In part one of A Beginner's Guide to the Cadillac Tax we discussed the reasons for the creation of the Cadillac Tax and who it directly will affect. In part two we will highlight the three step plan to getting things in order for 2018. So what does that plan looks like?
The Three Step Process
In a three step process, large sized business looking to manage their potential liability should follow these steps to prepare for the tax:
1. Incorporate consumer-driven wellness programs into enrollment. These can include lifestyle management, tobacco cessation, health risk assessment, biometric testing, etc. Be sure to assist your employees in helping them understand the difference and correlation between participating in wellness programs and their medical benefits. Begin adding reward and penalty programs during open enrollment to help establish consumer responsibility.
2. After a year of preventative and wellness exams, begin offering more choices in health benefits. More HDHP offerings along with critical illness coverage will provide employees with the option of less expensive coverage. The second enhancement to increase employee engagement would be to offer support tools that incorporate personal health data as well as information for guiding employees through the benefits enrollment process.
3. Beginning fall of 2017, it’s recommended to offer a medical transparency platform. This step is important for the support of the transfer to HDHPs before January 1, 2018. Employees will then have the ability to compare procedural costs and reviews of physicians which helps them to become informed to best utilize his or her HSA spending.
Extraordinary change is occurring with how employees select their healthcare plans based on how employers sponsor their medical coverage. Employee benefits will be elected based on cost also as the two (benefits and wealth) begin to converge during the consideration process. What is fortunate is that the selection process will be modeled in a similar fashion of purchasing car insurance, providing familiarity for employees.
How Employees Will Adapt
Routine maintenance creates preventative care to prolong the car’s value and durability. These smaller maintenance procedures are all funded out-of-pocket, but are planned events that take away the surprise element of the bill. Car owners understand that it’s not the goal of their car insurance to reach their deductible. So with the adoption of HDHPs it is hopeful that employees will begin to manage their healthcare plans the same way leaving their plans for use of annual checkups and the unlikely event of catastrophic injury or illness.
It is always possible that the Cadillac Tax will be altered, but will most likely not be significantly modified at least before the 2016 election. What has taken hold though is the idea of limiting the tax preference for employer-sponsored healthcare, which will most likely remain a part of the ACA in some form. In the next few years, employers will be rushing to find different ways of saving money and maintaining their benefits programs. The good news is that technology will help ensure that for every economic gain employers end up making, it does not come at the expense of the employee. Employees now have more tools than ever that assist them in staying active participants in their healthcare management.