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Health Benefits Excise Tax:
How May It Impact Your Company?

This excise tax calculator is for meant for illustrative purposes only and is based on a simplified formula pertaining to active employees. With the reconciliation bill now signed into law, the excise tax requirements include adjustments that will benefit employers with high costs due to the age or gender of their workforce, or if they operate in a high-risk industry. Those adjustments are not reflected in this calculator.

Step 1. Using COBRA Valuation Rules, enter the annual 2009 premium amount for single and family coverage (employer and employee contribution) for your company’s group health benefits for active employees (monthly COBRA rate x 12), excluding dental and vision coverage. If pharmacy is offered separately from group health, please enter its value as well.

	Single	Family
Group Health:	$	$
Pharmacy:	$	$

Step 2. What is your estimated annual percentage increase for these benefits? %

Step 3. For the same group of employees, please enter the average contributions or reimbursements made under the following arrangements.

	-------- EMPLOYER SHARE --------		-------- EMPLOYEE SHARE --------
	Average Employer Contribution — Single	Average Employer Contribution — Family	Average Employee Contribution — Single	Average Employee Contribution — Family
FSA1:	$	$	$	$
HRA:	$	$	--- $0 (not allowed) ---	--- $0 (not allowed) ---
MSA:	$	$	$	$
HSA:	$	$	$	$
NOTE: 1 The new health care reform law will limit health FSA contributions to $2,500.00 beginning in 2013, and indexed by CPI thereafter. To simplify the calculation, we capped FSAs at $2,500 and indexed all medical account contributions by 2.9 percent annually.

Step 4. Does your company offer any supplemental health benefits to this group of employees? If so, please enter the aggregate premiums (employer and employee share) for any supplemental coverage below. DO NOT INCLUDE premiums for dental coverage, vision coverage, wellness programs, accident or disability income insurance, long term care insurance, supplemental life insurance, liability insurance, workers compensation insurance, automobile medical payment insurance or credit-only insurance. INCLUDE costs related to onsite medical clinics and executive physical programs.

	Single	Family
Supplemental Benefits:	$	$

Step 5. Average number of employees enrolled in single coverage?

Step 6. Average number of employees enrolled in family coverage?

Calculations Based on 2009 Workforce and Coverage:

2018 Calculated Totals:

		Single	Family
Projected 2018 per-employee premium2:		$	$
Projected 2018 threshold under Reconciliation Bill:3	(minus)	$	$
Amount subject to taxation:		$	$
40% Excise Tax Applied:	(multiply)
Projected 2018 per-employee tax:		$	$
Projected tax (based on your 2009 workforce)4:		$	$

Estimated Excise Tax for
Single and Family in 2018:
$

2021 Calculated Totals:

		Single	Family
Projected 2021 per-employee premium2:		$	$
Projected 2021 threshold under Reconciliation Bill:	(minus)	$	$
Amount subject to taxation:		$	$
40% Excise Tax Applied:	(multiply)
Projected 2021 per-employee tax:		$	$
Projected tax (based on your 2009 workforce)4:		$	$

Estimated Excise Tax for
Single and Family in 2021:
$

2025 Calculated Totals:

		Single	Family
Projected 2025 per-employee premium2:		$	$
Projected 2025 threshold under Reconciliation Bill:	(minus)	$	$
Amount subject to taxation:		$	$
40% Excise Tax Applied:	(multiply)
Projected 2025 per-employee tax:		$	$
Projected tax (based on your 2009 workforce)4:		$	$

Estimated Excise Tax for
Single and Family in 2025:
$

Because this does not go into effect until 2018, several variables could influence your estimated excise tax, such as:

• Changes in your estimated annual percentage increases (step 2).
• A national inflation rate that is higher or lower than projected here.
• Modifications to your benefit plan.
• Changes to the excise tax requirements by policymakers in future sessions.

As you look at the estimated taxes, remember that you are looking at something that is calculated for 15 years from now. Although the hope is that trends will flatten, average premiums for employer plans have more than doubled over the past 10 years. The estimated tax should be considered in terms of 2025 values.

As you run your numbers through the calculator, let us know what you find. Are you hitting the threshold at all? Not immediately, but in the future? Also, if you have questions about how to use the calculator or what your results mean, please contact Jesse Oberloh.

We will use the information we gather to communicate with policymakers and other influential groups over the next several months. It is important to let them know how the excise tax will affect employers before it is implemented in 2018.

Other Notes:
² In projecting your future premiums, we indexed your 2009 medical and pharmaceutical premium by your estimated annual premium increase but indexed your other health benefit costs by 2.9 percent, the Social Security Administration's projected cost of living adjustment over the next several years.
³ The 2018 threshold could increase if actual growth of health costs between 2010 and 2018 exceeds projected growth during that period. After that, the thresholds will increase at or near the rate of inflation.
⁴ Insurance companies and/or benefits administrators would be liable for the tax, although employers will be responsible for determining ratio of liability.