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MAJOR FINANCIAL CONCERNS WITH LOOMING CADILLAC TAX

By: Nicola Heredia, CHS Marketing Coordinator

The activation of the Cadillac Tax in 2018 could cost some employers millions in what they owe to the government unless changes are made to the health benefits currently offered throughout the company. This tax is another aspect of the Affordable Care Act, or ACA, which had a delayed start date from the law.

Approved by the government in 2010, the Cadillac Tax is an excise tax that has been enacted as a way to curb businesses from offering “luxury” type of health care plans to employees. Companies that are providing their staff with generous benefits with reduced cost-sharing will face large tax bills if changes are not made prior to 2018. 

“To me, it’s a penalty for giving our employees a generous benefits package,” said Action Environmental Group Chief Financial Officer Brian Giambagno, in a Wall Street Journal article.

The primary reason for the Cadillac Tax coming to fruition comes down to two rationales. First, it was thought that the tax would slow down the increase in health care costs and force employers to restructure their benefit plans. Second, the large fines that companies could face would be the primary resource for funding subsidies for the government’s insurance marketplace.

The tax will affect companies with employee health plans valued at $10,200 for individual coverage and $27,500 for family coverage. There is a higher threshold for those in certain high-risk professions and pre-age 65 retirees, raising the value of plans to $11,850 for individuals and $30,950 for family coverage.

“As employers face penalties when employees get subsidized plans on exchanges, employers have the incentive to simultaneously have premiums low enough to avoid the Cadillac tax and benefits rich enough to provide a sufficient actuarial value,” said Adam Powell, PhD, president of Payer+Provider Syndicate, in a HealthCareDive.com article. 

If companies are offering plans that meet the value threshold, then they will face a non-deductible tax of 40 percent. A study conducted by the AHPI reported that approximately 17 percent of all U.S. businesses will be hit with the excise tax in 2018, as well as 38 percent of large employers.

The study estimated the cost of the tax for some employers to be in the millions with one company estimating that they will spend an average of $4,500 per covered employee. Another business estimated their tax to reach $284 million from 2018 to 2024, as reported in Healthaffairs.org.

The threat of high costs due to the Cadillac tax is forcing companies to take a look at their employee benefit package and determine what the best financial option for the business is. Depending on the employer, some may decide to pay the tax, while other may start cutting benefits and incentives for their staff.

“Employers need to devote significant time and energy to maintain compliance with the law,” said Julie Stich, director of research at the IFEBP, in a written statement. “The extensive amounts of data that employers are required to collect can take hours of manpower and even require complex IT infrastructures. The process has meant a cost increase for many, especially smaller organizations.”

Although many companies, unions and government officials are calling for a change or repeal of the law, experts recommend that companies who know they will be affected by the tax start to develop a strategy to handle the Cadillac Tax if it is here to stay.

Repealing the tax may satisfy the public, but it could create other catastrophic problems. The revenue from this tax was supposed to fund the subsidies for low and middle income families. Without the tax, the government may have a new funding issue to solve.

FOOD TRANSPARENCY DESIRED AMOUNG CONSUMERS

By: Dennis Riedmiller, CBC from Riedmiller & Associates

Most recently, the debate surrounding the use of genetically modified organisms, or GMOs, have called for the public and other organizations to push more labeling to better inform consumers. The goal of the labels would be to alert a grocery shopper as to whether or not GMOs have been included in the food product.

The consumers’ desire to have more knowledge when making decisions about their food purchases have driven the Agriculture Department to develop labeling for foods that have not been genetically modified.

“We know labeling won’t increase food prices,” said Libby Foley, an EQG policy analyst who wrote a report published by EWG. “We also know consumers are clamoring for more information about their food and a say about the agricultural practices that produce what they eat. So the question is why the food and biotech industry is so committed to keeping consumers in the dark that it’s spending millions of dollars to defeat customer-supported efforts to label GMO foods?”

The EWG’s analysis reports that in 2014, food and biotechnology companies spent a total of $63.6 million to oppose mandatory labeling of GMO ingredients. Instead, the government has developed a standardized way to label non-GMO foods, which is not mandatory and will be a cost to the companies in order to be certified.

In the U.S., the practice of using genetically engineered nutrients and food has long been a controversial topic. This method modifies the DNA artificially to add specific traits to the seed or organism. For example, GMOs are added to corn seed to add a pesticide to the tissue of the seed that can resist herbicides.

The issue of safety has been discussed internationally and countries have different approaches publicizing the use of GMOs. Up until now, the US Food and Drug Administration has only required labeling “if the food has a nutritional or food safety property that is significantly different from what consumers would expect of that food.”

The international stance on GMOs is quite different, however.  According to LabelGMOs.com, there are 50 countries that currently restrict or ban the use of GMOs. Additionally, 64 countries, which are home to over 40 percent of the world’s population, require labels for genetically engineered foods.

“There are numerous non-GMO claims in the marketplace, but it’s unclear to the consumer how valid those are, or what are the standards being used to assert those claims,” said Greg Jaffe, the head of Center for Science in the Public Interest’s biotechnology project, in an IB Times. “It’s better to have USDA provide a common standard and procedure so that consumers who want those labels know what they’re receiving.”

The new USDA certification that is being created will allow non-GMO claims to be verified for accuracy. The USDA organic label that currently exists also certifies that foods are free from genetic modifications, but non-GMO foods are not always organic. Companies will pay to have their product verified by the USDA and once approved, they will have access to the certification logo for their packaging.

Many activist group and anti-GMO individuals believe that there still needs to be more labeling to identify GMO traits in food. This may be in the future, but the government developing a new certification is a step in the right direction to help educate consumers about what they are purchasing.

When it comes to grocery shopping, consumers are required to constantly make decisions on what type of food they will purchase. Organic vs. non-organic, branded vs. generic and the list goes on. Consumers are continuing to become more knowledge about the food they are purchasing in an effort to make healthy decisions.

“Mandatory labeling of GMOs would allow consumers to vote with their dollars and have a say in the type of agriculture they would like to see in this country,” said Gary Hirschberg, chairman of the Just Label It campaign, in a US News article.

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