ACA & The New Normal

Three out of Four Employers To Be Hit with Cadillac Tax by 2022

Even Bronze-Level Plans Subject to Excise Tax, Finds UBA Survey

INDIANAPOLIS, IN—(December 10, 2015)— Many employers falsely assume that the Cadillac tax will apply only to the richest plans. However, newly released data from the 2015 UBA Health Plan Survey shows that even the lowest quality “Bronze-level” health insurance plans on the Affordable Care Act (ACA) exchanges are at risk of triggering the tax, potentially affecting 74 percent of employers by 2022.

“When the law was created, it was assumed that only three percent of plans would trigger the Cadillac tax, and it was marketed as a tax on ‘the rich benefits of executives,’” says Les McPhearson, CEO of UBA. “The reality is that this tax will weigh heavily on a majority of American businesses that can’t afford it and will have to make severe cuts to stay above water. Unless something changes by 2018, the tax will hit more government employers — like schools and fire departments — than finance firms.”

United Benefit Advisors’ Health Plan Survey, the nation’s most comprehensive benchmarking survey of employer-sponsored health plans, includes responses from more than 10,000 employers that mirror 99 percent of American businesses.

The Cadillac Tax

The Cadillac tax, which takes effect in 2018, will levy a 40 percent tax on health insurance plans that cost more than $10,200 for individuals and $27,500 for families. The excise tax is not currently based on benefit levels, but is solely based on annual premiums.

Current regulations also will include employer and employee contributions to Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). (UBA did not include these amounts into the trend increases below.)

The reality is that this tax will weigh heavily on a majority of American businesses that can’t afford it

Using a six percent rate or “trend” increase, compounded each year, UBA finds that by 2018, 30 percent of employers will be subject to the Cadillac tax; by 2020, 50 percent; and by 2022 it will hit 73.79 percent of employers.

According to the survey, based on statewide plan averages, only 7.5 percent of employers with plans that have greater than 90 percent actuarial value (AV) will trigger the tax by 2022. Of those plans with a statewide average AV between 80 and 89.99 percent, 58.68 percent will get hit, and for plans with AVs between 70 and 79.99 percent, 33.79 percent will face the Cadillac tax.

Burdensome thresholds

“Many of these employers, even after reducing benefits and premiums, will still not be able to lower their annual costs under the Cadillac tax thresholds,” says Carol Taylor, Chairwoman of the UBA Client Compliance Solutions Committee and the Director of Compliance with D & S Agency, a Virginia-based insurance firm and UBA Partner. “The Cadillac tax hits those employers with an aging workforce, those with high claims and those in areas with high medical care costs. They should be strategizing now, however, to mitigate liabilities as much as possible.”

“Employers will continue to cut benefits and increase deductibles in an effort to curb consumer health care spending by passing costs onto their employees, as we’ve seen in recent years,” says McPhearson. “There is potential for changes to the law that could make it affect fewer businesses, but unless employers start planning now for the changes coming January 1, 2018, they could face devastating cost increases.”

For further information about the latest in employer-sponsored health plan trends, order a copy of the 2015 UBA Health Plan Survey Executive Summary at




About the UBA Health Plan Survey
Data released in the 2015 UBA Health Plan Survey contains the validated responses of 18,186 health plans, sponsored by 10,804 employers, who cumulatively employ more than 2 million employees and affect more than 5 million total lives. Individually validated responses from employers in more than 3,000 communities were utilized in compiling the database.
While other surveys primarily target large employers, the focus of the UBA survey is to report results that are applicable to the small and mid-size companies that represent the overwhelming majority of the nation’s employers, while also including a mix of large companies in rough proportion to their actual prevalence nationally.
The survey includes plan renewals from June 2014 to May 2015 through the joint effort of 129 of the nation’s premier independent employee benefit advisory firms and their clients. The national distribution of UBA Partner Firms, the diversity of their client base, and the extraordinary number of survey responses provided a unique basis to conduct a non-probability sample survey that yields benchmark results that pertain to a representative cross-section of the nation’s employers.
Contact a UBA Partner Firm for a customized benchmark survey based on industry, region and business size.
About United Benefit Advisors
United Benefit Advisors is the nation’s leading independent employee benefits advisory organization with more than 200 offices throughout the United States, Canada and the United Kingdom. As trusted and knowledgeable advisors, UBA Partners collaborate with more than 2,200 fellow professionals to deliver expertise, thought leadership and best-in-class solutions that positively impact employers and make a real difference in the lives of their employees and families. Employers, advisors and industry-related organizations interested in obtaining powerful results from the shared wisdom of our Partners should visit UBA online at