2/3 of Businesses Will Take Steps to Avoid Obamacare Cadillac Tax in 2018

May 14th, 2015

The ACA was designed to front-load the benefits, and back-load the costs. The subsidies for exchanges, the Medicaid expansion, and other provisions were designed to make the feel-good aspects of the law kick in right away. The one exception to this was the massive cancellation of the plans, which the Obama Administration effectively disregarded through the so-called “administrative fix.” But the painful parts of the law will not be felt till later. Specifically 2018, when the Cadillac tax kicks in. This provision will impose a 40% tax on plans that offer benefits above $10,200 for individuals, and $27,500 plans for family members. (My plan will be covered by this).

The Hill reports that nearly 2/3 of businesses will take steps to avoid paying this tax:

Nearly two-thirds of companies facing a new ObamaCare tax say they are changing their coverage to avoid the extra costs, according to a new survey.

The so-called Cadillac tax, which applies to healthcare plans above a certain expense threshold, is one of the most pressing changes still to come under ObamaCare, according to a survey of about 600 members of the International Foundation of Employee Benefit Plans.

Only 2.5 percent of companies that would be hit by the Cadillac tax starting in 2018 said they plan to pay the tax. A total of 62 percent of companies said they have already taken action or plan to take action to avoid it.

Most say they are shifting toward higher deductible plans, while others said they are reducing benefits, shifting more costs to employees or dropping high-cost plans altogether.

Invariably, more employers will dump employees onto the Obamacare exchanges, because it will be much cheaper–and this was done by design. Obamacare was structured to place as many people onto government exchanges, and to get them off those profligate and generous plans provided by employers.

Zeke Emanuel, brother to Rahm, and Obamacare architect, predicted by by 2020, 90% of Americans who previously received health insurance through their employers will be shifted onto the exchanges.

By 2020, about 90 percent of American workers who now receive health insurance through their employers will be shifted to government exchanges created by the health law, according to a projection by S&P Capital IQ, a research firm serving the financial industry.

It’s not an outlandish notion. Ezekiel Emanuel, an architect of the Affordable Care Act, has long predicted a similar shift.

But the scope and speed of the shift is surprising. So is the amount of money that companies could save. The S&P researchers tried to estimate what it would save the biggest American companies. Their answer: $700 billion between 2016 and 2025, or about 4 percent of the total value of those companies. The total could reach $3.25 trillion for all companies with more than 50 employees.

The “if you like your plan, you can keep your plan,” lie hasn’t even really kicked in yet. This massive disruption in 2018 will make the cancellations in the fall of 2013 pale in comparison. And by then President Obama will be long gone. This will be someone else’s mess to clean up.

By the way, this provision was added to the law to ensure it was CBO Budget Neutral. Any effort to eliminate the Cadillac Tax will impose a severe deficit to the law. But then again, the CBO gave up trying to score the impact of Obamacare in June 2014.

“Isolating the incremental effects of those provisions on previously existing programs and revenues four years after enactment of the Affordable Care Act is not possible.”

And as Steven Brill noted in his excellent book, Bitter Pill:

With that change, and others, I now counted nearly $ 100 billion in negative changes by executive fiat since the CBO had scored the law as being deficit neutral.

So whenever the President takes a victory lap as another million sign up, keep in mind what lies ahead for the rest of Americans who were happy with their health insurance plans, and the ACA’s inevitable impact on our massive debt. Success is not only measured in terms of how many people gained coverage, in light of the President’s broken promises.