The One Big Beautiful Bill Act (OBBBA), signed into law July 4, 2025, makes sweeping changes to U.S. tax and health policy. While the law has been celebrated for delivering significant tax cuts—especially to individuals, families, seniors, and certain workers—it simultaneously reduces or restricts a wide range of federal benefits, particularly Medicaid and ACA Marketplace subsidies.
For insurance professionals, this dual nature is critical. On one hand, many clients will enjoy lower tax burdens and new deductions, freeing up cash for savings and protection products. On the other hand, millions risk losing health coverage, facing stricter eligibility requirements, or paying higher out-of-pocket medical costs.
Understanding both sides allows insurance advisors to give clients balanced guidance, and to position insurance products as solutions in a changing landscape.
The Act makes permanent the lower individual income tax rates from the TCJA, which were scheduled to expire after 2025. Clients can plan around lower rates long term, improving cash flow for insurance planning.
For 2025-2028, taxpayers in tipped occupations can deduct up to $25,000 in tip income (phase-out: $150k single / $300k joint). Service industry clients have more after-tax income to fund insurance protection.
For 2025-2028, taxpayers can deduct overtime pay up to $12,500 ($25,000 joint). Workers relying on overtime gain extra income stability, potentially useful for disability or life insurance coverage.
Borrowers can deduct up to $10,000/year of interest on loans for U.S.-assembled vehicles. Families can redirect savings from car financing into insurance or retirement contributions.
The SALT deduction cap is temporarily raised (to around $40,000 for many households). High-tax-state clients gain breathing room, freeing funds for estate planning or life insurance.
Taxpayers 65+ receive an additional $6,000 deduction. Retirees see reduced tax drag, helping preserve assets for long-term care planning.
The Child Tax Credit rises to $2,200 per child, indexed for inflation. Young families gain modest extra liquidity, useful for buying family life coverage or education savings.
Beginning 2026, itemized deductions for high-income filers are capped at 35%. High-income clients may see fewer tax benefits, requiring closer coordination with estate and insurance planning.
Able-bodied adults 19–64 must complete 80 hours/month of work, training, or volunteering to maintain Medicaid eligibility. Administrative or employment hurdles may cause loss of coverage.
Expansion enrollees must re-certify eligibility every six months. Missed paperwork deadlines could result in lapses in coverage.
Expansion-state enrollees with incomes 100–138% of FPL face new co-payments (up to $35/service). Out-of-pocket costs increase for lower-income households.
Applicants with home equity above $1 million are ineligible for Medicaid (no inflation indexing). Clients with property wealth but limited liquidity could lose access, increasing need for LTC insurance.
Medicaid retroactive eligibility cut from three months to one month. Clients may face uncovered bills after sudden illness.
Five-year waiting period for many lawfully present immigrants; restrictions on gender-affirming care; provider bans on some nonprofits. Certain groups may lose coverage, necessitating private insurance.
States face reduced flexibility in raising Medicaid funds, creating pressure to cut reimbursement rates. Provider networks may shrink, reducing access.
CBO estimates 10–12 million Americans could lose coverage over a decade due to these changes.
The OBBBA’s dual reality—lower taxes but weaker benefits—means advisors must tackle both sides in planning conversations.
The One Big Beautiful Bill Act is both an opportunity and a risk for clients. The tax relief provisions give individuals, families, and seniors new financial breathing room. At the same time, Medicaid and ACA benefit cuts will expose millions to greater healthcare costs and coverage instability.
For insurance professionals, the message is clear: help clients capture the upside of tax cuts while protecting against the downside of benefit reductions. By integrating both into planning, advisors can provide holistic, proactive guidance in a shifting policy landscape.
