The Inflation Reduction Act: What The Healthcare Provisions Mean For Your Business

The Inflation Reduction Act: What The Healthcare Provisions Mean For Your Business

President Biden recently gave a speech in the White House Rose Garden on the healthcare provisions in the Inflation Reduction Act. During the speech, he lauded this landmark legislation as an important economic victory for working families and the private sector.

Small business owners have often cited the rising cost of healthcare and prescription drug prices as the top concern for the future of their business. In fact, a recent survey found that 83% of small business owners said rising health insurance costs had an impact on their business. Fortunately, the Inflation Reduction Act includes critical provisions addressing the cost of healthcare. Here are three ways the Inflation Reduction Act could impact healthcare costs that are important for employers:

1. Enhanced Premium Tax Credits for Health Insurance: Many small employers can’t afford to offer health insurance for themselves or employees. Many of them use the health insurance marketplace (healthcare.gov) to get access to health insurance. The good news is that key tax credits that reduce monthly premium expenses and make health coverage on the Affordable Care Act (ACA) Marketplace more affordable to millions of Americans were set to expire, but the Inflation Reduction Act law extends them for the next three years, through 2025. Overall, about 13 million Americans will save an average of $800 per year, compared to what they would pay without the Inflation Reduction Act. Not only will this help business owners free up business owners to access capital, it will allow them greater ability to grow and be more competitive. Both small employers and workers can learn more at www.healthcare.gov.

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2. Negotiating Medicare Drug Prices: The legislation requires the Department of Health and Human Services (HHS) Secretary to negotiate prices for 10 of the drugs covered by Medicare. While these 10 drugs still need to be determined by HHS, National Economic Council Director Brian Deese made the case by saying in a recent interview, “requiring Medicare to negotiate better prices for prescription drugs because when we do that, we not only reduce the costs to consumers for whom prescription drugs can make up a significant portion of their monthly budget, but we also reduce the cost to the federal government.”

3. Capping Medicare Drug Costs: The Inflation Reduction Act caps out-of-pocket prescription drug costs for Medicare Part D beneficiaries at $2,000 annually. There currently is no out-of-pocket cap for Medicare Part D beneficiaries, so once an individual reaches the “catastrophic phase” of $7,050 in annual out-of-pocket costs for covered drugs, they could have to pay 5% of the cost of their drugs going forward. This can end up being many thousands of dollars per year. By setting this cap, the law protects these individuals from paying for prescription drugs above the cap, saving them money which can be redirected toward entrepreneurship or other living expenses. In addition, the legislation caps out-of-pocket costs in Medicare Part D for insulin at $35, which will be very helpful for the 1.6 million to 3.3 million Medicare beneficiaries taking insulin.

Healthcare access and cost continue to be an ongoing challenge for American employers – particularly those who are small and medium-sized. While the steps outlined above could be helpful to drive costs down across the market and will help many consumers, there is more work to do. For example, limits on the price of insulin outside the Medicare program ultimately weren’t included in the Inflation Reduction Act. However, President Biden reiterated his commitment to continue fighting for this commonsense policy to save Americans who rely on insulin hundreds or thousands of dollars a year on that lifesaving treatment, by saying, “we’re going to go back at this, and we’re going to lower the cost of lifesaving insulin for children as well as families for everybody, whether they’re on Medicare or not.”

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