These days one of the most controversial subjects that has everyone talking, is the Affordable Care Act (Obama Care). There has been so much confusion surrounding it, mostly from a lack of information being given out regarding it. Which is why one of the most commonly asked questions is how we are going to be able to afford Obama Care? The majority of the public haven't realized up until now that the Affordable Care Act requires taxes to be collected in order to fund certain provisions of the health reform. The 4 required Affordable Care Act taxes are added directly into your monthly premium, so most people won't even realize the reason their insurance costs will be jumping more than normal in 2014 is due to the taxes.
Take a look at the breakdown of these taxes:
The Health Insurer Tax: this tax will help fund premium subsidies for certain individuals and families purchasing coverage through health insurance exchanges. It will be effective January 1, 2014 and will be 2.3% of your insurance premium.
The Transitional Reinsurance Tax: the purpose of this tax is to help stabilize premiums and the cost of high-risk individuals entering the individual market in each state's health insurance exchange. It will become effective January 1, 2014 and will be 1.3% of your insurance premium.
The Exchange Tax: will help cover ongoing operating costs of the California Exchange. It will become effective upon renewal in 2014 and will be .2% of your premium.
The Risk Adjustment Tax: is meant to reduce or eliminate premium differences between plans based on expectations of member risk. It will become effective upon renewal in 2014 and will be .02% of your premium.
These taxes total 3.82%, which to some may not sound like a lot. However, when the average individual pays $300 per month for basic coverage, these taxes add an additional $11.46 per month. The average family pays $900 per month which adds $34.38 to their monthly premium. Now, in 2012 there were 38 million people in California. If we say 10 million of those people are individuals paying $11.46 per month in ACA Taxes, that's $114.6 million per month collected on just a fraction of California's population. I believe we have just answered how Obama Care is getting paid for.