An excise tax on generous employee health benefits, like the one proposed in the Senate's version of healthcare reform, would spur many companies to downsize their health plans, according to a survey of 465 companies conducted by Mercer.
Sixty-three percent say they would reduce the cost of their healthcare packages to below the level that would trigger the excise tax, while 23% say they would share the cost of the tax with their employees. Another 7% say they would terminate their plan.
The Senate's healthcare reform measure would charge a non-deductible excise tax of 40% on annual costs of health coverage that exceed $8,500 for an employee-only plan and $23,000 for family coverage. Measured costs include the premiums paid for health, dental and vision plans by both the employer and employees. There are higher thresholds for retiree health coverage and some other special situations.
Mercer estimates about 20% of companies provide health plans whose cost exceeds the thresholds for the tax proposed in the Senate bill. The excise tax has been attacked by both employers and labor unions.
The survey shows that of the companies that would cut health benefits to avoid the tax, 75% say they would increase their plan's deductibles and copays. Forty percent say they would add a low-cost health plan in addition to their current plan, while 32% would replace their current coverage with a low-cost plan, 19% would eliminate the company contribution to a flexible spending accounting or health savings account, and 19% would introduce programs like health management incentives and medical homes.