The Cadillac Tax: 4 Ways Organizations Are Reacting

Perhaps the most debated provision of the Affordable Care Act, the Cadillac tax, is at the forefront of discussion among employers and politicians across the country. The 40% excise tax on high-cost health plans offered through the workplace doesn't go into effect until 2018--but employers are already taking action. A new survey of employers from the International Foundation of Employee Benefit Plans found:

1. They are doing the math. Nearly nine in ten organizations (87%) said they've done calculations to see if their plans will trigger the tax, and 60% will. Among those, most (62%) will trigger the tax right away in 2018 and another 12% will do so in 2020.

2. They have a game plan. A little more than one-quarter (27%) report they've done the calculations, and they won't trigger the tax; in several cases it's because they've already changed their plans to avoid it. Among those triggering the tax, two in five organizations (40%) are working on changes to avoid the tax, and another 40% plan to start making changes before 2018.

3. They aren't paying up. Only 5% aren't planning to make any changes and instead will just pay the 40% tax.

4. They are changing it up. Almost half (46%) are trying to hold down overall plan costs by shifting more costs to workers via coinsurance, copayments and the like. Two in five (39%) are moving to a high-deductible health plan, one-third are reducing benefits, and nearly one-third (31%) are dropping higher cost plan options.

Employers are taking action now because making the changes needed to avoid the tax can be time consuming and challenging--and may have big implications for their workers. With only 5% of employers reporting that they plan to pay the Cadillac tax, many Americans can expect to see changes to their employer-sponsored health plan. Full survey results are available on the International Foundation's website.