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The New Biden Spending Bill Framework, for Agents

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What You Need to Know

  • The proposal would cut the 10-year cost of new social welfare programs to $1.75 trillion, from $3.5 trillion.
  • Medicare could add hearing benefits, and Medicaid could get more home care funding.
  • Insurers could face a 15% global minimum tax and a 1% tax on stock buybacks.
  • High-income people could face extra income and net investment income taxes.

The administration of President Joe Biden has released a new Build Back Better Framework that might shape what kind of spending bills Democrats can actually get through Congress.

Officials have pulled provisions from the giant H.R. 5376 spending package to come up with a version that both progressive Democrats in the House and more centrist Democrats in the Senate, such as Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, can live with.

The White House says the new version could lead to $1.75 trillion in federal spending increases and tax cuts over the next 10 years. That compares with 10-year budget impact estimates of $3.5 trillion for H.R. 5376.

The government is on track to generate about $4.2 trillion in revenue this year, and about $55 trillion over 10 years.

Insurance Provisions

Here are package provisions that could affect Americans’ insurance coverage and caregiving support:

Affordable Care Act premium tax credit subsidies: This provision would provide four years of expanded premium tax credit subsidies for people who earn too much to get Medicaid coverage but too little to qualify for ACA premium tax credit subsidies under current rules. (Cost: $130 billion over four years)

Medicare hearing benefits: This permanent provision would give people with traditional Medicare coverage help with paying for hearing exams and hearing aids. (Cost: $35 billion over 10 years)

Medicaid home care benefits: This permanent provision would provide extra support for Medicaid home care services and for adult daycare services and other community-based care services. ($150 billion over 10 years.)

‘Revenue Raisers’

Here are provisions that could affect insurance costs and income taxes for insurers and insurance customers:

Medicare drug rebates: The Tax Cuts and Jobs Act of 2017 calls for the Medicare program to change how it handles prescription drug discounts, or rebates. The Biden framework includes a permanent version of the H.R. 5376 provision that calls for Medicare managers not to implement the new Medicare drug rebate rules. (Revenue: $145 billion over 10 years)

Global minimum tax: This permanent provision, which is also in H.R. 5376, would set a corporate alternative minimum tax. It would require corporations with more than $1 billion in profits to pay a tax of at least 15% on their profits. (Revenue: $325 billion over 10 years)

Stock buyback tax: Shareholders and stock analysts now press insurers to buy back hundreds of millions of dollars of their stock every year. This framework provision, which is also in H.R. 5376, would set a 1% surcharge on corporate stock buybacks. (Revenue: $125 billion over 10 years)

High-income surtaxes: This provision would impose a 5% surtax on income above $10 million and an 8% surtax on income over $25 million. (Revenue: $230 billion over 10 years)

More on this topic

Net investment income tax rule changes: The changes would affect the taxes of people who pay what’s sometimes called the 3.8% Medicare surtax. (Revenue: $250 billion over 10 years)

What the New Biden Framework Leaves Out

Here are some insurance-related topics addressed in old Biden administration proposals and in the current version of H.R. 5376 that are not mentioned in the new framework outline:

  • Estate and gift taxes.
  • ACA premium tax credit subsidies for unemployed people and people with income over 400% of the federal poverty limit.
  • Adding dental insurance and vision care benefits to the traditional Medicare benefits package.
  • Benefits aimed at users of individual retirement arrangements.
  • Retirement savings.
  • Changes in trust rules that could lead to taxation of life insurance.

The Gameboard

Democrats have narrow majorities in Congress. When Republicans are united in opposition to a bill, the Democrats need support from every Democratic senator to pass a bill with a simple majority vote in the Senate, and all but three Democratic representatives to pass a bill in the House.

Originally, the Biden administration wanted Congress to pass a big bill that would include social welfare infrastructure provisions along with physical infrastructure provisions.

Some Republicans support the physical infrastructure provisions, but they appear to be united in opposition to the social welfare provisions.

Sen. Joe Manchin, D-W.Va., has objected to the idea of lumping social welfare spending in with physical infrastructure provisions.

House progressives have objected to the idea of voting for a package with no social welfare provisions.

The Biden administration and congressional leaders have responded by creating a physical infrastructure bill, which appears to have bipartisan support, and a separate Build Back Better social welfare spending bill.

House progressives have been sparring with Manchin and Sinema for weeks, but the prospects that Democrats can pass the social welfare spending bill appear to be improving.

Rep. Pramila Jayapal, D-Wash., who leads a group of House progressives, has said that House progressives can vote for a bill based on the new Biden framework.

Manchin and Sinema have also indicated that they can live with the framework, according to remarks Sen. Chris Coons, D-Del., made in television interviews with CNN and NBC Thursday.

Implications

In the past, life insurers have sold products that have helped clients manage tax liabilities.

Any new legislation that increased the net investment tax or added surtaxes for high-income people could create markets for arrangements that help clients reduce their investment earnings or overall taxable income.

(Image: Shutterstock)