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Employers May Reduce Premium Benefits Under Health Care Law

Premium insurance plans costing more than $27,500 a year for family coverage will be heavily taxed starting in 2018.

ACA

Photo: Joe Hren

Participants for the Affordable Care Act Volunteer program meet for orientation in October.

Recent outcry about the Affordable Care Act has focused on insurers canceling health insurance plans considered too skimpy to comply with the new health care law. But at the other end of the spectrum, employers who offer premium plans will also be taxed under new rules that take effect in 2018.

Plans that cost more $27,500 a year for family coverage are often called “Cadillac” insurance. Employers that continue to offer the plans in five years will incur a 40 percent tax. Society of Human Resources Managers Government Affairs Director Chris Schrader says he predicts employers will start reducing benefits so they won’t have to pay.

“For a lot of them, this is real cash,” says Schrader. “They’re going to have to pay this tax. I would expect that most would find a way to trim their sales, giving themselves a few years to do it to avoid workplace disruption.”

Schrader says it’s the same thing that happened earlier this year when part time workers saw their hours cut as a portion of the law requiring employers provide benefits to anyone working 30 hours a week or more took effect.

But he adds the reduction in benefits won’t sit well with workers who have negotiated premium benefits as part of their compensation. He says it’s likely President Obama‘s supporters in organized labor will push for change — and the political climate is right for a challenge.

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