Insurance and the Inflation Reduction Act of 2022

This post is part of a series sponsored by AgentSync.

President Joseph Robinette Biden Jr. signed the Inflation Reduction Act of 2022 into legislation, and ripple effects throughout the economy remain to be seen.

Much of the law has been criticized and discussed for its impact on the fiscal outlook, inflation, and climate change. However, as our focus here at AgentSync is on the insurance industry, this blog will delve into the impact of the new law on this segment of the economy, specifically.

As we have covered before, the insurance industry is largely regulated by state regulations. However, federal legislation often affects insurance tangentially, such as federal mandates. on cyber reports for companies in critical infrastructurethe Department of Labor regulation on fiduciary standards for insurance professionals selling annuitiesor any number of insurance-related bills proposed in this latest session of Congress.

The Inflation Reduction Act is no different, as it directly or indirectly intersects with insurance areas as it meanders. through more than 117,000 words. So if you’re interested in debating whether this bill will actually reduce inflation or the federal deficit as promised, it’s not. However, if you want to know how this bill could affect the insurance industry, welcome! keep reading

2022 IRA and Affordable Care Act Marketplace Tax Credit Extensions

Since the inception of the Affordable Care Act (ACA) and its federal insurance marketplace, those who obtain insurance from their federal or state pool qualify for subsidized tax credits to offset the cost of health care premiums as long as family income is less than 400 percent of the federal poverty level. This works out to around $52,000 for a single person, or $106,000 for a family of four..

In 2021, the American Rescue Plan (ARP) expanded these benefits to everyone who purchases ACA-qualified insurance plans on exchanges if their insurance premiums exceed 8.5 percent of their income. A Center for Medicare & Medicaid Services Blog notes that the ARP benefit primarily affected families and individuals who depend on small business owners and self-employed individuals, as well as those in populations who are retired but not yet eligible for Medicare.

The ARP tax credit expansion was scheduled to expire in 2023, and the IRA 2022 now extends it to fiscal year 2025. States have scrambled to price health insurance on their health insurance exchange sites as they speculated whether the credit expansion would expire.

Therefore, if you are a provider in a state that requires authorization for insurance premium increases, if your allowable price factors in subsidies were determined, at least for this year, based on whether your state commissioner assumed that the ARP expansion would remain in effect.

The Inflation Reduction Act and changes to Medicare and drug price negotiation

By far the most extensive effects for the insurance industry may be related to those insurers that offer health insurance benefits through the Medicare Advantage and Medicare Supplement programs. (If you missed our Medicare Monday series, now is a good time to review your knowledge of Medicare, from Medicare 101 a Medicare-specific digital outages to how Medicare Advantage affects the solvency of Original Medicare.)

Prescription drug prices have been a long-standing wives for Medicare. Although traditional health insurers can negotiate the cost per unit with pharmaceutical companies, Medicare has been prohibited by law for the past 19 years from negotiating the cost of prescription drugs..

Going forward, the 2022 IRA seeks to reduce out-of-pocket costs for consumers and the overall cost of Medicare hedging provisions for:

• Allow Medicare to negotiate the costs of prescription drugs
• Limit Medicare Part D out-of-pocket costs to $2,000 per year
• Limit insulin costs to $35 for a month’s supply

To facilitate these changes, the new law makes reference coinsurance requirementsco-payments or any other insurance arrangement in which the consumer is responsible in whole or in part for paying the costs of prescription drugs.

Potential downside effects on the P&C insurance market of the Inflation Reduction Law

Much of the sprawling bill concerns subsidies and incentives to shift America’s power grid from a heavy reliance on coal and fossil fuels to renewable energy solutions. It’s a bit of a stretch to put this up as part of insurance-related legislation, but here we are.

As the property and casualty industry suffers trying to price coverage for homeowners insurance, commercial insurance, etc., with increasing loss events related to climate changewe are willing to listen to the argument that policies aimed at reducing these risks in the long term fit into a tangential realm of insurance.

Many of the grants are for considerations at the household level, such as reimbursement for insulation projects, window sealing, and energy-efficient appliances. These probably won’t have any direct effect on insurance companies. But, with more states requiring weather risk data from insurersthese projects and general adherence to best practice recommendations for energy consumption may become an indirect factor in insurance companies’ weather risk disclosure submissions.

IRA 2022 and auto insurance

In general, climate-based policies aim to reduce energy costs by subsidizing more energy-efficient appliances and lower carbon emissions by subsidizing US-made electric vehicles. Auto insurers will no doubt see the effects of EV adoption and may consider the changes of this emerging technology in underwriting.

Federal and state regulations are always in flux, one of the factors that makes this industry challenging and rewarding for compliance experts. If you want your growers to be compliant regardless of management changes at various levels of government, check out AgentSync solutions.