Impact of One Big Beautiful Bill on the Insurance Industry

Impact of One Big Beautiful Bill on The Insurance Industry

July 14, 2025

The Future of Tax Policy: What Insurance Carriers Need to Know 

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill (OBBB) into law, marking the most sweeping tax and entitlement reform since the 1980s. The bill, passed through budget reconciliation, cements many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introduces major changes to healthcare, energy, and federal spending. 

Here’s what the new law means for insurance carriers across sectors: 

What Was Preserved from TCJA 

• 21% corporate tax rate remains in place 

• 20% pass-through deduction (Section 199A - Qualified Business Income Deduction) made permanent 

• Estate tax exemption increased to $30M (joint) and indexed 

• Bonus depreciation restored to 100% and made permanent 

• Reserve discounting rules under TCJA remain unchanged, preserving stability and predictability for insurers 

• Under TCJA, insurers use standardized discount rates and longer payment patterns to calculate the present value of future claim liabilities. While this reduces deductible reserves (raising taxable income), it provides predictability and consistency in tax planning. If this TCJA provision would have expired, older rules would have likely returned—potentially increasing deductions but also introducing greater variability and complexity 1.  
  
  

New provisions under OBBB  

• Deductions for tip income, overtime, and auto loans 

• $1.15T in federal health spending cuts 

• IRS Direct File eliminated 

Health Spending Cuts Explained, according to the Congressional Budget Office (CBO): 

• ~$930B from Medicaid (via work requirements and financing restrictions) 

• ~$170B from Affordable Care Act (ACA) subsidies (via rollback of enhanced credits and stricter eligibility) 

• Based on current law as of 2025, instead of a hypothetical TCJA expiration 2 

• As the Wall Street Journal editorial board explains in “The Great Budget Baseline Con”, using the current law baseline—where all TCJA provisions expire—can inflate the appearance of spending cuts. The editorial calls this a “budget gimmick” that distorts the real policy impact and public understanding 3. 

Impact on Health Insurers: 

• Higher churn: For ACA-related plans, the bill eliminates automatic reenrollment and income-based special enrollment periods, and shortens the open enrollment window—leading to more frequent coverage lapses 4. 

• Increased compliance costs: New income verification rules, the end of provisional eligibility, and uncapped tax credit repayment introduce more administrative burden and customer service complexity 4. 

Impact on Life Insurers: 

• More life settlement activity: With the estate tax exemption rising to $30M (joint), high-net-worth individuals may no longer need life insurance for estate liquidity. Combined with rising healthcare costs, more seniors may choose to sell their policies for cash through life settlements—creating turnover and repricing challenges for insurers 5. 

• There may also be a shift in demand toward income protection and long-term care hybrids. 

Impact on P&C Carriers: 

• While the bill doesn’t directly target P&C carriers, its broader economic effects matter.  Carriers must prepare for higher reinsurance costs, regional underwriting shifts, and greater volatility in catastrophe-prone areas.  

If TCJA Provisions Would Have Expired 

• Top individual rate returns to 39.6% 

• Standard deduction halves 

• Personal exemptions reinstated 

• Section 199A - Qualified Business Income deduction expires 

• Estate tax exemption drops to ~$6.5M 

• Bonus depreciation phases out 

Certified Financial Planners (CFP) Board Survey Insight 6: 

A March 2025 survey by the CFP Board found that 88% of CFP professionals believe TCJA expiration would have posed significant risks to clients’ financial goals. 

• 57% cited retirement income 

• 53% cited legacy planning 

• $5.6M+ in potential estate tax liability for High Net Worth couples 

(Source: CFP Board via Investment News, March 2025) 

Projected Impact on Insurance Carriers: 

• There would have been a surge in demand for estate-focused life insurance 

• There would have been reduced affordability in health markets 

• There would have been expanded casualty loss deductions increasing P&C claims  

Strategic Takeaways for Carriers 

Model multiple tax scenarios: 

• Analyze the impact of different corporate and individual tax rates on product pricing and profitability. 

• Assess the effects of potential future changes to the estate tax exemption on life insurance demand. 

• Evaluate the implications of various healthcare policy changes on health insurance enrollment and coverage gaps. 

• Consider the impact of changes to pass-through deductions on small business insurance products. 

• Monitor state legislative developments associated with the passage of this new federal tax law to stay ahead of potential regulatory changes and model their potential impact on the insurance market. 

Engage brokers on ACA and Medicaid changes: 

• Analyze potential impacts on coverage gaps and enrollment rates. 

• Provide training on navigating new income verification rules and handling increased administrative burdens.  

• Explore opportunities for brokers to offer solutions that address the anticipated rise in customer churn and compliance costs.  

• Consider developing targeted marketing campaigns to educate clients on the implications of policy changes and promote relevant insurance products. 

Reassess tax reserves and deferred tax assets: 

• Review and update tax reserve calculations to reflect the new corporate tax rate and other relevant provisions. 

• Evaluate the impact of the permanent bonus depreciation on deferred tax assets and liabilities. 

• Model various tax scenarios to anticipate potential future changes and their effects on financial statements. 

• Collaborate with tax advisors to ensure compliance with new income verification rules and other administrative requirements. 

• Consider the implications of health spending cuts on tax reserves related to health insurance products. 

 Final Thought 

The One Big Beautiful Bill is now law—and with it, a new era of tax and entitlement policy begins. Insurance carriers that act now to adapt their pricing, product strategy, and compliance posture will be best positioned to thrive in this transformed landscape.