When the PPACA (Patient Protection and Affordable Care Act) was signed into legislation, it was endorsed as a way to increase access to affordable health insurance coverage. Three months in and the rate of uninsured individuals has started to dwindle. Many families can now get federal subsidies for coverage that would have normally been unaffordable.The PPACA has even helped small companies with less than 50 employees to provide coverage. However, for those companies with more than 50 employees, the PPACA may seem like more of a burden. This is mainly due to the large tax penalties employers could face if they offer too generous coverage or not enough coverage.
Many US employers have begun counter-balancing these penalties by eliminating some of the coverage options available to their employees or by decreasing their overall contribution. In fact, four out of five US employers have raised their deductibles and copays for their employees or have considered doing so in the near future.
The Impact of the Cadillac Tax
Employees may face further changes to their employer-sponsored coverage, as many employers – one in five – have even begun reducing benefit plans or dropping coverage entirely. Why? The PPACA’s Cadillac Tax that will take effect in 2018. The tax is aimed at businesses that offer overly generous health benefits that drive increasing medical costs nationwide. Once in place, the Cadillac Tax will impose a 40% excise tax on the “excess benefits” offered to an employee. The “excess benefit” is the premium value above a set threshold - $10,200 for an individual and $27,500 for a family.
An Alternate Solution - Self-Funding
Self-funding has become a popular alternative solution that many employers have begun to adopt. Today, almost 60% of US employers self-fund their employee’s health coverage. Why has self-funding become so widespread?
Self-funding allows many employers to avoid the more harmful provisions of the PPACA, like the Cadillac Tax itself. Employers can design health plans that are best-fit to their employees needs and don’t have to offer many of the mandated or unnecessary benefits; they will no longer need to comply with the Employer Shared Responsibility mandate; and they can control premiums, deductibles and copays accordingly without any federal interference.
The choice to self-fund offers a variety of benefits to employers that lie outside of the PPACA. These include the integration of wellness programs; greater cash flow control; less risk assumed by the employer; and ultimately greater savings.
If you have been considering alternate options to sponsor your employees' health plans or you’d like to learn more about the advantages of self-funding, contact PayerFusion Holdings, L.L.C. to discuss the self-funding solutions we can build to best fit your business at (305) 760-8739 or visit us online at www.payerfusion.com.