AARP Shifts Health Plan Costs to Avoid ‘Cadillac Plan’ Tax

November 5, 2010 ( – Lobbying organization AARP has announced an 8%-hike in employee health insurance costs to 13% - in part, it says, because of the health care reform law.

An Associated Press news report said AARP is also reshuffling its copayments and deductibles to avoid a 40% “Cadillac Plan” tax on high-cost health plans taking effect in 2018 under the law.

“Most plan co-pays and deductibles have been modified,” Jennifer Hodges, AARP’s director of compensation and benefits, wrote employees in an October 25 e-mail, according to the Associated Press. “Plan value changes were necessary not only from a cost management standpoint but also to ensure that AARP’s plans fall below the threshold for high-cost group plans under health care reform.”

AARP officials said medical inflation is the main reason employee costs will be going up. The health care law is “a small part,” David Certner, legislative affairs director, told the Associated Press. Certner said AARP’s plans are currently under the threshold for the tax. “We intend to stay below those thresholds. It’s not in anybody’s interest to move above those thresholds, not the employees’ nor the employer’s.”

About 4,500 people are covered by AARP’s plans, including employees, dependents and retirees.

AARP warned its employees that more cost-shifting could be in store. “AARP intends to make similar changes, as necessary, in the future to avoid the  (health reform) tax,” said Hodges’ e-mail.