The newly passed tax plan, known as the Tax Cuts and Jobs Act (H.R. 1370 and H.R. 1), will be the most important health care legislation enacted since the Affordable Care Act (ACA) in 2010. The law’s two major health-related aspects are the elimination of the penalties paid by people who fail to have health insurance as required by the individual mandate, and according to the Congressional Budget Office (CBO), the repeal could result in as many as 13 million fewer Americans having health insurance.
Some will choose not to buy insurance because the penalty has disappeared. Others, especially higher-income individuals who don’t qualify for subsidies under the ACA, will drop insurance because of increases in average premiums predicted by the CBO. These premium increases will occur because, with the repeal of the mandate, many young, healthy people will exit markets, leaving a sicker, more costly insurance pool behind. Older individuals will be most affected. For example, a 60-year-old not receiving subsidies could face premium increases of $1,781, $1,469, $1,371, and $1,504, respectively, in Alaska, Arizona, Nevada, and Maine.
What does this mean for your clients?
The final bill with more than 500 pages and going into history books as “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for the Fiscal Year 2018” reads that the (H.R. 1) repeal does not become effective until 2019. Which means from 2019 and on, people who do not purchase health insurance will not have to pay a fine to the IRS. However, in 2018, the individual mandate is still in effect. Your clients have the option to purchase any of the ACA-compliant plans, on-marketplace, off-marketplace, and of course minimum essential health coverage options.
The purpose of the individual mandate was to ensure the insurance risk pool was spread throughout a mix of young and old, healthy and sick. The CBO predicts that premiums will spike 10% without the mandate as exchanges will be used by individuals with more health problems. For most of the enrollees on the marketplace (individuals between 150% and 400% of the federal poverty level – or those receiving tax credits/subsidies), an accompanying increase in federal subsidies will make up for the higher premiums. Those making above 400% of the federal poverty level will face the brunt of premium increases.
How can you help your clients make insurance affordable again?
With the legislative changes to short-term medical and the ability to offer these policies year round, this may be the best option. Not only providing a short-term medical plan, but adding in additional low-cost plans to fill in the gaps, including: accidental, hospital indemnity, and dental, vision, and hearing. The chart below compares the current health insurance options for a family of 4 with an ACA off-marketplace plan vs. a short-term medical and gap filling product suite.
Agent Pipeline will continue to keep you updated on all legislative changes. If you are interested in learning more about helping your clients through this confusing time with health insurance, contact one of our Individual & Group Health experts at 800-962-4693 now! Agent Pipeline staff is trained and certified in the marketplace to help you advise your clients on how to save on their health care costs and how to ensure you continue to retain your book of business.
For more information on the signing of H.R. 1, Tax Cuts and Jobs Bill Act, and H.R. 1370, please check out the following resources:
- Remarks by President Trump at Signing of H.R. 1 and H.R. 1370, whitehouse.gov – 12/22/17
- H.R. 1 Tax Cuts and Job Acts Summary from GovTrack.us
- H.R. 1370 Summary from Congress.gov
- H.R. 1 Summary from Congress.gov
- 2018 Subsidy Calculator for ACA Marketplaces
- Whitehouse.gov
- Healthcare.gov
If you’re an agency owner and interested in learning how the tax bill affects your small business, you can also click here to read the Insurance Journal’s article on insurance industry statement releases.
