On Tuesday October 13, 2009, the Senate Finance Committee passed a health care reform proposal, "America's Healthy Future Act of 2009", by a vote of 14 - 9. There is still significant process to be completed before any bill makes the President's desk to be signed into law. However, one of the revenue provisions in the Senate Finance bill is the so-called "Cadillac Plan" excise tax. The excise tax amounts to 40% of the cost of benefits over certain thresholds - beginning in 2013. The threshold amounts would be indexed to CPI-U beginning in 2014, and they would be higher for plans covering early retirees and employees in high risk industries, such as mining or law enforcement.
For insured plans, the excise tax would be imposed on the insurer and would presumably be passed on to policyholders in the form of higher premiums. For self-funded plans, the tax would be levied on the employer-sponsor, but again would impact the employer's ability to provide wage and salary increases and/or sustain its employer health plan contributions.
Obviously, employers will want their plans to be below these thresholds in 2013. But, the components of the cost ($8,000 for Individual coverage, and $21,000 for family coverage) are not limited to medical coverage. They include other benefits as well: dental, vision, HRA and HSA contributions by employers, and FSA deferrals by employees. So, how do employers know if they might have a "Cadillac Plan" today, tomorrow, or in 2013?
Findley Davies, a Human Resources consulting firm, has developed the Findley Davies ETC (Excise Tax Calculator). This tool projects current costs for an employer to 2013 and beyond (up to 2017) in order to estimate the impact of the Excise Tax on their projected costs. In this way, employers can begin to evaluate and implement strategies to ensure their total costs will fall below the Excise Tax thresholds. With a minimal amount of current information, the tool allows employers' human resource and finance functions to work together to ensure that strategies are in place well before the 2013 deadline.
For a demonstration of the Findley Davies ETC, or to discuss this issue with a Findley Davies consultant, please contact: Tod Tillman (Charlotte) at ttillman[at]findleydavies.com or 704.944.7515 or Bruce Davis (Toledo) at bdavis[at]findleydavies.com or 419.327.4133.
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