Budget Cuts Include De-Funding of Insurance Exchanges

The budget compromise which was finally reached on Friday evening will impact two parts of the 2009 health care reform law, parts which are hotly contested by businesses. One of the portions of the law was cut outright, and the other’s funding was severely lowered.

The portion of the ACA which will be eliminated altogether is the provision which would have allowed lower-income employees to choose to opt out of the health care plans offered by their jobs, whereupon they could seek health insurance from other, possibly more affordable, sources in the insurance exchanges which are to be created in 2014.

Businesses oppose this part of the ACA because it would require them to help subsidize the coverage those employees who choose to opt out decide on through the exchange. The bone of contention was that the businesses would be still paying for a benefit that the worker had chosen not to accept through the employer, increasing the business’s costs. At the same time, the provision would lead to the decreasing of the size of the insurance pool for the corporate group policy, which could ultimately increase premiums for everyone in the corporate pool.

While eliminating this provision from the budget would eventually save around $4 billion over the course of ten years, those savings wouldn’t begin until 2014, when the ACA comes into full effect. Obviously, this concession was made to the Republicans who have blocked the passage of the Democratic budget, allowing them to compromise some things while allowing the budget to pass.

The new budget compromise will also retract $2.2 billion in federal funding which had previously been earmarked for the development of non-profit health-care co-ops, which would have eventually competed with private insurance companies, which are for-profit.

These budget cuts constitute half of the co-op budget for 2011, but its budget would go back up to the $4.4 billion mark again in 2012, unless more actions are taken by congress to limit future re-funding.

The alterations to the ACA taking place now are the second time that Congress has made any changes to this law since it was ratified and signed into law a little over a year ago.

More details regarding the budget changes are still emerging, but the total of all cuts will be around $39 billion altogether. The compromise was reached right before midnight local time on Friday, April 8, and ensured that a complete government shut-down would not happen. This budget will fund the federal government for another six months, comprising the second half of the 2011 fiscal year. It is likely that more health care cuts will be included in that $39 billion total.

Health insurers have responded to the ACA in mixed ways, ranging from positive to the mandate for everyone to carry insurance to negative for the elimination of pre-existing condition disqualifications for coverage and other areas.