More Employers to Shift Health Care Costs to Employees

May 18, 2012 (PLANSPONSOR.com) - Cost-shifting to employees will continue, and companies will ramp up efforts to encourage employees to adopt healthy habits and save for health care costs in retirement, Fidelity Investments says.

Corporations are waiting to see how the Supreme Court will rule on the health care act, but according to Brad Kimler, executive vice president of Fidelity Investment’s benefits consulting team, they’re taking measures to rein in costs regardless of how the ruling turns out.  

A provision in the Patient Protection and Affordable Care Act levies a 40% tax on the annual value of so-called Cadillac plans, health care plans that exceed $10,200 for single coverage or $27,500 for family coverage beginning in 2018. Union plans will reach the cost limit on high-cost health care plans much more quickly, according to Sunit Patel, senior vice president in benefits consulting with Fidelity.  

Just as the retirement benefits industry has already seen a shift from defined benefit to defined contribution plans as a cost-cutting measure, companies are thinking about how this can be done in health care. Kimler cites that just as with the excise tax, the cost will fall squarely on employees. “I have yet to meet an employer who will pay that tax,” Kimler told PLANSPONSOR. "Companies will try to stay below that gap" in health care plan design.