Snapshot

Employers want more guidance on how clinics fit in with Cadillac tax


Large employers view their onsite or near-site worker clinics as a success, although some are holding their breath to see whether such facilities will push their health care offerings into Cadillac tax territory, according to a Mercer survey.

Scheduled to go into effect in 2018, the Cadillac tax is a 40% excise tax on the cost of health plans that exceed a certain annual amount ($10,000 for individuals, $27,500 for family coverage). The tax is part of the ACA, and proponents say it will help curb the cost of health care and is an important source of revenue for the federal government’s health care reform efforts. Critics, who include Hillary Clinton and all the Republican presidential candidates, say it will harm Americans by curtailing their health benefits, which really aren’t so Cadillac.

Of the 134 large employers (5,000 or more employees) that Mercer surveyed, 15% said that the clinics will push them into the bracket where they will have to pay the excise tax while 11% think the clinics will help keep the tax at bay, “presumably by helping to hold down the cost of the company’s health plan,” according to Mercer.

Will your clinic help or hurt your Cadillac tax calculation?

But most of the respondents either didn’t know (46%) how the clinics will affect their Cadillac tax status or didn’t think there would be an effect (28%).

Just what will be counted as part of health benefits for Cadillac tax purposes? That’s yet to be decided. In February, the IRS issued a notice that indicated that a clinic isn’t considered part of the employer’s health benefits if it offers just first aid and is free and available only to employees.

But many clinics do a whole lot more than that, providing immunizations, screenings, and other services. The IRS said it was seeking comments on how the costs associated with those additional services might be treated.

Objectives for worksite clinic

Measure of clinic success

Medical services offered

Source: Mercer, “Survey on Worksite Clinics,” Sept. 2015

Employers hope to convince the IRS that clinics are medical settings and not part of benefit packages, says Larry Boress, president and CEO of the Midwest Business Group on Health.

Boress goes a step further: “I believe employers should get a tax credit because the clinics promote the major themes of the Affordable Care Act, including better accessibility and improved patient experience.”