The Inflation Reduction Act is chock-full of provisions aimed at tackling climate change, escalating costs and much more. However, within the new law lies a handful of provisions, which has the power to revolutionize healthcare and what it could look like moving forward for millions of Americans. This critical point within this new law continues the enhanced Advanced Premium Tax Credits, which were initially created to provide financial relief to consumers who were on Individual Marketplace Plans at a time when many faced immense financial uncertainty from layoffs during the COVID-19 pandemic. It’s clear that these subsidies did their job as it drastically lowered the cost of healthcare for millions of Americans who may not have been able to obtain coverage otherwise.
We know these enhanced Advanced Premium Tax Credits work and have further bolstered enrollment participation in Individual Marketplace Plans. This renewal comes at a pivotal time in our nation’s history as it further proves that custom individual marketplace plans are the future to providing Americans with lower-cost quality healthcare coverage.
Customized Individual Plans Versus Traditional Group Plans
When it comes to healthcare coverage, working Americans are accustomed to having their employer choose a Traditional Group Plan for their entire organization to sign up for during Open Enrollment. This often leads to employers picking the worst of two, three or four bad options for their employees because the cost of these plans have dramatically increased over the past two decades. The data is clear that this trajectory is unsustainable.
Individual health plans are often referred to as Affordable Care Act, Marketplace and Exchange Plans are model insurance options designed to meet the individual needs of whomever is purchasing that plan. This coverage operates like normal health insurance, but instead of it being part of an expensive group plan, it’s intended for individuals. Because these plans are more tailored to a specific person rather than a group, the cost for both the employer and employee is often much more affordable and more attractive to both parties. A 2022 National Health Benefits Analysis found a strong desire from Americans for this shift with 60% of employees, when given the choice between the two, selected Individual Marketplace plans for their health coverage.
Enhanced Advanced Premium Tax Credits Create Instant Discounts for Consumers
These enhanced tax credits that were originally made available through the Affordable Care Act and continued in the Inflation Reduction Act compound the savings Americans already capture through their Individual Marketplace Plans. These subsidies create instant discounts for consumers on their healthcare coverage. Recent data shows that 79.5% of all individuals are eligible for these tax credits and subsidies, which on average lowers their individual premium by $8,948 a year.
These credits were enhanced during the COVID-19 pandemic to provide some relief to consumers as they dealt with unprecedented challenges brought on by the public health crisis. Since their inception, Individual Plans saw record participation and created more competition in the Marketplace, which helped drive down the cost even further. This made obtaining quality health insurance coverage in reach for more Americans than ever before.
Bottom Line For Employers
Sticker shock continues to be top of mind for consumers across the country and employers are no exception. Group plans are not immune to inflation and business leaders are not alone when it comes to taking a hard look at their bottom line these days to see where they can cut back on overhead costs let alone annual increases to traditional group plan coverage.
It’s no secret healthcare costs likely eat up a major portion of an employer’s budget, but these Advanced Premium Tax Credits make an already more affordable health insurance option even more in reach for employees. Data shows that the switch from group plans to individual can save 30-50% in healthcare costs while also offering their employees lower deductibles and premiums.
The continuation of these enhanced Advanced Premium Tax Credits is a win-win for the employer and the employee. This marks a pivotal point in our nation’s history as it illustrates what the future of health benefits could look like for Americans. Quality health insurance options should not have to break the bank and these subsidies made available through the newly signed Inflation Reduction Act prove they don’t have to.
John Staub serves as Director of Outreach for Remodel Health, an HR service used by universities and colleges across the country that provides innovative health benefits solutions to employers and employees alike. As a national thought leader and expert in the health benefits field, John brings passion and knowledge to the benefits industry.