Private health exchanges see slower growth: Enrollments curbed by Cadillac tax delay


By Shelby Livingston, Reporter, Business Insurance

Originally posted on January 31, 2016. 

The two-year delay of the Cadillac tax may take some of the wind out of the sails of private health insurance exchanges, but experts say private exchanges will continue to attract customers.

The Cadillac tax, which is to impose a 40% excise tax on the portion of group health plan premiums over $10,200 for individual coverage and $27,500 for family coverage, has been a boon to enrollment in private health insurance exchanges, several benefit experts say.

Private exchanges have been one way for employers to cut health costs through a defined contribution model, while allowing employees to shop for the lowest price and greatest value.

But Congress last year passed and President Barack Obama signed legislation delaying implementation of the Cadillac tax by two years to 2020.

“There's no question that the Cadillac tax was a tailwind for private exchanges, and with the pause button hit, private exchanges will need to rely on other tailwinds,” said Jeff Yaniga, Chicago-based chief revenue officer for private exchange provider Maestro Health.

For example, Accenture P.L.C. last year predicted a spike in exchange enrollment in 2017 as the Cadillac tax's original 2018 effective date neared.

While Accenture last year projected private exchange enrollment would hit 12 million in 2016 and 22 million in 2017, it reported last month that only about 8 million people enrolled in private exchanges this year.

An Accenture spokeswoman said the firm has “made a deliberate decision” to not predict private exchange enrollment in the future.

While the delay in the excise tax “will have an impact in that spike” in 2017 that Accenture predicted last year, “employers are continuing to pursue and assess various strategies to help stabilize their health care costs,” said Scott Brown, a Chicago-based managing director of Accenture's private health exchanges. “We believe that this is why it's even more critical for private exchanges to deliver meaningful differentiation in the market.”

If the Cadillac tax added allure to move to a private exchange, choice and decision-support tools are the “sticky” factors that will keep them coming, Mr. Yaniga said.

“Ten years ago, the choice you had around health care benefits was "yes or no.' "Do you want them or not?' And I think the millennial generation, and the X'ers and Y'ers especially, are saying, "I need more options,' and that all persists with or without the Cadillac tax,” Mr. Yaniga said.

Still, others don't see the Cadillac tax delay, or even a full repeal, having a significant impact.

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