Employer-Provided Health Plans Scaling Back Under Obamacare Tax

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As millions of Americans receive notice that they’re being dropped from their insurance, a nationwide debate has ensued over the quality and cost of the plans not meeting Obamacare standards. (Chip Somodevilla/Getty Images)

As millions of Americans receive notice that they’re being dropped from their insurance, a nationwide debate has ensued over the quality and cost of the plans not meeting Obamacare standards. (Chip Somodevilla/Getty Images)

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For more information about the Affordable Care Act, visit CBSDC.com/ACA.
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WASHINGTON (CBS DC) – As millions of Americans receive notice that they’re being dropped from their insurance, a nationwide debate has ensued over the quality and cost of the plans not meeting Obamacare standards.

The Obama administration argues that the more than 2 million people who have lost their “grandfathered-in” insurance is a result of those companies altering those policies after the Affordable Care Act went into effect. President Barack Obama stated that such insurers will have to “replace them with quality, comprehensive coverage.”

However, for workers receiving employer-based benefits, certain policies will be scaled back due to the “Cadillac tax” implemented under Obamacare.

Although not set to take effect until 2018, the rule will impose a 40 percent excise tax on employee benefits exceeding $10,200 for individuals and $27,500 for families. In 2013, the average employer-sponsored plans for individuals cost $5,884 and the average family plan cost $16,351, CBS News reports.

“Every employer plan since the passage of the health care law has been working to make sure their health care cost trends keep their plans under the ‘Cadillac tax,'” Steve Wojcik of the National Business Group on Health, a nonprofit that represents large employers, told CBSNews.com.

The Obama administration has been making the case that no one in both the individual market and the employer-based market should expect to keep their current plan forever.

“The expectation was never there that a plan is going to be set in stone for any length of time,” Wojcik told CBSNews.com. “Plans should adopt to new evidence and new benefits practices — they shouldn’t be set in stone. We’ve wanted to do something about health care costs growing out of control.”

Wojcik added that the “Cadillac tax” is provoking employers to scale back plans with more “immediacy.”

“The clear expectation was and is that the ‘Cadillac tax’ — the tax on high-cost health plans — will cause those [employers offering] highly generous plans to pare back benefits somewhat so that they won’t be subject to the tax,” Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, explained to CBSNews.com. “It’s not going to affect a large number of people to begin with, but it is significant in the longer run in terms of its potential to hold down health care costs.”

“Yes, if you like your plan, you can keep it, unless you have great benefits,” Lindsay McLaughlin, legislative director for the International Longshore and Warehouse Union, told CBSNews.com.

Obama told NPR in 2009 that the “Cadillac Tax” is levied against plans that “don’t make people healthier, but just take more money out of their pockets because they’re paying more for insurance than they need to.”

During a speech before Organizing for Action Monday night, Obama described what he meant when he previously said that no one would lose their coverage under the new law.

“Now, if you have or had one of these plans before the Affordable Care Act came into law and you really like that plan, what we said was you could keep it if it hasn’t changed since the law was passed. So we wrote into the Affordable Care Act you’re grandfathered in on that plan,” Obama said.

“But if the insurance company changes it, then what we’re saying is they’ve got to change it to a higher standard. They’ve got to make it better. They’ve got to improve the quality of the plan that they’re selling. That’s part of the promise that we made, too.”

As a whole, the Affordable Care Act may reverse the increasing trend of insurance prices.

The Kaiser Family Foundation found that from 2000 to 2010 insurance premiums increases an average of 8.2 each year. In that same time period, the percent of employers offering coverage fell from 68 percent to 59 percent.

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