On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the Act) impacting a broad range of issues related to fighting inflation, including certain healthcare matters that may indirectly impact employers that sponsor group health plans.

Compliance Snapshot

While the Act concentrates mostly on non-health care related matters, there are a few health care items addressed. Highlights include:

  • Insulin-Related HDHP Safe Harbor. Effective for plan years beginning on or after January 1, 2023, HDHP plans will not lose their qualified status for failing to have a deductible for certain insulin products. This means that HDHPs will be permitted to cover insulin for a broader range of uses pre-deductible without any impact to an individual’s eligibility to contribute to a Health Savings Account (HSA).
  • Expanded Premium Tax Credit. The American Rescue Plan Act (ARPA) provided an enhanced premium tax credit for taxable years 2021 and 2022. The Act now extends the applicability of the enhanced premium tax credit through 2025. As background, the Affordable Care Act (ACA) created a premium tax credit available on a sliding-scale basis for individuals enrolled on the Exchange (who are not eligible for coverage providing minimum value). The ACA limited the credit to individuals with household income between 100% and 400% of the federal poverty line. ARPA subsequently removed the upper income limit of 400% of the federal poverty line and increased the amount of the available credit. The change under ARPA will now continue through 2025.
  • Medicare Part D Prescription Drug Costs. Effective in 2023, cost-sharing for insulin will be capped at $35/month for Medicare Part D enrollees, and manufacturers will be required to pay Medicare a rebate, should the average price of certain drugs increase faster than inflation. Effective in 2025, the annual out-of-pocket prescription drug costs will be capped at $2,000. Lastly, effective in 2026, the Department of Health and Human Services (HHS) will be required to negotiate certain Medicare drug prices with manufacturers.
  • IRS Plan Audits. With the Act allocating nearly $46 billion to enforcement, it is reasonable that plan audits could increase in the future.

Impact to Group Health Plans

While the Act does not directly affect group health plans or their administration, there may be indirect impact in which employers should be mindful. For example, reduced costs for Medicare enrollees could potentially influence employer plan costs should price increases shift to private plans. Further, because applicable large employers (ALEs) can face penalties if full-time employees receive premium tax credits, expanded eligibility for such credits may potentially create increased penalty exposure with for ALEs (who fail to offer affordable, minimum-value coverage to all full-time employees and their dependents).

In sum, while there are no direct employer action items related to the Act, employers should be mindful of these developments.

Additional Resources

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2022 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Diane Cross — Diane is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Diane enjoys spending time with her family, live music, and cycling.