Health care premiums are on the rise. In fact, employment-based health insurance premiums rose by 4 percent this year. According to a study published by the Kaiser Family Foundation, the average annual premium for single coverage is now $6,251, while the average annual premium for a family plan reached $17,545. But the increase in health care costs pales in comparison to the substantial increase in deductibles.
Since 2010, the average dollar amount for deductibles for single coverage has risen by two-thirds, yet premiums increased by only a fourth.
Why the drastic change in one area but not the other?
The effect of the ‘Cadillac tax’
This year, 2015, was the first year employers with at least 50 or more full-time or full-time equivalent employees (with certain transition relief available for employers of fewer than 100 employees) were required to offer affordable insurance to workers or pay a penalty under the Affordable Care Act’s employer mandate. As a result, employers with overzealous plans are paring benefits.
Research shows that one in five companies with at least 200 employees expect to be liable for the “Cadillac tax,” a 40 percent excise tax targeting health plans with the most generous level of benefits and little cost-sharing for employees. Although the Cadillac tax isn’t set to take effect until 2018, companies have begun to pare benefits in order to avoid it. Unfortunately, rising deductibles are often a side effect, causing employees to take on more of the cost.
Because employees will feel the greatest effect of this cosmic shift, employers should remain transparent about significant changes and consider reducing benefits gradually to help alleviate a great burden all at once.
