How a Cadillac Tax Repeal Affects Revenue Cycle Management
“Repeal it and politicians — if they are being fiscally responsible — will have to find other sources of revenue rather than add to the deficit.”
By - Repeal of the Cadillac Tax – a tax on high-cost healthcare insurance plans some private companies offer to employees – is up for debate once more, especially among recent presidential debate conversation and household media outlets.
The tax – a 40 percent excise tax beginning in 2018 – may impact one in three employers in terms of compliance concerns related to the Affordable Care Act (ACA). Many employers are reportedly embracing high-deductible plans to avoid Cadillac Tax penalizations.
Said Bill Melville, Market Analyst for Decision Resources Group, to RevCycleIntelligence.com, “The Cadillac tax piece, built into the funding of the ACA to help fund things down the road, is the last big piece to be implemented in 2018.”
“Premiums are going to be in the spotlight because this is the first year they’re being calculated in full-year claims,” he stated. [The Cadillac Tax] is a big concern for union-sponsored health plans where something will have to change, perhaps within this or the next administration.”
Is the Cadillac Tax bad for revenue?
The Cadillac Tax’s overall impact upon the healthcare industry is far from positive, says United States Representative Joe Courtney (D-CT) in a Huffington Post op-ed. The tax is expected to detrimentally impact the health plans of working families, retirees, and Baby Boomers, he says.
“Fundamentally, the tax on high-cost health plans will degrade the quality of insurance plans available to employees of all stripes – teachers, emergency personnel, factory workers, and a myriad of others who may have negotiated for better health insurance plans by forgoing wage increases in the past,” says Courtney.
“If the goal of the Cadillac tax is to reduce superfluous health care spending, as its proponents assert, then it will also reduce necessary health care spending, which leads to poorer outcomes for patients,” he adds.
The Cadillac Tax proves especially problematic, he states, because healthcare consumers may choose to not make an appointment with a physician if such a visit is merely too costly.
“The tax is a blunt, indiscriminate instrument that must be repealed as soon as possible before it reduces access to necessary care, and damages the important progress we have made in reducing uninsured rates and intelligently bending the cost curve of health care spending,” Courtney states.
As RevCycleIntelligence.com reported, such dire financial consequences are perhaps on the revenue cycle horizon. Said the Alliance to Fight the 40 (Alliance) in a letter to the House of Representatives:
Congress’ original intent was to target only a small number of ‘overly rich’ plans. However, nonpartisan analyses reveal that it will hit modest health plans that are expensive simply because they are offered in high-cost areas; or because they cover large numbers of people whose health costs are typically higher than average – women, older and disabled workers, and families experiencing catastrophic health events. …
The stated goal of health reform was to build upon employer-based coverage and lower costs. This tax will do neither. Instead, it will erode an important source of quality coverage and compel a shift of costs to workers – something neither employers, nor employees want to see happen.
Is the Cadillac Tax good for revenue?
According to a New York Times op-ed piece published earlier this week, the Cadillac tax is good for business, primarily business involving increased revenues.
“If there is to be reform of the Cadillac tax, a responsible approach could be to limit the financial benefits of the tax exclusion to $2,000 (or less) for households making over $250,000 and totally eliminate it for households making over $1 million,” write Ezekiel J. Emanuel and Bob Kocher.
$91 billion will be raised by the Cadillac Tax within 8 years, the authors maintain. Through the active eradication of waste from the healthcare system, out-of-pocket costs will decrease, they claim.
“Repeal it and politicians — if they are being fiscally responsible — will have to find other sources of revenue rather than add to the deficit,” the authors say. Out-of-pocket expenses, they add, require immediate addressing.
“The public is complaining bitterly about the growing out-of-pocket expenses for health care,” they state. “This is a big problem, largely driven by employers who are shifting costs through higher premiums and more deductibles to their workers.”
As RevCycleIntelligence.com reported, out-of-pocket copayments, coinsurance costs, and deductible expenses are expected to exceed $345 billion. According to some leading estimates, healthcare spending will soon exceed $10,000 per person if high-deductibles complicate point-of-service collection efforts.
