What pays for the ACA?
“To sum it up…”
- According to Obamacare Facts, it will cost the U.S. government approximately $1,207 trillion to fund Obamacare through the 2016-2025 fiscal years
- Many insurance companies left the Obamacare marketplace forcing the remaining companies to raise their monthly premiums
- Major insurance companies such as UnitedHealth, Aetna, and Humana struggle to turn a profit in the individual exchanges. In February of 2017, Humana announced it would exit the Obamacare marketplace, leaving a heavy burden on many smaller insurance companies who offer healthcare
Who or What Pays for the Affordable Care Act
Most of the money for the ACA comes from government spending cuts that occurred when the law was first adopted. The law also included several tax increases for higher-income taxpayers. The ACA imposed a tax of 0.9 percent on the wages of single Americans who earned more than $200,000 per year.
Married Americans who filed their income taxes jointly paid an additional tax of 0.9 percent on incomes above $250,000. The ACA also levied a 3.8 percent surtax on certain types of investment income on taxpayers who earned more than $200,000 per year.
The government spending cuts included a reduction in Medicare payment rates to doctors along with cuts in the Medicare Advantage Program. According to the Congressional Budget Office, the cuts would add an additional $700 billion to help pay for Obamacare. The ACA also forced American workers and employers to obtain qualified health care or face a monetary penalty.
The CBO estimates that the funds raised from the penalties imposed would generate an estimated $43 billion from taxpayers and $167 billion from employers by 2025.
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What the Average American Pays for Obamacare in 2017
According to the Centers for Medicare and Medicaid Services, 10.4 million Americans obtained health insurance through the Obamacare Marketplace as of June 2016. Estimates show that by the end of 2017, premiums could range anywhere from $364 to $872 based on a person’s age and income.
If you earn more than 400 percent of the poverty level in the U.S., you could see your premiums increase by 100 to 400 percent depending on which state you reside.
For example, residents of Arizona will see an increase of 116 percent or more on the benchmark silver plan, which is the second-lowest cost plan under Obamacare.
Obamacare Rates Rising
With Aetna, Humana and UnitedHealth Group leaving the Obamacare marketplace, the insurers who are left will likely raise premium costs for marketplace health insurance policies in 2018.
According to Reuters, Obamacare premium costs increased by 25 percent in 2016. With the failure of President Trump’s proposed repeal and replace health care plan earlier in the year, Obamacare will remain in effect through 2018.
However, many analysts speculate the insurance companies who remain in the marketplace will propose sweeping changes. Many in the health insurance industry feel the federal government will follow suit by trying to defund cost-sharing subsidies and other payments by the government to help low-income individuals and families.
Comparison Shopping is More Important Than Ever
With Obamacare premiums higher than ever, consumers must place an emphasis on comparison shopping, including private policies offered outside of the Obamacare marketplace. Keep in mind that health insurance companies can change their networks, coverage options and premium options each year, which could be to your benefit.
If you choose to auto enroll in your health insurance policy each year, you could lose out on other insurance companies offering premium reductions, or you could lose your primary care physician if your current insurance company changes networks.
Before you start comparison shopping, remember that the cheapest plan does not always equal the best plan.
Not What Insurers and Regulators Expected
One of the crippling problems with the healthcare exchanges, one that insurers and regulators did not see coming, was people who first enrolled in the program were sicker than anticipated.
Not many healthy Americans signed up for health insurance through the Marketplace, and insurance companies were forced to raise premium costs to cover the higher than anticipated expenses incurred by sicker participants.
In addition, general healthcare costs started to rise about the time people with preexisting conditions and illnesses enrolled in Obamacare.
The Trump Administration and Obamacare
Many analysts speculate that if President Trump and his administration do not continue paying subsidies to companies who participate in the healthcare exchange, Obamacare could implode, leaving millions of Americans without health insurance, according to the New York Times.
If companies do not receive payments for subsidies, it could drive them out of the marketplace leaving few options for many low-income Americans. Although the administration said it will continue to pay the subsidies for now, most Republican lawmakers want to eliminate the cost-sharing subsidies.
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