Between the billions of dollars in medical debt and the exponential increase in the cost of care, the Health in the United States may seem like an out of control market at best. But President Biden is adding new rules.
The Cut Inflation Act 2022 tackles everything from investments in clean energy and carbon emissions to tax loopholes for the rich and job creation in manufacturing. On the health front, the IRA is set to extend the Affordable Care Act’s improved premium subsidies through 2025 and reduce prescription drug prices and out-of-pocket costs for Medicare beneficiaries. . This means that anyone who purchased their individual health plan from the ACA Marketplace or who is enrolled in Medicare can see significant savings.
However, the same cannot be said for employers.
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“The reason this legislation is so profound is that, overall, it stabilizes and even lowers the cost of individual plans,” says John Staub, director of outreach at Remodel Health, a health benefits management platform. for employers. “If employers offer a group plan, there is no protection against rising costs.”
Employers typically offer group health plans, directly providing health coverage to all of their staff. But Staub points out that may not be a profitable choice in light of the IRA.
The IRA now allows the government to negotiate the prices of Medicare drugs – something it has been prohibited from since the creation of Medicare Part D, the prescription drug coverage program passed in 2003. The government will be able to negotiate the prices of 10 drugs by 2026 and 20 drugs by 2029. This is expected to reduce public spending by $100 billion over the next 10 years. In addition to this, the IRA also institutes inflation caps in Medicare Part D, which means that if a drugmaker raises the price of its products above the rate of inflation, it will incur tax penalties. Not to mention, there is now a $2,000 cap on Part D expenses and a $35 per month limit on cost sharing for insulin products.
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Staub notes that while these savings are certainly needed for those with health insurance plans, insurance companies will seek to recoup these benefits.
“The simple reality is that the US government is telling the pharmaceutical companies that they will no longer pay this high amount that they were billed,” he says. “That’s billions of dollars in revenue that pharmaceutical companies will want back. That lost revenue will trickle down to insurance companies and then to employers.”
In other words, pharmaceutical companies are likely to increase costs to recoup what they see as lost revenue previously made up for by the government and Medicare beneficiaries. Employers may end up with little protection as insurance companies pass on higher prices to group health plans, driving up premiums. And if an employer is already struggling with inflation and overhead, that added cost comes from employee paychecks.
“Their employees are going to have to pick up the cost if they haven’t gotten the proper raise to deal with inflation,” Staub says.
But there may be a solution: ACA individual insurance. The IRA will extend a stipulation of the American Rescue Plan Act to maintain strong premium subsidies in the ACA market, which have saved Americans thousands of dollars in annual premiums. This extension will not only prevent two million people from losing their cover, but will protect them against rising premium prices.
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Anyone buying a plan on the ACA Market will pay no more than 8.5% of their income, and if an individual’s income does not exceed 150% of the poverty level ($27,465 for a family of two), you can pay as little as $0. . They do not inherit the higher cost of premiums.
“Subsidies increase as costs increase because they’re based on a percentage of your income, not a percentage of the plan you have to pay,” Staub says. “You are deeply isolated – individual insurance plans will see a negligible difference.”
Staub advises employers to consider encouraging their employees to enroll in an ACA health plan. While large employers with more than 1,000 employees may find themselves isolated by their size, employers with 50 to 500 workers may find the next year even more difficult on the health care front. Ultimately, it may be time to reassess the value and protection that current employer plans provide.
“Employers of all sizes can participate in a number of compliant ways to enroll their employees in individual plans,” Staub says. “Employers need to assess what their options are to ensure they protect themselves from incoming cost increases.”