The surprise election of Donald Trump means healthcare reform for every sector of the healthcare industry is about change. Exactly how is still to be determined. But for employers, who are the largest purchasers of insurance, several changes are likely:
The controversial excise tax, often called the Cadillac Tax, has proven to be unpopular on both sides of the aisle and will most likely be repealed. It was designed to help fund healthcare reform by charging a 40 percent tax on the cost of employer-sponsored healthcare coverage exceeding certain thresholds: $10,800 for single coverage and $29,100 for family coverage. It was supposed to target plans that offered overly generous benefits as a way to keep costs down. But many purchasers of insurance, including California Public Employees’ Retirement System (CalPERS), found that some of their plans if left unchanged could trigger the tax. Employers had already begun changing their plan designs when the Cadillac tax was delayed in December 2015 by two years from 2018 to 2020.
For employers in industries with lower wage workers like retail and hospitality, an expected repeal of the employer mandate (which requires employers with more than 50 full-time equivalent employees to provide health insurance) will mean they no longer have to provide health insurance to those working at least 30 hours. Employers in these industries will likely go back to requiring more hours in order to qualify for healthcare coverage, and will also revert back to leaner coverage, probably similar to what they offered pre-ACA. Small employers may decide not to offer insurance at all or reduced coverage plans as well. Most large employers will not be too affected, as they will continue to offer healthcare coverage, but they will not have to devote time to the administrative reporting requirements of the ACA.
While most employers will welcome the rollback of the employer mandate, increased reporting requirements, the essential benefits requirement, and the Cadillac tax, the proposals for “replacing” the ACA include a cap on the tax exclusion for employer-sponsored health benefits. The Pacific Business Group on Health said many employers are concerned that this would erode the employer-based system, which covers nearly half of all Americans.
Employers support efforts to reduce costs and increase quality, and the ACA contained elements that reduce waste such as new provider payment and delivery models. Employers have launched their own innovative programs in alignment with government initiatives, such as centers of excellence, accountable care organizations, bundled payments, and programs for high-cost patients. PBGH said employers are worried the progress that has been made in moving from fee-for-service to fee-for-value will be seriously threatened if the ACA is repealed. Another concern is that the millions that will lose coverage gained from Medicaid expansion could cause hospitals to raise prices on commercially insured patients to pay for the costs of the uninsured.
The new administration has said it expects to overhaul the tax code and healthcare industry regulation, and that an expansion of health savings accounts will be a cornerstone of its healthcare agenda, which could involve increasing limits on HSA contributions. Another long-range plan could tax employer-provided health insurance coverage. While employers will be happy to be free of some reporting requirements and taxes associated with the ACA, what will be put in its place is unknown and its impact on employers a question mark as well.
Jenny Kerr is a senior analyst at DRG and an Employer Benefit Trends expert. Follow her on Twitter at @JennyKerrDRG.
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