With the Affordable Care Acts excise tax just around the corner, some employers may be struggling with how to maintain the quality of their health care benefit plans and still avoid triggering the tax. But surprisingly, rather than simply shifting costs to employees, some innovative employers in traditionally stagnant industries such as manufacturing and mining are looking at voluntary core benefits to limit health care cost increases.
Speaking at last weeks Benefit Forum & Expo, Philia Swam, director of health, wellness and group benefits at global construction materials manufacturer Lafarge U.S., explains that the company has been more proactive in recent years. While noting that the company does not wait for the cement industry to do anything because well be here for a long time, Swam explained the cement, aggregates, concrete and asphalt supplier strives to be the leader in its industry in terms of health and wellness.
We dont wait. We benchmark against what the industry is doing, but we actually take a good hard look at top Fortune 500 companies: What are they doing? How can we make sure we are competitive from an industry perspective but [also from an] overall financial perspective? says Swam.
In 2015, Lafarge U.S. is planning to take a new approach to core benefits through a voluntary benefit wrapper that is going to be paid by the employer. Approximately $1.3 million, coming from Lafarge U.S.s pocket, will cover everything from in-patient hospital cash benefits to group accident and critical illness insurance. Also, up to $500 and $1,000 will be deposited in HSA accounts for employees and their spouses or dependents, respectively, should they complete a screen for metabolic syndrome, which is a cluster of risk factors that are linked to coronary artery disease, stroke, and Type 2 diabetes.
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The funding of these voluntary benefits is not subject to the excise tax, so youve actually reduced your exposure from an employer standpoint, said Dave Ratcliffe, principal at Buck Consultants at Xerox. Its really a win-win situation, and one that I think a lot of employers will move to over the next few years.
Effective in 2018, the excise tax is a 40% tax on employers that provide high-cost health benefits to their employees. Thresholds are $10,200 for individual coverage and $27,500 for family coverage.
More than 16 years ago, Chicago, Ill.-based Lafarge U.S., an operating unit of Lafarge North America, had roughly 12,000 employees. Through a steady progression of hard economic times, and an audit of plant locations and its overall workforce, there are now approximately 3,000 employees in the U.S. During this time frame, Lafarges rich employee and health benefits have stayed the same. With an aging workforce and an average tenure of 12-13 years per employee, Swam says Lafarge U.S. decided to switch to a high-deductible health plan with a health savings account.
We are going from an extremely generous health plan to one that is still extremely good, but requires the employee or the member to put a lot more money into the plan than they ever had before, Swam told BFE attendees last week. But the key for us was the excise tax. Im not sure we would have done it so quickly if there was no excise tax.
Meanwhile, Swam says premiums are slowly decreasing, and employees are becoming more proactive. More staggering, however, are current estimates for when Lafarge could hit the excise tax wall. Based on its new plan design, Lafarge will be subject to the tax in 2023.
Thats better than 2018, but what do we do after that? Swam asked.
Every employer eventually hits the excise tax, because the underlying medical trend is higher than regular inflation, said Ratcliffe.
A Towers Watson analysis agrees, finding that half of U.S. employers will hit the health care tax in 2018, with 82% expecting to trigger the tax by 2023. Additional estimates from the Congressional Budget Office point to total liability for companies in this time span could reach $79 billion.
