President/CEO Medical Pay Solutions, Consultant, Author, Speaker
SEPTEMBER 1, 2015 – Many interesting a debate over the last week on my post about the effect of the so called “Cadillac” Plan tax written into PPACA.
I have predicted since reading this law that the net result would be businesses would drop benefits and move employees to Exchanges. I did this long ago prior to researching business owners and executives. Which only confirmed my prediction.
This would already be evident if the administration did not arbitrarily delay the employer mandate. Which kicks in this year.
Because I read so much, talk to so many and have been blessed with a gifted memory recall. I often cite facts and quote information in my posts without adding source. This for those who disagree with me seems to lessen the credibility of the points I make, even though they are verifiable with a few mouse clicks and often my followers fill the hole adding the sources.
So today to make this point I am adding the sources. You have often seen me write about companies like AT&T, Caterpillar and John Deere doing “what if” scenarios on dropping benefits, giving employees raises and paying the fines. The nets savings for each is in the hundreds of millions of dollars. The net effect to the public cost of these moves is massive increase in tax payer subsidies not projected in the overall cost of PPACA.
Here is an article from 2010 speaking to such considerations:
And another from 2012:
You can google for a whole list of articles on companies considering dropping benefits due to PPACA.
You have seen me write about then Secretary Sebelius testifying before Congress and saying “we have grossly underestimated the number of businesses who would do this”, her words not mine. She at the time said this could add as much as 100 billion dollars a year cost to PPACA. I am having trouble finding these articles, but at the time she said it would add as much as 100 billion a year to cost of PPACA.
You have seen me post about how PPACA affected all policies not just the individual market only to be challenged this was not the case. This article spells out exactly how the employer sponsored market was and is affected and the added cost to do so.
Okay lets get to the point. Based on what we already know, the Cadillac Tax was aimed at eliminating HMO style plans which had low deductible and co-pay requirements. These deemed unfair by some arbitrary ruling of CMS and others.
But the PPACA is moving all plans into the tax threshold as my post from last week spells out in great deal with all the source links attached.
Thus we have a law which sets to tax what it deems unfair benefit plans and sets a threshold for a 40% tax on those plans. And then drives over a short time span all plans into that threshold.
So what can we expect, if companies like AT&T, Caterpillar, John Deere and Verizon can save around 600 million a year each by dropping benefits, why wouldn’t they? And if it works for them, it will work for all companies big and small.
Thus, they will, and they will push employees to exchanges and the tax payer cost to subsidize these plans which were not considered in cost projections will soar.
But here is the irony, as this occurs and all plans move above the threshold, we will actually use tax payer money to pay a 40% increased tax on health insurance plans. Put another way, we will use tax payer dollars to pay increased taxes! Now I don’t care what political persuasion you claim, does this make sense to anyone?
The employer mandate was delayed a year because the fallout from the cancellation of 5 plus million individual plans was causing much push back and political currency in support of this bill. Adding the cancellation of tens of millions of employer sponsored plans at the same time would have been the death of this law. So illegally the administration delayed this mandate for a year which now happens in 2016. And the fallout is already being felt as the exchange premium increases requested we are seeing in some areas are over 50%.
The more you dig into the counter to goal and plan features of this bill the more you realize just how poorly it was written, thought out and deployed.