Repost from August 9, 2013
Over the years there has been a massive discussion about what Obamacare (Affordable Care Act) will cost, and how individuals will pay that cost. Yet, to date there have been no real answers that the Average American can pull up and understand at a glance. In fact there is no system available to even easily get an estimate of the cost at this time. But after being asked again recently, I decided to cull some data to get an idea of what might be the result.
First, healthcare insurance is now a requirement of all citizens (enforced as of 2014). No matter if you are in poverty or a billionaire, you must have healthcare insurance or suffer penalties – 2.5% of income (maximum, based on income) assessed on your income taxes. Thus, if you are making say $25,000 a year and choose not to get healthcare you will have a fine of $95 added to your taxes. Of course the average refund for a person in New York State (2011) was $3070.70. So the above example would still result in a refund to the taxpayer.
This is the first problem with Obamacare. Some people, generally the young that are just starting their careers or those that are poor, will not suffer negatively from the penalty (if it even applies). So the impetus to get healthcare insurance before it is needed is subdued, increasing the burden on those with health insurance and likely a catalyst to increase cost in the future.
Separate of the penalty, what happens to those that do get health insurance. We will look at 2 groups, a single person making $31,796 and a family of 3 making the same (1 kid). The dollar amounts and family size are based on the Census results for NY State – of which the results for the NY-22 are lower.
Before we look at the estimates, the following is the annual cost of healthcare in America: Single – $5,615 and for a Family – $15,745. The deductible is respectively $1,120 and $2.075. For those covered by an employer, they pay respectively $1,225 and $4,316.
The approximate out of pocket cost, based on 2010 figures, is $2787. That is the cost of co-pays and other expenses separate of the health insurance premium. Estimates are for that figure to go to $3,301 in 2014.
So given the above, assume that either your employers have either removed their healthcare coverage (because it is cheaper not to provide it) or that it is not an option (you are either part of the trend of part-time workers or otherwise unable to get other coverage). We will also assume that the age is 50, again based on Census data.
A non-smoker under the above conditions, NOT including out-of-pocket costs, is 277% above poverty and so could have a premium of $2,806 for a silver plan, $1,883 for a bronze plan. Of this the Government might give a tax credit of $2,584*.
A non-smoking family of 3 with 1 child under 20, under the above conditions, NOT including out-of-pocket costs, is 163% above poverty and so could have a premium of $1,459 for a silver plan, $0 for a bronze plan. Of this the Government might give a tax credit of $11,238*.
The key points that should be addressed:
So what happens in the above estimate figures, if the plan holder gets a raise (assuming that poverty does not change)? If we ONLY change the income by 3% the figures become
A non-smoker under the above conditions ($32749 annual), NOT including out-of-pocket costs, is 285% above poverty and so could have a premium of $2,969 for a silver plan, $2,046 for a bronze plan. Of this the Government might give a tax credit of $2,421*.
A non-smoking family of 3 with 1 child under 20, under the above conditions ($32749 annual), NOT including out-of-pocket costs, is 168% above poverty and so could have a premium of $1,576 for a silver plan, $0 for a bronze plan. Of this the Government might give a tax credit of $11,121*.
The increase is 5.8% for a Single person, 8% for a Family. That far outpaces the actual income gain.
*Another critical point about the healthcare premium. The Government provides a tax credit on the income taxes for what has been paid. In other words, the plan holder will pay (in Example 1) Single – $5309, Family – $12,697 up front. The tax credit will be applied on their taxes that following year, which may result in a refund of all or just part of what is paid. The estimated $3,301 in out-of-pocket costs is NOT covered by the tax credit.
Therefore, under this non-State specific summary, a single person making just $31,796 could pay a total of $8610, a family of 3 could pay $15,998, of which they may or may not get all, part, or none of the tax credit as actual in pocket cash depending on the poverty level at the time of the tax return and their income tax return filed.
Complicated? More than a bit. Especially as no standard for what is considered a basic minimum has been reached.
Worse is if you just change the age. If the same data from Example 1 is used, but the age is 25 instead of 50, the tax credit drops to just $229 out of a premium of $3030 for a Single. Instead of the proposed 51% discount, the younger plan holder will only get a 24.5% discount. Not much incentive for the youth to join up, with whom the cost savings of the Obamacare estimates are dependent on. If younger Americans opt out, paying $95 on their tax returns and keeping the cash in their pocket thru the year, costs for Obamacare will rocket higher.
But no matter the complications, as of January 1, 2014, all citizens must comply with the demands of the Government or be penalized. In the meantime, businesses have a 1 year reprieve as they try to sort through the actual costs and determine the best way to go. As the growing trend of part-time workers has indicated, many have realized that it is cheaper and far more expedient to drop healthcare than adapt to the Government loopholes. The public does not get the same options though.
I hope this has helped.