Everything Old Is New Again—In Many Ways OB3A Is a Return To Obamacare 1.0 - 08-01-25

The good news is that none of the changes to the Affordable Care Act, Medicaid, or other health-insurance-related tax items in the One Big Beautiful Bill Act (OB3A) were retroactive to the beginning of 2025. The bad news is that the first set of changes is coming in 2026. The worse news is that some changes that were not included in the final version of OB3A are included in a new Federal Rule – but the provisions of the Federal Rule are only temporary. Basically, what we have is some federal rulemaking that was designed to give Congress time to codify the rule’s provisions into law, but only some of the provisions were codified – which simply means the provisions are merely temporary, not invalid.

This podcast is going to discuss some of the important provisions concerning healthcare coverage that are included in OB3A, one that didn’t make it into the law, but that is in the new Federal Rule, and two that kind of blew up on social media but aren’t in OB3A or in the new rule.

This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax

Transcript

Welcome back to the deep dive. Look. This show, it's really crafted specifically for you, the tax professional. Whether you're a CPA, an enrolled agent, maybe you practice tax law. That's who we're talking to.

Exactly. And today, we're navigating something critical. It's this rapidly shifting landscape of health care related tax items. Your clients, they're already asking questions. Oh, absolutely.

And our goal here is simple. Make sure you're not just current, but really ahead of the curve. Right. And, you know, for those of you who've been deep in these health care tax weeds for a while, you'll probably notice something familiar. Oh, yeah.

In many ways, this new one big beautiful bill act, o d three a, they're calling it. Right. It feels like a return. A big step back towards, Obamacare one point o. Interesting parallel.

It is. Now some good news first, maybe a a sigh of relief. None of the OB three a changes themselves are retroactive to the start of 2025. Okay. That's key.

Huge. But the first significant shifts, they're set to hit for the 2026 tax year, plan year 2026 as well. Cool. And here's a really critical distinction, something to keep straight from the get go. Some provisions, things people expected maybe, they didn't get written into OB three a law.

Okay. But they've popped up elsewhere in new federal rules. Now these rules, often they're temporary. HHS or another agency puts them out, gives congress time to maybe make them permanent law later. Then maybe not.

But maybe not. And that hasn't happened for all of them yet. Creates a bit of a confusing picture. Precisely. So our mission, really, in this deep dive is to give you the clarity needed.

You've gotta be able to tell what's actual law, what's just a temporary federal rule, and frankly, what's just noise from social media. Mhmm. So much noise. Right. This clarity, it's essential so you can proactively and with confidence guide your clients through what's coming.

We want you prepared, not just reacting when a client gets a surprise. Absolutely. Preparation is key here. So let's unpack this a bit. If you're active online, professional forums, social media Mhmm.

You've seen it. The swirling misinformation about proposed bills It's everywhere. A real minefield. It really is. And for tax professionals like you, it just hammers home how vital it is to actually read the law.

Yes. Even if it's, you know 870 pages of legal goop. Exactly. Or at the very least, be super rigorous. Check dates on summaries, cross reference analyses.

Because proposed stuff, it just keeps getting talked about like it's already passed. It has a zombie like quality sometimes. Keeps coming back. It does. And that causes real confusion for your clients.

Absolutely. So to cut through that noise, let's be crystal clear on what didn't make it into the final OB three a law despite all the talk. Okay. Let's list them. Them.

Three specific things got a lot of buzz, but are not in the law. First, a shortened open enrollment period for the marketplace. Didn't happen in o b three a. Okay. One down.

Second, those really big increases to HSA contributions. Way beyond the normal inflation adjustment. Yeah. The ones people were excited about. Those didn't make it either.

And third, any significant changes to ICHRA's individual coverage health care reimbursement arrangements. Right. ICHRA stayed put. Correct. Those three were widely discussed.

Some anticipated them, but no no legislative traction in the final bill. Okay. That provides some clarity. But hang on. You mentioned the open enrollment period, the OEP.

You said it wasn't in a law, but you hinted it's still happening somehow? Yes. Good catch. That sounds like exactly the kind of tricky detail our listeners, you know, the CPAs and EAs need to nail down. Walk us through that nuance.

It's a critical point. Absolutely. And it really shows how you have to track both congress and the agencies. Okay. So the OEP Yeah.

For plan year 2026, which means open enrollment happening later in 2025. Mhmm. Technically, the OEP stays November 1 through January 15. Okay. Same as usual for that period.

Right. And the deadlines within that are the same too. Enroll by December 15 through January 1 coverage. Enroll after December 15. Coverage starts February 1.

That's the baseline for plan year 2026. Got it. So where's the twist? Here's where it gets interesting and, yeah, bit complex. While Congress didn't shorten the OEP and o b three a, it is becoming a reality anyway through a federal rule, the Department Health and Human Services, HHS.

Ah, the agency route. Exactly. They issued a rule earlier this year. It went through comments, got published officially in the federal register back in June. And this rule?

This rule, its official title is, vacation protection and affordable care act, marketplace integrity and affordability. Catchy yet. Right. Rolls right off the tongue. Doesn't it?

But the key thing is it includes the shorter OEP. And, crucially, it takes effect for plan year 2027. 2027. Okay. So not immediate, but it's coming via regulation.

Precisely. And what's really fascinating from a practical standpoint for you is this interplay. Law on one track, agency rules on another. Means you have to watch both. You absolutely have to stay current on both.

New laws and these evolving federal rules. It adds a layer of complexity when advising clients clients on marketplace stuff. And it also really highlights you know, sometimes you need to know when to say this eligibility question or this subsidy detail. You need a specialist in marketplace coverage because these rules can shift things. That's a really vital distinction.

Good advice. Okay. So the agency shortened the OEP starting for 2027 plans even though congress didn't in o b three a. Yeah. Got it.

Let's shift gears then. HSAs, health savings accounts. Okay. Many of us were following the house version of o b three a. Right?

And the proposed increases to the annual contribution limits were, well, pretty substantial. They were eye popping. Yeah. Figures like, what was it, $8,600 for individuals, $17,100 for families under certain income levels? That looked like a huge boost for tax deferral.

It did. It generated a lot of excitement. So it's definitely a letdown, I think, for many that those specific much larger increases just didn't make it into the final law. It is. Yeah.

A disappointment for sure. The actual inflation adjusted limits for 2026, they're much more standard increases. So what do the real numbers for 2026? For 2026, it's $4,400 for cell phone coverage and $8,750 for family coverage. Yeah.

So, you know, an increase, but not that dramatic jump we saw proposed. Right. Modest. But, okay, there is a significant silver lining here, isn't there? Something that does offer new planning opportunities for your clients.

Yes. Absolutely. This is important. While the amounts didn't skyrocket, the eligibility for who can contribute to an HSA got expanded. That's the real story here.

Yes. This opens up new paths for tax deferred savings starting in 2026. And this is where your advisory role can really make a difference. Can you detail these expanded eligibility groups for us? I can.

And OB three a really does broaden the scope here quite a bit, which is frankly great news for tax planning. Okay. Like who? Alright. Specifically, starting in 2026, working seniors.

If they're enrolled in Medicare Part a, they can now contribute to an HSA. Oh, that's a big one. Lots of client questions there usually. Huge point of confusion. Resolve now.

Also, employees who have access to those on-site employee health clinics, they're now eligible too. Clears up a gray area. Okay. More clarity. Good.

Then there's the ACA marketplace side. If your clients choose a bronze level plan, good news, those are now explicitly considered high deductible health plans, HDHPs, for HSA purposes. Okay. Section two twenty three c two h. That's the one.

Same goes for taxpayers with catastrophic plans. They're also clearly defined as HDHPs now. So HSA eligibility confirmed for them. Makes sense. What else?

And this is really interesting. People using direct primary care services, DPC. If they use DPC in addition to having a high deductible plan, they're eligible for an HSA. How do they clarify that? The law under IRC section two twenty three c one basically says DPC services are not considered a health plan that would normally disqualify you from an HSA.

Okay. That's crucial for people exploring those DPC models. It really is. And building on that, the DPC fees themselves, up to a $150 a month for an individual or $300 a month for a family. Yep.

Those fees are now considered qualified medical expenses for HSA distribution, so you can pay for DPC with HSA money tax free. That's under two twenty three t five. Nice. More ways to use the HSA funds, any other nuances. Yeah.

One more technical one. There's a new safe harbor. IRC section two twenty three c two subsection e. It basically says your health plan doesn't lose its HDHP status just because it covers telehealth services before the deductible is met. Telehealth flexibility.

That's very current. Exactly. Reflect how health care is changing. Oh, and one thing that didn't make it, just to be complete. Remember the talk about making a 500 a year gym membership a qualified medical expense?

Vaguely. Yeah. That was dropped. Re removed from the final bill. So no HSA money for gym memberships.

Okay. Good to know. So, wow, that's quite a list of expanded eligibility. It really does open up new conversations you can have with clients who maybe thought HSAs weren't for them. Definitely.

Especially clients in your Medicare age, maybe self employed folks, people looking at DPC. This is a solid planning territory for you. Absolutely. Who do you think benefits most? You asked that earlier, and I'd say, yeah, the self employed piecing things together, those nearing Medicare maximizing savings.

Small business owners maybe. Small business owners looking at DPC for their teams. Exactly. These rules give them flexibility and tax advantages they probably don't even know about yet. You can bring that to them.

Great point. Okay. Now let's pivot. We need to talk about an area requiring, I think, significant proactive guidance from your firm. Mhmm.

This is a big one. The premium tax credit, the PTC. This is where your expertise as a tax pro goes from just valuable to, frankly, indispensable. It could have huge financial impacts if clients aren't guided properly. Indeed.

Let's set the stage a bit. The PTC, as you know, it was massively expanded during the pandemic under the American Rescue Plan. Right. And then extended through 2025. Extended through 2025 by the Inflation Reduction Act.

It's that critical subsidy helping millions of Ford Marketplace Insurance, and many, many of your clients likely got it paid in advance. Absolutely. Meaning reconciliation on form eight nine nine six two at tax time. The dreaded eight nine six two reconciliation. Yes.

Okay. So let's quickly trace how the PTC worked to really grasp what's changing. Originally, Obama era ACA, the PTC was capped. Available only if household income was under 400% of the federal poverty level, the FPL, hit 400%. Cliff, you paid back subsidies.

Right. You hit the cliff, subsidies got repaid. Yeah. But, importantly, there's a maximum repayment amount, a cap to limit the damage. Okay.

That cap was key. It was. Then fast forward, COVID era, Biden legislation effective through the 2025, that changed fundamentally. How so? It got rid of the 400 FPL cliff entirely.

Poof. Gone. And it even provided some subsidies for people over 400 FPL, basically capping their premium costs at 8.5% of income. Right. That brought a lot more people into the marketplace.

Huge new enrollment. Yeah. And the idea was bigger risk pool, maybe lower premiums for everyone, theoretically. So that's the system we've had recently. Now, OB three a, effective starting plan year and tax year 2026.

What happens? Here's the critical shift. OB three a essentially hits rewind. It takes the PTC structure right back to the original Obama era design. Meaning?

Meaning, first, those enhanced expanded subsidy amounts from the COVID era, repealed, gone. Okay. Subsidies shrink back. Subsidies shrink. And here's the really crucial part.

That 400% FPL income level, it becomes a hard repayment cliff again. Oh. But here's the kicker. The change that demands your immediate attention as advisers, the recapture of excess PTC. When someone gets too much subsidy Yeah.

Don't tell me. It is no longer capped. Wow. No cap at all. Zero cap.

Yikes is right. This is a massive point of exposure for clients. If they estimate income wrong, get a raise, whatever, and they end up ineligible for the subsidy they received They owe it all back. They're expected to repay the full now. Regardless of their cash flow, regardless of how big that subsidy was, the safety net is gone.

That's significant and potentially painful. Very. And just like the original ACA structure, fewer subsidies, the return of the cliff, it likely means premiums feel higher for many, especially without those enhanced credits soaking up the cost. Your clients will feel this. So this seismic shift, especially the uncapped recapture, what does this mean for you, for your practice?

It sounds like this is precisely where your value proposition just skyrocketed. That's exactly right. Look. These changes, yeah, they could create some really nasty surprises, huge tax bills for some clients. Definitely.

But and this is the important part for you. They also present excellent planning opportunities. It's a chance for you to be proactive. How so? Just like it was back under the original PTC rules, you are uniquely positioned.

You have the knowledge, the tools to help clients with marketplace coverage strategically manage their income. To avoid that cliff and that nasty recapture. Exactly. To reduce their potential payback amount, maybe even eliminate it entirely. Yeah.

Your intervention here isn't just helpful. It's potentially critical to their financial health. Oh, okay. So what are the strategies? What levers can you pull for these clients?

We're talking about familiar tools, but applied specifically for PTC planning. Things like, capital loss harvesting. Stocks, crypto, other assets timed right at year end. Perfectly timed. Yeah.

Very effective. Also, traditional IRA contributions. Deductible contributions lower that household income number. Obvious one, but key here. Key.

Same with HSA contributions, four zero one k deferrals, anything that reduces adjusted gross income, or MGI technically for PTC. Right. Modified AGI. And for your self employed clients or those with rentals. Optimizing depreciation, section one seventy nine, bonus depreciation if available, that can significantly impact their income calculation for the PTC.

So lots of levers available within standard tax planning. Exactly. Levers you know how to use, applied strategically to manage their PTC eligibility and dodge that uncaptured recapture bullet. Okay. This is absolutely a clear call to action for our listeners.

For you, now is the time. Start the proactive planning now. Don't wait until 2027 when clients walk in with a massive unexpected tax bill from their 2026 returns. Please don't wait. Be proactive.

What are the first concrete steps you should take right now or very soon? Okay. Strongest suggestion, immediately. Yeah. Go into your software.

Use your data mining tools. Identify every single client who filed form eight nine sixty two in recent years. Hard acquired. That's your primary group. They're directly impacted by these PTC changes.

Once you have that list, proactively reach out. Offer them a specific billable service. Call it a marketplace review or PTC planning session. Billable. I like that.

This isn't just compliance anymore. Absolutely not. This is high value advisory work. It's a financial planning, risk mitigation. You're saving them potentially thousands of dollars and a lot of stress.

Yes. A billable service. That's the key. This moves you beyond just preparing the return into that trusted adviser role, the forward thinking planner. Couldn't agree more.

And the timing for doing these reviews, it's crucial. When's the sweet spot? You wanna be doing these sometime during this year's open enrollment period for plan year 2026 coverage. Which starts? Conveniently, it kicks off just a couple of weeks after the October 15 tax deadline.

Perfect timing, really. Really. Okay. So identify the clients now. Plan the service.

Plan the service. Figure out exactly who you can help. Define the scope, what will the review cover, income projections, strategy implementation Mhmm. And critically, figure out your pricing. What are you gonna charge for this incredibly valuable service?

Right. Value your expertise. Absolutely. Then start booking those appointments for late October, November, December. Get ahead of it.

This proactive step, it won't just save your clients major headaches. It will cement your relationship and significantly boost your advisory practice. This has been, wow, a really critical deep dive. It underscores just how vital your role as a tax professional is in this constantly changing environment. It really does.

We've hopefully clarified that crucial difference between actual law and those temporary federal rules, like with the OEP. Mhmm. We explored HSA eligibility expansions, real planning opportunities there for you. And maybe most critically, we flagged that huge issue, the significant uncapped premium tax credit recapture hitting clients starting in 2026. That's the big alert.

It is. And, look, this isn't just a list of changes. It's really a blueprint for you to engage proactively with your clients. It's a major opportunity for your practice. Which really raises an important question, I think, for you, our listener.

In light of all this complexity, these constant shifts Yeah. How can you strategically use this knowledge? Mhmm. How do you leverage it to deepen your client relationships, to really expand your advisory services well beyond just filling out tax forms? That's the core question.

Today's topic is a prime example of where your expert guidance becomes truly irreplaceable. Absolutely. In an environment like this, constant legislative change, information overload everywhere, your ability as a tax pro to cut through the noise, distill these complex health care tax rules, and give timely actionable financial planning advice, that's not just a service anymore. Right. It's a profound competitive advantage for your practice.

And frankly, it's an essential lifeline for your clients. We really trust this deep dive. It helps empower you to navigate these waters with confidence and, real expertise.