Health insurance subsidies, which will expire at the end of 2022, extended via the Inflation Reduction Act

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Americans may not believe the Cut Inflation Act will actually reduce inflation, with 57% of voters polled in a Morning Consult poll saying they expect the new law to have no effect. no positive impact on inflation and could make it worse.

But for people who buy their health insurance on Healthcare.gov, the new legislation can mean real savings.

The Inflation Reduction Act includes a provision to extend health insurance subsidies to reduce monthly premium expenditures for the next three years. Those grants, expanded through the American Rescue Plan Act of 2021, were due to expire at the end of this year. If they had expired, the Kaiser Family Foundation (KFF) estimated that almost all of the 13 million people receiving subsidies for their Health Insurance Marketplace insurance would have faced increases in their monthly premiums due to the combined impact of premium rate increases and reduced premiums. subsidies. For those listed on the federal marketplace, Healthcare.gov, premiums could have increased by more than 50%.

Before the US bailout went into effect, premium tax credits were only available to people who earned between 100% and 400% of the federal poverty level (FPL). Tax credits could be taken up front and paid directly to the health insurance company to directly reduce insurance premiums, called advanced premium tax credits, or credited through annual tax returns. . Regardless, grants have been reconciled at tax time to account for changes in income that may affect eligibility.

Those earning more than $54,360 (400% of FPL in 2022) previously faced a subsidy cliff. Individuals earning more than 400% of the FPL were subject to the full premium fee without assistance to offset health insurance costs.

With the American Rescue Plan, the criteria changed from a fixed income threshold to a percentage of annual income that would be needed to pay for health insurance. Anyone who would have to pay more than 8.5% of their income for health coverage could benefit from subsidies, regardless of their income. This approach has reframed premium tax credits around affordability.

According to US Department of Health and Human Services14.5 million people purchased health insurance through Healthcare.gov (the federal marketplace) and state-based health insurance marketplaces in 2021. More than 90% of those enrollees were eligible for some type of subsidy, with average premium savings of $67 per person per month.

In 2022, 1.1 million those eligible for premium tax credits with incomes above 400% of FPL – and would not have been eligible without the subsidy expansion. HHS estimated that 10 million people would have lost or reduced their subsidized premiums. As many as 3 million people could have lost their health insurance if premium tax credits had not been extended.

The Cut Inflation Act has drawn more attention because of its potential impact on prescription drug prices, which 83% of Americans say are unreasonable.

For the first time, the new law allows Medicare to negotiate the price of 10 prescription drugs covered by Medicare Part D in 2026. The scope of negotiations increases to 20 drugs, including drugs covered by Medicare Part B, by 2029. The law also caps out-of-pocket insulin costs $35 per month for Medicare enrollees, reduces coinsurance for catastrophic Part D coverage in 2024, and adds an overall annual Part D out-of-pocket cap of $2,000. in 2025.

According KFFit’s unclear how many people will benefit from drug price negotiations without knowing which specific drugs will be affected, but other provisions could help between 1 million and 4 million Medicare enrollees save money.

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