5 federal budget moves that could impact your employee benefits renewal
The federal government is exploring a slew of changes that could impact employer-sponsored health benefits. Updates to the Affordable Care Act, potential cuts to Medicaid and a new approach to vaccines and preventive care are just a few of the possibilities on the horizon.
Here's are five items to watch for and how they could impact your benefit renewal.
1. International Rx sourcing: For years, pharmaceuticals have been exempt from tariffs, but the Trump administration is now considering including them as taxable imports.
Though the president has pivoted on this issue several times, recent announcements say that tariffs for pharmaceuticals are likely coming, which would make imported prescription drugs more expensive. Commerce Secretary Howard Lutnick has said the goal is to push more companies to manufacture drugs in the U.S. India now supplies 45% of generic drugs in the U.S.
Work with your broker to closely monitor prescription drug tourism, as well as look for rebates and coupons on a monthly basis to help offset rising costs.
2. Medicaid cuts: A recent budget resolution in the House of Representatives called for a $2 trillion reduction in spending over 10 years. The bulk of those cuts would come from the section of the budget that funds Medicaid.
Employees could turn to their employer-sponsored plans to provide care for those family members no longer on Medicaid, thereby increasing the employer's costs.
Oswald provides to its clients a robust employee communications plan that includes Medicare and Medicaid alternatives.
3. The Affordable Care Act created the health insurance exchange to help people without coverage find affordable options. As subsidies for this plan expire this year, the Urban Institute estimates that 7.2 million people could choose not to maintain their coverage through the exchange.
A smaller pool of members in the federal exchange could lead to higher premiums, so those impacted could seek more affordable coverage through their employer. The employer's costs could rise due to having to cover more people.
4. Vaccinations could lose support for continued coverage without a deductible. That could raise the cost of care in the long run as people choose not to get vaccinated to avoid the associated out-of-pocket costs.
5. On a more positive note, employers could benefit from reforming how pharmacy benefit managers operate, a focus of both the Biden and Trump administrations.
Some mandates for reform, such as prohibiting PBMs from charging more than a drug's cost (also known as spread pricing), and greater transparency in pricing could be good for employer-sponsored plans.
Planning ahead
There is still so much unknown and many expect a continued bumpy ride on the federal level. In addition, the changes are expected to have different impacts in each state and they will have varied effects on people based on race, income and age, the Urban Institute warns.
Keeping all this in mind, it could be difficult for employers to plan for renewals of their benefit plans.
Play it smart by paying close attention to regulatory matters and use your utilization data to your advantage. As your broker, Oswald can help you mine your data for usage trends and look for ways to control your costs while also taking care of your employees.
Contact me at jsadlier@oswaldcompanies.com or 614-696-5615.
Founded in 1893, Cleveland-based and employee-owned, Oswald is among the nation's largest independent insurance brokerages. Oswald is a founding partner of Unison Risk Advisors Inc., whose mission is to secure a thriving future for independent insurance and risk management firms; their owners, employees and clients; and their communities.
Jonathan Sadlier is the Central Ohio market president for Oswald Companies. He has more than 20 years of experience in the insurance industry. He specializes in the financial and technical aspects of plan strategy and the implementation of innovative, client-specific solutions.
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