(Bloomberg) — Large employers are increasingly putting an end to their most generous health-care coverage as a tax on “Cadillac” insurance plans looms closer under the Patient Protection and Affordable Care Act (PPACA).
Employees including bankers at JPMorgan Chase & Co. and college professors at Harvard University are seeing a range of moves to shift more costs to workers. Companies are introducing higher deductibles and co-payments, rising premiums and the imposition of wellness programs that carry penalties for people who don’t comply.
Requiring employees to shoulder more of the cost burden may undermine public support for PPACA just as Congress, now firmly under Republican control, considers new ways to gut the law.
The tax takes effect in 2018, and employers are already laying the groundwork to make sure they don’t have to pay the 40 percent surcharge on health-insurance spending that exceeds $27,500 for a family or $10,200 for an individual. Once envisioned as a tool to slow the nation’s growing health-care tab, the tax has in practice meant higher out-of-pocket health-care costs for workers.
“I don’t think there’s any employer that’s planning on paying that tax,” Steve Wojcik, vice president of public policy for the National Business Group on Health (NBGH), which represents large employers, said in a phone interview.
“It doesn’t help the company, it doesn’t help the employees, it doesn’t help the shareholders,” he said. “It doesn’t really help anybody except the federal government.”
The tax on Cadillac plans — named after the luxury vehicle to denote their lavishness — is one reason the growth in health-care premiums has slowed since PPACA took effect in 2010.
Last year, average family premiums rose 3 percent to $16,834, while single premiums held steady at $6,025, according to the Kaiser Family Foundation. Companies with a large percentage of high-wage workers paid more, with an average of $6,244 for single coverage.
Among employers with 200 or more workers, 51 percent had employees paying one-quarter or more of their premiums for family coverage last year, according to Kaiser’s report in September. That portion has been gradually increasing since 2011, when it was 42 percent.
Employers who have traditionally offered generous benefits to lure top professional talent, or who have conceded to demands from labor unions for better health benefits, are most susceptible to the tax, Wojcik said. Many are responding by imposing new requirements on workers and reducing their health benefits.
The tax “is having the effect that was intended, which is the cost of these plans are being reduced,” Christopher Condeluci, a former Senate Republican aide who helped design it, said in a phone interview. “Sadly, the way in which they’re being reduced is they’re shifting more costs onto the employees.”
JPMorgan expanded its wellness program for 2015, requiring workers to complete a biometric screening and an online questionnaire in exchange for $200 in a savings account for medical expenses. Employees who don’t comply will pay $500 extra for their insurance premiums.
The bank also raised its insurance premiums for workers and even more for their spouses, who “have higher claims, on average,” it said in an employee brochure.