What’s Paying the Bills for Obamacare?

The Affordable Care Act depends on taxes and penalties to pay for the subsidies that help low-income individuals and families buy insurance. But the administration has repeatedly been cavalier about money.

Companies with over 50 employees are required under the Act to pay for insurance for their full-time workers or pay a fine of at least $2,000 and as much as $3,000 per employee. Yet right off, and out of compliance with the ACA statute, the White House issued waivers to several hundred companies — seemingly anyone who asked. Then the employer mandate was postponed for a year to 2015, then postponed another year for companies with 50 to 99 employees, and just recently the threshold was changed from 50 to 100 employees for all businesses.

Companies that provide their employees with lavish health insurance plans — so-called Cadillac plans — are to be charged a 40% tax on the value of each policy beyond $10,200 for an individual and $27,500 for a family. Feeling pressure from businesses and unions, Congress members of both sides of the aisle want to kill the tax altogether. In a test vote the Senate voted 90-to-10 to do so. That would wipe out $91 billion over 10 years, not necessarily from the tax itself. The intent is to encourage companies to cut back on such policies, which are thought to encourage wasteful spending in the healthcare system, and to increase paychecks instead, bringing in higher income and payroll tax revenue.

Congress got part of its wish. As part of the deal reached on the spending bill for 2016, the tax is delayed for two years, even though it was not to have started until 2018. That pushes it to six years after the start of Obamacare.

Doing its part to trim revenue, Congress has shown an appetite to repeal the 2.3% tax on medical devices which is slated to pull in $$24 billion over 10 years. They succeeded in delaying this tax, too, by two years as part of the spending bill just signed by the President.

Insurance companies pay a "premium" tax in recognition of the added business Obamacare brings them. This has been delayed by one year as part of the spending bill.

These three provisions were to have brought in billions in revenue, but have been signed away.

That fewer people are signing up for insurance means higher revenue from penalties for not doing so, but there is a long list of exemptions available, especially in states which did not take up the ACA's offer to fund Medicaid expansion. The Kaiser foundation estimates that 22% of those otherwise leigible for a fine will not be charged.

Notwithstanding whether these taxes are good policy or not, aren't the waivers, postponements and cancellations are cutting off Obamacare's oxygen? Without them — there are 23 taxes altogether, including an expanded Medicare tax and a net investment income surcharge for high-income earners that remain in place — how will the government be able to fund the subsidies? Over 80% of current insurance buyers on the federal exchanges are subsidized. They will need $849 billion from 2016 through 2025 according to the Congressional Budget Office Added to that, the projected cost of increased Medicaid and the Children's Health Insurance Program during those years will be $847 billion.

The media is absent on the subject. We nowhere find an updated study of Affordable Care Act revenue streams. So the question hangs in the air: why has so little attention been paid to what all these changes means for the funding — the indeed the survival — of the Affordable Care Act?

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