So far, companies have looked to reduce costs in a number of ways. Wal-Mart Stores, Inc. (NYSE:WMT) has looked at paying for health-related travel costs to get patients suffering from heart and spine ailments to hospitals with better track records of success. Cummins Inc. (NYSE:CMI) has already moved some workers to high-deductible health plans that put more of the onus on employees to control their health care costs, but it has also implemented wellness programs to try to encourage healthier living that reduces the likelihood of incurring high costs from chronic conditions later in life.
Despite these innovative ideas, the simplest way to cut costs below the Cadillac-tax threshold is to reduce benefits. As a result, you can expect some of the most generous plans offered to employees, whether they work in the public or private sector, to slowly degrade in quality by the time the tax takes effect.
Will health insurers suffer?
Meanwhile, efforts to get rid of high-cost plans could have a negative impact on UnitedHealth Group Inc. (NYSE:UNH), WellPoint, Inc. (NYSE:WLP), and other health-insurance companies. By imposing a fixed-percentage medical-loss ratio limitation on profits based on premium revenue, Obamacare allows higher-cost plans to retain a higher dollar value for administrative costs and profits than plans that charge lower premiums.
Moreover, because of those limitations, employers’ efforts to get their workers to be healthier could end up actually hurting insurers’ profits. Ordinarily, a health-insurance company would want to reduce medical claims, because paying less in claims would boost its bottom line. However, once the Obamacare profit limitations kick in, insurers have to return excess profits to customers in the form of rebates. That reduces their incentive to help their customers implement cost-savings strategies, changing the dynamic between insurers and their employer-clients.
Watch your policy
Between now and 2018, you’ll want to keep a close eye on your insurance coverage. With a growing number of employers making major modifications to their health-insurance plans, you might find yourself bearing an increasing burden of the cost of your health care in the years to come.
The article How Obamacare’s Cadillac Tax Will Affect You originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Cummins, UnitedHealth Group, and WellPoint. The Motley Fool owns shares of Cummins and WellPoint.
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