While the Presidential debates may not have contained a lot of substance, President-Elect Biden and the administration have tipped their hats as to which direction they would like to take healthcare. As we shift into a new era in the White House, what changes can Americans expect to see when it comes to this ever-important issue? Of course, a lot will depend on who controls the Senate – Georgia, we are watching.
As far as healthcare and the impact Biden may have on coverage for Americans, the issues range from the future of the Affordable Care Act to prescription drug prices to decreasing medical costs.
The Affordable Care Act (Obamacare) Under President-Elect Biden
Since becoming the front-runner of the Democratic party, Biden has made it clear that he intends to offer a public plan option for Americans – the idea is to basically allow anyone to buy into this system. This option would operate similar to Medicare and continue building on the foundation Obama set in place through Obamacare. This public option would be administered by the federal government and compete with private insurance plans. Many proponents indicate that this could substantially reduce the cost of insurance in light of the significant leverage the government would have and the fact that the government would not have profit margins as the goal in running the program.
Currently, the Affordable Care Act protects people with pre-existing conditions - such as cancer, heart disease, diabetes, etc. Additionally, it limits out-of-pocket expenses users pay for doctor visits and medical expenses, as well as require employers with 50+ employees to offer insurance coverage.
Currently, around 27.9 million (or 8.5 percent) Americans are uninsured.1 Biden has pledged on the campaign trail to lower this number to three percent.
Affordability of a Public Plan Option
Currently, Obamacare plan options have a limit of charging 9.86 percent of household earnings for a health insurance plan. Biden’s new plan proposes a decrease in cost limits to 8.5 percent.2
Biden’s plan also proposes an elimination of the tax credit income cap, currently set at 400 percent of the federal poverty line.2 This would allow more Americans to be eligible to receive tax credits that assist in offsetting the cost of plan premiums. This will be a key issue to follow for those that retire early. If the credits are expanded to higher income individuals, there may be more “income planning” that can be done to help one become eligible for more subsidies.
Medicare Age Change
Speaking of Medicare, the Biden administration has also proposed a drop in age eligibility for Medicare from 65 to 60. As we work with many individuals and families that are considering retiring before age 65 – as many of you might be – this can have an enormous impact on your decision to retire. This is often cited by our clients as their number one concern in early retirement.
Prescription Drug Prices
Like the Trump administration, Biden wants to lower the ever-increasing costs of prescription drugs. As the primary effort to drive down such costs, Biden has proposed allowing the federal government to negotiate drug prices for those in the Medicare system. However, many see this as unlikely if the Republicans continue to control the Senate.3
Biden has also proposed an inflationary limit to drug prices for both Medicare and public option and to use international reference pricing in an attempt to more reasonably set prices for new specialty drugs.4
There have been some interesting laws referencing prescription drugs proposed in Congress as recently as the Trump administration who also favored attempts to lower prescription drug prices. However, many proposals have stalled in the Senate.
Reduced Health Care Costs
If you have seen a medical bill lately or been frustrated from the lack of transparency from various medical providers, it won’t surprise you that medical costs have skyrocketed. One such example or cause of high medical costs is surprise billing. One of the primary ways a patient can get a surprise high bill is to use an out-of-network provider. Such costs can include the cost of the health care providers themselves or the cost of the hospital facility fees. While many elected officials on both sides of the aisle would like to make changes to the system, representatives from both parties also gladly receive contributions from powerful medical lobbying groups to allow such practices to continue.5 Stay tuned for this continued debate in 2021 and beyond.
Healthcare has remained top of mind for many Americans throughout 2020, and it will likely continue to be an important issue as we step into 2021. If you are wondering how the Biden administration’s proposed healthcare changes may affect your current coverage, stay in close contact to your company’s HR department, insurance provider or financial advisor for guidance.