As an HR Professional in 2010, I recall thinking, as I struggled to wrap my mind around the myriad of complex provisions included in the ACA, that the Cadillac tax was probably one provision that I didn’t need to concern myself with. After all, it was years in the future and only applied to those other, richer plans, right? Time for a fast forward reality-check.
The Cadillac tax has been delayed in the past but is set to begin in 2022 on high-cost employer-sponsored health coverage. It will tax health coverage that exceeds $10,200 for individual coverage and $27,500 for family coverage at the rate of 40%. This includes contributions made by employers and employees toward health coverage premiums but not cost-sharing amounts such as deductibles, coinsurance or co-payments made when care is delivered.
But, employers, like mine, have certainly not been idle during the last eight years. We have continued to work to design health care plans that will attract and retain top talent while ensuring that coverage meets minimum value and affordability requirements mandated by the ACA. All the while, health care costs, particularly driven by prescription drug costs, continue to climb. Studies suggest that prescription drugs will continue to represent a larger portion of the overall health spending. I have seen this firsthand with the employer-sponsored plans I manage where prescription drug costs may represent over 30% of total health claims spent.
This leaves employers with some tough decisions to either reduce the benefits they offer to maintain a cost-effective plan that still meets minimum coverage and affordability standards or absorb additional costs. And then, there’s the Cadillac creep. A monthly individual premium of $10,200 annually or $850 per month no longer seems far-fetched as I stare into a future where drug cost inflation rates outpace wage increases.
I’m a proud member of the Society for Human Resource Management (SHRM), which encourages Congress to fully repeal the excise tax. I support and join in SHRM’s advocacy efforts to defeat this tax because over 178 million Americans get their health care through employer-sponsored health plans. We can’t afford to let the Cadillac creep impact employers and employees.