Excise tax. In 2018, the ACA will impose a 40 percent excise tax on employer-sponsored health coverage that exceeds a threshold amount. Plans with this level of coverage have been dubbed “Cadillac” health plans. The tax will be imposed with respect to coverage for a tax period if: (1) an employee is covered under an applicable employer-sponsored plan; and (2) there is any “excess benefit” with respect to the coverage. An excess benefit is defined as the sum of the monthly excess amounts during a tax period. A monthly excess amount is the excess of: (a) the aggregate cost of the applicable employer-sponsored coverage of the employee for the month, over (b) an amount equal to 1/12 of the annual limitation for the calendar year in which the month occurs.
Majority taking steps to minimize exposure. Aon Hewitt did find that while a quarter of organizations have not assessed the impact of the excise tax on their health plans, the majority of companies are taking steps to minimize their exposure to the tax. The survey noted that 40 percent of employers expect the excise tax to affect at least one of their current health plans in 2018 and 14 percent expect it to immediately impact the majority of their current health benefit plans.
Of those employers that have determined the excise tax’s impact, 62 percent said they are making significant changes to their health plans for 2015, including reducing the richness of their plan designs; increasing the use of wellness incentives; evaluating private exchange options for retirees (both pre- and post-age 65); and reducing spousal subsidies through mandates or surcharges.
“While the excise tax provision of the ACA doesn’t go into effect until 2018, it is accelerating the pace of change for U.S. employers,” noted Jim Winkler, chief innovation officer for Aon Hewitt's Health business. “Over the next few years, employers expect to use both traditional and innovative tactics to make substantive changes to their health plans to minimize their exposure to the tax and put them on a path to lower rates of health care cost increases.”