The Inflation Reduction Act: What Insurance Professionals Need to Know

By Anne Shropshire, CLU
Mar 8, 2023
Inflation Reduction Act: What Insurance Professionals Need to Know

The Inflation Reduction Act has created big changes that Health Insurance Marketplace-registered agents and brokers ought to know to best serve their clients in 2023.

Passed in August 2022, the Inflation Reduction Act impacts health insurance exchange subsidies (i.e. premium tax credits), who qualifies for exchange subsidies, and allows Medicare to negotiate drug prices with drug manufacturers for the first time.

Here are the most significant changes you need to know as an insurance professional in 2023:

Who is Eligible for a Premium Tax Credit?

The Inflation Reduction Act expands the existing premium tax credits keeping an estimated 2 million people from losing health insurance coverage.

Set to expire in 2022, these tax credits were initially included as part of the 2010 Affordable Care Act and the American Rescue Plan Act of 2021. These marketplace enrollment subsidies have been extended another three years, through 2025.

Eligibility for these subsidies has also been expanded to include individuals making more than 400 percent of the federal poverty level (FPL). Before the change, only those whose income fell between 100 and 400 percent of FPL were eligible.

Now all taxpayers who purchase their health insurance off an exchange are eligible, regardless of income level or tax bracket.

What is a Qualified Health Plan?

Inflation Reduction Act changes only apply to qualified health plans that are available through the health insurance marketplace.

A qualified health plan is an insurance plan that has been formally certified by and offered through the Health Insurance Marketplace. These plans provide essential health benefits and follow precise guidelines on cost sharing and other stringent standards.

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What is the Impact on Medicare Drug Costs?

Expect lower drug costs since Medicare can now negotiate better prescription drug prices with drug manufacturers. Medicare participants are no longer required to pay out-of-pocket for recommended vaccines either.

Beginning in 2023, Medicare can cap the rise of drug prices. Insulin price caps and rebates begin this year and out-of-pocket caps begin in 2025. Drug price negotiations begin in 2026, when Medicare can negotiate the prices of 10 drugs. That number increases to 15 drugs in 2027 and 2028, then rises to 20 drugs in 2029.

These changes should save Medicare participants money while working towards more reasonable prescription costs for all. Private health insurance costs may even be impacted as a result.

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Crucial Insights for Insurance Professionals

The Inflation Reduction Act makes several big changes to health insurance, particularly the expansion of eligibility for premium tax credits for plans purchased through the Health Insurance Marketplace.

Medicare participants can also expect to see major changes in 2023 and beyond—changes that may eventually influence private insurance prices, too. As an insurance professional, it's important to stay on top of these changes as they occur so you can provide the highest level of service to your clients.