Employers Prepare to Make PPACA-Related Changes to Employee Health Plans

Although the vast majority of midsize and large companies responding to a survey by Towers Watson see subsidized health care benefits for their employees as an important part of employee compensation, most of these employers also see making changes to their health benefits plans by 2016 as a result of implementation of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148).

Excise Tax

One of the biggest concerns among the 420 employers who responded to the survey is the excise tax for more generous health plans that will be levied starting in 2018. A 40 percent excise tax will be imposed on health coverage providers starting in 2018 to the extent that the aggregate value of employer-sponsored health coverage for an employee exceeds a threshold amount of $10,200 for individual coverage and $27,500 for family coverage.

More than 60 percent of responding employers said that their companies’ health plan would trigger this 40 percent excise tax, and 40 percent plan on making changes to their health plans starting with the 2014 plan year to avoid the tax. For the 2015 and 2016 plan years, 49 percent of employers are considering providing outcomes-based incentives to their employees. Forty percent are considering using value-based benefit designs.

Retirees

The number of employers who are likely to discontinue health coverage for retirees aged 65 and older will grow from 25 percent in 2014 to 44 percent in 2015. The percentage of employers likely to make changes to coverage for retirees younger than 65 will increase from 10 percent in 2014 to 38 percent in 2015.

UPS Example

One company that is making a change now is UPS. The global package delivery company announced it would no longer provide health coverage for working spouses of UPS employees. The policy change would affect about 15,000 of the 33,000 spouses who are currently covered by UPS. The company will still provide coverage for employee spouses who do not work, or who work for employers that do not provide health coverage. UPS notes that the change is “consistent with the way many large employers are responding to the costs associated with [PPACA].”