Texas CEO Magazine September|October 2014 | Page 8

executive education

DEPT

by Teri Mullaney

FOUR
STRATEGIES
FOR
ADDRESSING
HEALTH
INSURANCE
Tough Decisions Lie
Ahead for Employers

Employers in Texas and other states are at a
crossroads.
Increases in health insurance premiums
have eased somewhat over the past two
years, but employers still face a staggering
cost burden. This year, health insurance
premiums average $12,535 per employee,
according to a survey by Towers Watson
and the National Business Group on Health.
Employers are paying about $9,560 of the
tab.
For a business with 100 employees,
that’s nearly $1 million – money that could
be spent replacing aging equipment or hiring
workers. Yet the Affordable Care Act (ACA)
will impose penalties on companies that
don’t offer coverage.

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Texas CEO Magazine

As they come to terms with unsustainable cost increases and the provisions of the
ACA, employers face four possible courses
of action – and countless tough questions.
Maintain the Status Quo
Although health care costs remain steep,
premiums rose just 4.1 percent in 2013 and
4.4 percent in 2014. For employers satisfied
with the current benefits package, maintaining the status quo might be the best course
of action, particularly if employees also are
satisfied.
In a year or two, as the landscape continues to shift, change might be in order.
A risk associated with maintaining the
status quo is that many employers soon will

Discuss. Learn. Lead.

run into an excise tax that the federal government will impose on “Cadillac” health
plans, or those plans that offer unusually
rich benefits.
Beginning in 2018, a 40 percent tax will
be levied on health plans that exceed annual
cost limits of $10,200 for individual coverage and $27,500 for self and spouse or family coverage. Employers offering insured or
self-funded group health plans will have to
pay the tax on spending beyond those limits.
Employers may sidestep the excise tax
by increasing employee copayments, deductibles and co-insurance and dropping some
benefits. The tradeoff is that such changes
will undermine employee satisfaction.
Employers will need to decide what’s worse: