percent) as their top cost drivers in complying with the law.

As businesses look towards the future, they report the greatest cost associated with Obamacare will hit next year with the “employer mandate.” The mandate requires all businesses employing 50 or more full-time employees to provide government-approved coverage to their employees or pay a penalty.

Image Credit: International Foundation of Employment Benefits

Image Credit: International Foundation of Employee Benefit Plans

The good news for employees is, despite the lower cost in paying the penalty and sending their employees to the Obamacare exchange, over 98 percent of businesses that provide health care coverage for their full-time workers intend to keep doing so.

The top reasons businesses listed for providing coverage included attracting future talent (79 percent), retaining current talent (75 percent), and maintaining/increasing employee satisfaction (53 percent).

Do you think Obamacare is hurting businesses? Please comment below. 

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