August 8, 2022
Primary Provisions of Democrats’ Signature Tax and Energy Bill
The Senate passed the $700 billion-plus “Inflation Reduction Act” on Sunday, August 7, with Vice President Harris breaking the tie. It was a significant victory for Democrats and the Biden Administration, and is expected to be approved by the House of Representatives on Friday. Last week, we reported the primary provisions of the legislation, including:
- A three-year extension of the Affordable Care Act subsidy expansion that was a part of the American Rescue Plan in 2021.
- A 15% minimum corporate tax on $1 billion-plus firms, with a 1% tax on stock buybacks.
- The bill would allow the government to negotiate prices on select Medicare medications, cap seniors’ out-of-pocket spending on drugs at $2,000 a year, and penalize drug makers that increase prices for Medicare Part B and D drugs by more than the inflation rate. Under legislation that established the Part D drug program in 2003, which was influenced by the drug industry, the government is prohibited from negotiating directly with pharmaceutical manufacturers. Individual insurance companies participating in Part D can negotiate, but they don’t have the bargaining power of the federal government. Allowing the government to negotiate directly is expected to save about $100 billion through 2031, according to Congressional Budget Office estimates.
- The legislation contains the single biggest investment in climate in U.S. history, with standards to lower emissions and provide tax incentives and grants to help with the transition to clean energy. It would invest nearly $400 billion in clean energy, with the goal of reducing carbon emissions by 40% by 2030.
While there are no provisions that are aimed at the commercial insurance brokerage sector, The Council’s greatest concern with the legislation is that it will exacerbate prescription drug cost-shifting onto employers. Democrats attempted to include a provision calling for negotiated drug pricing to be available to those in private plans (including $35 limits on insulin), but as we predicted months ago, the Senate parliamentarian ruled such provisions out of order for a “reconciliation” bill that can be passed with only 51 votes. (All provisions have to directly impact federal spending and taxation in reconciliation; private plan provisions, therefore couldn’t be considered.)We recommend this story from Bloomberg (login required) as to “winners and losers” in the Inflation Reduction Act. We will you update as we know more. Don’t hesitate to reach out to us with any concerns or questions.