Over one-quarter of employers to be hit with Obamacare tax, employees could lose benefits

More than one-quarter of employers — about 26 percent — will be hit with the Obamacare high-cost plan tax, or “cadillac” tax, for high-cost insurance plans when it takes effect in 2018.

As The Washington Examiner explains, the tax will come into play when the total spending on a healthcare plan exceeds $10,022 for individuals or $27,500 for families. This includes the employer and employee premium contributions, as well as contributions made to a health savings account or flexible spending account.

Motivation from lawmakers for this “cadillac” tax had to do with providing a sense of revenue to pay for the big costs of the healthcare plan, and to help with growing healthcare costs. Despite the good intentions, such a tax may still have significant effect on employee benefits.

An analysis provided by the Kaiser Family Foundation points to how generous healthcare plans contribute to employees spending more than they normally would, and attributes this to growing healthcare costs, but it also emphasizes the point that employers may modify their benefits, resulting in employees having to pay more out-of-pocket costs.

Possible modifications involve simplifying the amount of services provided to employees, including eliminating previously provided for services; using less expensive providers, which will likely decrease the size of available providers; increasing deductibles; and cap or even eliminate tax-free spending accounts used to pay such expenses.

And it is likely to impact even more companies in the years to come.

The Kaiser analysis suggests that if inflation grows faster than healthcare costs, this percentage is only expected to grow, reaching 30 percent of employers in 2023 and 42 percent in 2028.

A coalition known as Alliance to Fight the 40, so named after the 40 percent tax on these health benefits, and made up of insurers and employer groups have fought the tax, and have warned that it could even cause some to drop their coverage all together.

The coalition warns that, despite the tax having intentions to target only a small amount of plans, it will hit modest plans which happen to have higher costs as well.