How the Inflation Reduction Act Affects Employer-Sponsored Health Plans

The Inflation Reduction Act of 2022 was signed into law earlier this month. Most of its provisions don’t directly affect group health plans but could have an indirect impact. Here are the main issues we are keeping an eye on.

1. Enhanced Premium Tax Credit

The law makes premium assistance for coverage obtained through the Health Insurance Marketplace available to higher income individuals through 2025. Under the Affordable Care Act (ACA); subsidies were available only to taxpayers with household income between 100% and 400% of the federal poverty level. This expansion was first made available for 2021 and 2022 as part of the COVID relief included in the American Rescue Plan Act.

Potential impact on employers and health plans: Employers that are subject to the ACA’s employer mandate (those with 50 or more full-time employees) could face penalties if a full-time employee enrolls in subsidized coverage through the Marketplace. Because the subsidies will be available to employees with a higher income than was allowed under the ACA; there is an increased risk of penalties for employers offering coverage that isn’t considered affordable under the ACA.

2. Medicare Prescription Drug Cost Reductions

The Inflation Reduction Act also included several provisions that will benefit individuals who enroll in Medicare Part D prescription drug coverage. Specifically:

• The cost of insulin will be capped at $35 per month, starting in 2023.
• Drug manufacturers will be required to pay Medicare a rebate if the average prices of certain drugs increase faster than inflation, starting in 2023.
• Annual out-of-pocket limits for prescriptions will be capped at $2,000 starting in 2025.
• The Department of Health and Human Services will be required to negotiate certain Medicare drug prices with manufacturers beginning in 2026.

Potential impact on employers and health plans: Improved coverage under Medicare Part D may eventually make it harder for an employer’s health plan to be considered “creditable coverage” (i.e., at least as good as what an employee could get through Part D). Employers are required to disclose whether a plan is creditable to employees every October by distributing the Medicare Part D notice. As always, The Miller Group will help clients determine whether their plan continues to be creditable and provide the necessary notice for you to use.

In addition, there is some concern that these changes may cause carriers to increase premiums on private health plans – including employer-sponsored plans – to make up for lost revenue.

3. Insulin-Related Safe Harbor for HSAs

The legislation allows HSA-qualifying high deductible health plans (HDHPs) to pay up to 100 percent of the cost of insulin and other devices/tests used to monitor and control diabetes prior to the deductible being met. This is accomplished by classifying such expenses as preventive care, similarly to no-cost annual exams and vaccinations.

There was already an IRS rule – put in place in 2019 – that allowed this. The Inflation Reduction Act makes the change permanent, as opposed to the existing guidance from the IRS. This could more easily be changed from one administration to the next.

Potential impact on employers and health plans: If you offer an HSA-qualifying HDHP; we can help you determine whether it currently covers diabetes-related preventive care free of charge. If it doesn’t and you are interested in doing so, let your account executive or producer know.