As mentioned in my July 18 blog, our annual Iowa Employer Benefit Studies© have revealed that if health insurance trends continue in Iowa (based on the average five year history of rate adjustments), employers could be paying an average annual single and family premium of $13,295 and $35,000, respectively, by the year 2021. We all know this is clearly unsustainable.
Based on these numbers, the “Perfect Storm” is brewing during the next five years in Iowa – and beyond.
Here’s why. The Affordable Care Act (ACA) has an ominous provision surfacing in 2018 that will greatly impact the cost of health insurance offered by employers in Iowa and around the country. Known as the “Cadillac” tax, employer health plans that reach a pre-determined threshold of annual premiums in 2018 and beyond ($10,200 for single and $27,500 for family) will be charged an excise tax of 40 percent for any premium over these amounts. From our survey of Iowa employers in 2011, most employers don’t think they will be affected by this provision (see below).
So is it possible for Iowa employers to have premiums this high in about five years?
Absolutely!
As illustrated below, the average Iowa employer family premium in 2018/2019 could be hovering around the threshold amount of $27,500. This means about half of Iowa employers will be averaging premiums above this amount and paying the excise tax, while the other half are below the threshold amounts. (Although not illustrated here, the projected single premium in Iowa will also average around the single threshold of $10,200).
Clearly, Iowa employers must make strategic decisions today and in the next few years to prevent their plans from being subjected to this “Cadillac” tax. The excise tax will only accelerate the unsustainability of employer-based premiums.