Employers Increasing Worker Deductibles And Copayments to Slash Rising Health Costs

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By Caroline Chen  

March 12 --Four of five U.S. companies have raised deductibles or are considering doing so as health care costs increase, according to a survey of more than 700 employers.

About one-third of the companies have already increased deductibles or other cost-sharing provisions like copayments, and 48 percent are considering similar moves, the survey by New York-based consulting firm Mercer LLC found.

Employers are looking for ways to trim expenses as health-care costs continue to rise and the Affordable Care Act increases required benefits and imposes new taxes. United Parcel Service Inc. dropped coverage for employed spouses and Home Depot Inc. sent 20,000 part-time workers to government-sponsored insurance websites.

“Employers with a lot of part-time workers and low-wage employees are going to bump against the coverage requirements for anyone working 30 or more hours,” Beth Umland, Mercer's director of research for health and benefits, said in a telephone interview. “Employers who already offered generous packages, who don't have a lot of part-timers, are worried about the excise tax.”

The excise tax, also known as the “Cadillac” tax, is an ACA provision aimed at businesses with generous health benefits. Employers with coverage exceeding $10,200 for individuals and $27,500 for families will be taxed 40 percent starting in 2018, on the theory that the plans boost medical costs.

About 62 percent of employers surveyed had concerns related to the so-called Cadillac tax. According to Mercer, 42 percent of employers would be subject to the tax in 2018 if they made no changes to their current plans.

Employers aren't waiting to make changes, the survey found. Almost one in five employers have already dropped the plans and another 33 percent are considering dropping the coverage.

About 8 percent of employers have, like UPS, dropped coverage for spouses who have other coverage available, and another 11 percent are considering doing so for 2015, the survey said.


To contact the reporter on this story: Caroline Chen in New York at cchen509@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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