Employers consider wellness to offset Cadillac Tax: survey

More and more employers are looking to wellness programs to help relieve the expected burden of the Affordable Care Act’s excise tax on their high-cost plans. While 35% have already taken action to add or improve these supplemental programs, approximately 47% say they are considering this option, according to a new employer survey from Mercer.

In a webinar Wednesday, the global consulting firm says that trepidation facing the excise tax, commonly known as the Cadillac Tax, is a significant concern and very significant concern among the 723 employers surveyed in the January-to-February survey on health care reform.

Mandated for rollout in 2018, the excise tax is expected to tax employers 40% on the value of coverage exceeding $10,200 for individuals and $27,500 for families.

It’s commonplace that employers will look to avoid the impending tax. Mercer found that 48% are considering raising deductibles. Other options under consideration include dropping high-cost plans (33%), using a high-performance network (34%) and offering a private health exchange (33%). Not surprisingly, 44% of employers’ surveyed report already initiated steps to unbundle dental and medical coverage.

However, Tracy Watts, health care reform leader in Mercer’s U.S. health and benefits business, says that “adding or improving wellness programs is pretty high on the radar screen” in cost mitigation.

“[It is] definitely a new opportunity for employers as they think about their wellness programs,” says Watts.

Mercer found that outcome-based incentive and reward programs are expected to expand among the respondent population, where nearly half contained 500-4,999 employees. Approximately 37% are considering adding or increasing reward and penalty options in their wellness programs.

Presently, only 9% and 8% of the national sample have increased incentives for wellness programs and incentives for tobacco cessation programs, respectively. 

While warning that the jury is still out on the true cost benefit of wellness programs, Beth Umland, director of research at Mercer, says that three-fourths of larger employers have seen costs go down as a result of their health management programs.

Wellness initiatives and health management programs can “really bend that medical cost down,” Umland says, while noting that “employers are really banking on this.”