Financial Impact Of Affordable Care Act
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What is the financial impact that the Cadillac tax, Employer Mandate, Medicare Expansion have on employers and community health centers?
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Solution Summary
Different provisions of Affordable Care Act are analyzed and their financial impact on employers and health centers is also highlighted.
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AFFORDABLE CARE ACT
Affordable Care Act (ACA) was signed by the President Barack Obama on March 23, 2010. It marked a significant change in the U.S. healthcare system. It was enacted to expand public and private insurance coverage and increase the quality and affordability of health insurance. ACA reduced the uninsured rate by increasing coverage and affordability. Tools for ACA were mandates, subsidies, and insurance exchanges. As per new law, insurance companies have been obligation to insure all applicants as per minimum standards. Additional reforms were also introduced as a part of ACA to reduce the cost of care and improve the healthcare by shifting focus of companies from quality to quantity with a purpose to streamline the delivery of healthcare.
Cadillac Tax
Cadillac tax is created with a specific purpose to raise revenues for ACA. As per Congressional Budget Office (CBO) the tax was estimated to start collecting over $137 billion in taxes in 2013 but due to resistance by pro-union groups, it got delayed until 2018. Hence Cadillac tax will begin in 2018 and would affect a handful of firms. Cadillac is a penalty imposed on very high cost health plans and calls for a 40% excise tax on employer-sponsored plans spending more than $10,200 per employee or $27,500 per family (Roy, 2014). This number includes contributions of premium from both employee and employer as well as employer contributions to Health Savings Account (HSAs). The purpose of Cadillac Tax is to reduce the incentive of employer to overspend on health care plans and to increase employee willingness to overuse the services offered by such high cost plans. Other than its intended use as a funding mechanism, the Cadillac tax is likely to have significant consequences which were not planned for on employees and health system.
There would be significant impact on employer behavior as the tax intends to cut down over inflated health plans.
As an effect of Cadillac, employers would try to reduce the cost of plans to avoid the tax without reducing ...
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