The Council of the District of Columbia (Council) unanimously approved
a bill (Bill 20-775
) on May 6, establishing a sustainable local funding source to support operations of DC Health Link
, the District’s new health insurance marketplace established under the Affordable Care Act. District of Columbia Mayor Vincent C. Gray (D) signed the bill into law on May 22.
Although the operations of DC Health Link have been funded with federal implementation grants thus far, those funds are set to expire later this year. Both federal and District of Columbia law require the new marketplace to become financially self-sufficient by January 1, 2015. 
The Council approved a broad tax on all health-related insurance products sold in the District of Columbia. Essentially, DC Health Link will begin funding its operating costs through a tax on health insurance premiums. The “taxable” health plans would include long-term care, disability, vision and dental, among others. According to a senior adviser for the Council, the DC Health Benefit Exchange Authority (HBX) has recommended an approximate 1% tax to support its budget, although nothing has been made final.
Unlike states operating a state-based exchange, the District of Columbia does not have a sufficient number of customers buying insurance on its online marketplace to adopt the funding plan being employed by most states and the federal government—a tax of a few percentage points on premiums. To cover its $28 million annual budget, the District of Columbia’s exchange would have to levy an estimated 17% tax on every health plan sold on the online marketplace.
The tax is effective for 90 days on an emergency basis. The council may vote to extend the assessment for another 225 days. However, the measure must undergo congressional review before it can be made permanent.
Although some fear the additional cost will be passed on to consumers in the form or higher premiums, the true impact of the tax has yet to be determined. The HBX will ultimately be responsible for notifying companies about the tax.
 According to a March 2014 report by the Congressional Research Service, the Affordable Care Act (ACA) provided an indefinite appropriation for U.S. Department of Health and Human Services (HHS) grants to states to support the planning and establishment of exchanges. For each fiscal year, the HHS Secretary will determine the total amount that will be made available to each state for exchange grants. No grant may be awarded after January 1, 2015. Under the ACA, each exchange is expected to be self-sustaining beginning January 1, 2015. The ACA authorizes exchanges to generate funding to sustain their operations. In response, some states have allocated general funds to cover operating costs. Others are imposing an insurer tax on each individual plan sold on the exchange. HHS has indicated that to raise funds for each of the federally facilitated exchanges (FFEs), beginning in 2014, it will assess a monthly fee on each health insurance issuer that offers plans through a FFE.