The Affordable Care Act seeks to expand access to health insurance for more people, reduce costs, and enhance medical quality. It implements a number of reforms funded through taxes and new revenue.
On the exchanges, individuals can obtain premium tax credits and low-income families can access subsidies. Furthermore, employers with 50 full-time employees or more must provide health insurance or face a penalty.
Taxes
The Affordable Care Act is funded through a combination of cuts to government spending and new revenues, including taxes. To generate revenue, the ACA imposes tax penalties on those without health insurance (estimated at $43 billion by 2025) as well as employers who do not offer coverage to their workers ($167 billion), among other sources.
The Affordable Care Act (ACA) also limits how much money can be deducted from taxable income for medical expenses. Previously, you could deduct up to 7.5 percent of qualified medical expenses from your adjusted gross income.
Another major source of funding comes from high-income taxpayers, who pay a tax on Medicare premiums and an additional 3.8% surtax on various forms of investment income if their modified adjusted gross income exceeds $200,000 if single or $250,000 if married filing jointly. These taxes will generate $346 billion in revenues by 2025 according to the Congressional Budget Office.
Subsidies
The Affordable Care Act offers subsidies to low-income individuals and families to cover the cost of health insurance. These include premium tax credits and cost sharing reduction subsidies.
The premium tax credit and CSR subsidies are intended to reduce out-of-pocket expenses associated with ACA Silver plans purchased on the federal Marketplace. They are legally linked, meaning that individuals receiving income-based subsidies for their health plan must meet certain affordability criteria.
An analysis of benchmark health plan premiums by the Urban Institute has found that people with lower incomes pay higher benchmark premiums than those with higher earnings. The study examined average benchmark health plan premiums across 34 states using the ACA exchange as a proxy measure.
Subsidies under the Affordable Care Act (ACA) do not extend to catastrophic coverage plans, short-term health insurance plans, standalone prescription drug plans or supplements for dental, vision or critical illness care. While these alternatives may offer cheaper plans they do not meet ACA coverage criteria.
Mandate
Prior to 2014, the Affordable Care Act (ACA) required most Americans to have health insurance or pay a penalty. In 2014, this amount increased to 1% of an individual’s applicable income and then gradually decreased after that.
Supporters of the mandate argued that requiring people to have health insurance increased enrollment and helped control costs. Conversely, detractors of the mandate maintained it was unfair for consumers to be forced into purchasing coverage.
Individuals who purchase health coverage through the Affordable Care Act’s Marketplace may qualify for tax credits to cover some of their premium costs, depending on income and family size. These credits reflect a portion of the cost of a second-lowest-price silver plan minus an adjustment that increases with income.
Certain groups are exempt from the Affordable Care Act’s mandate, such as members of certain religious organizations and federally recognized Indian tribes. Unfortunately, these exemptions may cause confusion among consumers regarding their status and cause them to react more negatively towards any penalties imposed under this act.
State Funding
State budgets are essential tools for allocating resources, from healthcare to transportation and public safety, for local communities. These budgets have the power to transform lives, reduce long-standing racial and economic disparities, and guarantee all citizens have access to necessary programs.
Under the Affordable Care Act, states have several options to fund their own housing and community development initiatives. These may include:
Tax credits could also be created to encourage private investment in affordable housing (e.g., by offering a nonrefundable state low-income housing tax credit for owners of qualified rental developments that receive federal 4 percent LIHTC);
Tax-exempt private activity bonds can be issued to fund a variety of public benefit projects;
Funds used for affordable residential property construction or renovation may also be repaid with income generated from those activities financed. They have become popular to finance home mortgages for first-time homebuyers, technical assistance for housing and community development initiatives, or both.
