Issue link: https://nebusinessmedia.uberflip.com/i/619113
www.HartfordBusiness.com decemBer 28, 2015 • Hartford Business Journal 39 BOOK OF LISTS 2015-2016 Health Care Employers look to 'Cadillac' tax on high-cost health plans By John O'Connell, President, C.M. Smith Agency A lthough the healthcare excise tax (aka Cadillac tax) is not effective until 2018, employers are paying attention to the tax and will continue to implement strategies to avoid it. As a refresher, the measure will impose a 40 percent tax on the gross cost for any employer-sponsored plan above two cost thresholds — $10,200 for single coverage, and $27,500 for fam- ily coverage. (There are higher limits for early retiree programs and also for high-risk professions.) These dollar lim- its apply uniformly across the country, which means employers in high-cost healthcare areas, like Connecticut, will feel a greater impact. The gross cost noted above includes the portion of premium the employer pays, plus the portion paid by the employ- ee. The gross cost excludes payments made by employees for deductible and other cost-sharing elements. There are three key messages to consider. First, the excise tax is non-deduct- ible. For taxable entities sponsoring health insurance, this means that the effective tax impact is likely much higher than 40 percent, feeding the sense of urgen- cy on the part of many employers. Due to the fact that the Affordable Care Act imposed a minimum essential benefit level, employers who are consid- ering avoiding the tax by paring back benefits will eventually run out of room with this strategy. The only long-term method to avoid the Cadillac tax is for an employer to significantly slow down the pace of medical cost "trend" affecting their healthcare cost structure. One of the strategies for achieving this is a deeper level of care coordination by providers. Meantime, while the majority of employ- ers will remain engaged with their histori- cal wellness and disease management programs, others will follow the path of some larger plan sponsors by examining new models of care coordination that have proven highly effective. Since statistics show that about 3 per- cent of a covered population drive nearly 33 percent of costs, these new care-coor- dination models are highly adept at seg- menting the enrolled population and get- ting improved outcomes from those most at risk. In 2016, we will likely continue to see provider groups team with tradi- tional insurers and other market entrants to address this employer need. n Insurance solutions that fit your budget and benefit your employees Put us to work for you. We're great for your company! 1 9 9 4 2 01 4 2 0 t h Y e a r 1 9 9 4 2 01 4 2 0 t h Y e a r (860) 351-0100 www.myhcg.com We provide and specialize in: • Large & Small Group Health • Individual Health – on and off the Exchange • Dental • Life • Short & Long Term Disability • Voluntary Benefits • Plan Documents & Summary Plan Descriptions • Health Reimbursement Arrangements • Health Savings Accounts • Flexible Spending Accounts For the last 20 years, we have provided our clients with innovative insurance solutions. Our highly trained benefit consultants are experts in premium cost containment strategies, and will keep you compliant with Health Care Reform and coinciding ERISA regulation. With our seasoned client support team and proprietary Signature Services, we create customized benefit solutions that are compliant and tailored to your company. Let us design a customized strategy to fit your company's objectives. Put us to work for you, we're GREAT for your company! IS A DREAM YOU WANT YOUR FAMILY TO SHARE. YOUR BUSINESS MassMutual Financial Group refers to Massachusetts Mutual Life Insurance Co. (MassMutual) and its affiliated companies and sales representatives. CRN201609-185994 BUSINESS SUCCESSION PLANNING + RETIREMENT/401(K) PLAN SERVICES KEY EMPLOYEE RETENTION AND EXECUTIVE BENEFITS PRODUCTS What's right for your business has to be right for your family. So whether you're just starting out or ready to pass your business down to your children, Charter Oak's financial professionals focus on what you need when you need it most. Learn how we can help you achieve your family business goals. Peter Novak General Agent Charter Oak Insurance and Financial Services Co. 76 Batterson Park Road Farmington, CT 06032 860-674-1800 pnovak@financialguide.com www.charteroakfinancial.com John O'Connell ▶ ▶ The only long-term method to avoid the Cadillac tax is for an employer to significantly slow down the pace of medical cost "trend" affecting their healthcare cost structure.