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Small Business Employee Benefits and HR Blog

Top Employer Concerns - Cadillac Tax, Rising Healthcare Costs, and Employee Retention

April 21, 2016
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With the Affordable Care Act (aka Obamacare) in full swing and the Cadillac Tax on the horizon, employers are making significant changes to their benefits to manage costs, increase participation and engagement, implement cost-sharing strategies, and improve health. And, despite these benefits changes, the majority of employers (56 percent) expect 2016 healthcare costs to increase. This is according to the new Wells Fargo Insurance 2015 Employee Benefits Trends Survey.

The survey provides a glimpse into how employers of all sizes are addressing rising healthcare costs and new healthcare reform requirements.

Cadillac Tax, Controlling Costs, and Employee Retention

According to the Wells Fargo Insurance survey, costs, productivity, and Top Employer Concerns - Cadillac Tax, Rising Healthcare Costs, and Employee Retentionmaintaining current benefits are top priorities for employers, with a focus on attracting and retaining employee. For small employers (fewer than 50 employees), retaining current employees was even more critical, with 94 percent saying it was a top priority.

Preparing for the upcoming “Cadillac Tax” is also a top concern for the majority of employers. The survey found:

  • 52 percent of employers are concerned about excise tax exposure (the “Cadillac Tax”) with their current plan design.
  • 58 percent of employers expect their medical plan costs to exceed the thresholds for the excise tax in 2018.

In preparation for the Cadillac Tax (now delayed to 2020), the top three changes employers are planning include:

  • Increasing wellness initiatives to improve health of the population (51 percent).
  • Changing employee Health Savings Account (HSA) contributions to post-tax (46 percent).
  • Reducing the value of the plan design (46 percent).

Small employers are also expected to make changes to employee benefit programs because of healthcare reform, although their strategies look a little different.

According to the survey, smaller employers are controlling health benefit costs by:

  • Reducing health coverage to minimum essential levels (30 percent).
  • Moving employees to public exchanges when available (19 percent).
  • Eliminating part-time employee or spousal coverage (14 percent each).

Conclusion

For the majority of employers in the United States, healthcare costs are on the rise. In anticipation of rising costs and the looming Cadillac tax, employers do not have a “wait and see” attitude. Instead, employers are making proactive changes with cost-control strategies and employee retention in mind. Do you agree with the findings of the survey? What are your top healthcare priorities this year, and what are you doing to address them? Leave a comment or question below!

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