Although the Republican Party’s new plan to replace the Affordable Care Act faces an uncertain future given its many critics, its contents provide signs of how an eventual Republican replacement plan may affect employer-sponsored health insurance. Two particular changes proposed in the Republican plan stand to have a significant impact on employers:
- “Cadillac tax” delayed until 2025: While some observers had expected the GOP to eliminate the excise tax imposed by the ACA on high-cost employer-provided health plans, the proposed delay in the implementation date of this tax from 2020 to 2025 will give employers some relief from an imminent increase in their tax burden and allow them to avoid making major, sudden changes to their benefits offerings
- Expansion of the allowable size of HSAs and FSAs: The plan increases the allowable size of health savings accounts that can be coupled with high-deductible insurance plans to $6,550 for an individual or $13,100 for a family, among other measures to encourage greater use of these accounts. The plan would also allow flexible spending accounts to cover over-the-counter prescription drugs and let HSA holders use them to pay for medical expenses retroactively.
Another delay in the implementation of the Cadillac tax is welcome news to employers worried about the immediate effect it would have on benefits plan design. However, organizations will still remain concerned about the Cadillac tax unless it is fully repealed: In CEB’s 2016 Quick Poll on Medical Plan Trends (accessible here to CEB Total Rewards Leadership Council members), 40 percent of organizations surveyed said they were still concerned about the Cadillac tax after its implementation date was delayed from 2018 to 2020.
The expansion of federal HSA allowances, meanwhile, is in keeping with the increasing popularity of HSAs among employers with high-deductible health plans (HDHPs)—67 percent of employers offer HSAs to assist with their HDHP—but it is unclear whether this change will reignite interest in HDHPs in general. Enthusiasm for HDHPs among employers has cooled recently, in part due to increased skepticism that these plans reduce, rather than delay, costs: According to CEB’s 2017 Medical Plan Trends and Observations Report (which CEB Total Rewards Leadership Council members can read in full here) the percentage of organizations with high-deductible plans leveled off between 2016 and 2017: the prevalence of individual HDHPs dropped slightly from 28 to 26 percent while family HDHP prevalence increased slightly from 28 to 29 percent, compared to several percentage points of growth in the preceding year.
As the public discussion on health care continues, the greatest immediate risk to employers is increased employee confusion about their benefits plans. Benefits communication effectiveness is already hampered by message saturation: Our recent Benefits Communication study (available to CEB Total Rewards Leadership Council members here) found that employees receive an average of 123 emails, 67 text messages, and check their phones up to 150 times a day. Effectiveness is further diminished as fast-paced reporting on health-care legislation appears in the news and on employees’ social media feeds. In this environment, it is more important than ever for organizations to select the right communication content, channel and source to encourage employees to remain informed consumers of their benefits.