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I collectively refer to the two subsidies as “exchange subsidies.”īecause exchange subsidies are available only to persons not eligible for affordable employer coverage, the ACA requires that large employers either provide affordable coverage or pay a penalty, computed according to how many full-time employees they have. Most people getting insurance through the exchanges receive financial assistance in up to two ways: reduced insurance premiums (administered through an income-tax credit system) or reduced out-of-pocket health costs, such as co-payments and deductibles. Many, but not all, individuals shop on the exchanges by visiting a website that gathers customer information and quotes prices. To help the uninsured get health-insurance coverage, the ACA created what it calls “health-insurance exchanges,” the collection of policies offered to each state’s residents by private insurance companies, subject to state and federal regulations regarding standardization of policy benefits, provisions, and pricing. Quite distinct from the ACA’s impact on insurance availability and on the quality of health care, these effects should be better understood. Doing so, I found that, overall, the ACA will reduce wages by $1,000 per year-or about 4 percent of wages for workers from low-income families and nearly 2 percent of wages for workers from higher-income families.
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One way to understand this is through Adam Smith’s theory of equalizing differences, through which we can trace and quantify the effects of the employer penalty and the exchange subsidies on wages and productivity. And because the law privileges certain kinds of businesses over others, it will also reduce productivity. The employer penalties and the individual subsidies will exert a downward effect on average wages and on wage patterns, across industry sectors and income levels. economy, through its penalties for employers that don’t provide health insurance for their workers as well as through its subsidies for individuals to purchase health insurance (the latter of which is the subject of the King case). But the ACA also has significant potential to affect the allocation of labor-and thus wages-throughout the U.S. Burwell, which could determine the future of Obamacare, much of the economic discussion surrounding the Affordable Care Act (ACA) focuses, understandably, on the law’s effects on insurance premiums and on the delivery of health care. As a Supreme Court decision looms next month in King v.