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Shopping the online health insurance exchange, who’s really paying for the Affordable Care Act?

Nov 8th, 2013

online health insurance exchange

Credit: Images_of_Money via Flickr under Creative Commons

This week has been another one packed with news about the Affordable Care Act, most of it negative. From more people losing their old health insurance plans, to a sort of presidential apology about it, and journalists debunking ACA horror stories. No doubt it’s been an interesting week. The online health insurance exchange at HealthCare.gov is still not working at 100 percent capacity. News this week was that the site can now handle up to 17,000 visitors an hour, but now new problems are popping up.

It does seem though that for every story of cancelled health insurance plans, there is another about a family or individual being pleasantly surprised at how good of a health insurance deal they’re getting under the ACA. That good deal usually has a lot to do with the existence of federal health insurance subsidies being offered under the ACA. Those subsidies are available to those purchasing health insurance at the exchanges who meet certain income requirements.

So where is the money coming from for these subsidies? Who are the ones ultimately footing the bill?

 

The online health insurance exchange results in  new taxes, and more new taxes

Nearly half of the subsidies are being funded by projected savings in Medicare payments to hospitals and insurers. The subsidies are also being funded through several new federal taxes like those on medical device and drug companies. These extra taxes, especially the one on medical devices, became a sticking point for the GOP in the final days of October’s government shutdown as they tried to extract some concessions for opening back up the government.

Wealthy Americans are also footing some of the subsidies bill through an increase in the Medicare payroll tax for families making more than $250,000 a year. See a full list of the new taxes going into effect because of the ACA here.

The Medicaid expansion

While we’re on the subject of ACA funding, it’s also worth talking about the economics behind the expansion of Medicaid.

In case you missed it, the ACA calls for expanding the federal Medicaid program to include those with annual incomes up to 138 percent of the Federal Poverty Line, and for the first time single childless individuals.

Originally this expansion was a mandatory part of the ACA and had to be done in every state. Otherwise that state would lose all of its federal Medicaid money. However in the Supreme Court’s 2012 ruling on the Affordable Care Act they threw out this penalty and essential made the expansion optional.

The way that the expansion is structured is that the federal government will pay 100 percent of the extra money needed for the expansion for three years. After three years that number drops down to 90 percent until 2022. At the time of the ruling there was a fair bit of speculation that states wouldn’t just leave that money sitting on the table so to speak. But right now only 21 states have said they will expand Medicaid next year and another four are said to be considering the expansion.

Whether you agree with the expansion or not, it has been wildly popular during this first month of the Affordable Care Act. So far it appears that the majority of signups at state health insurance exchanges so far have been for Medicaid. In some areas experts estimate that Medicaid accounts for 9 out of every 10 signups.

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