How Much Will Obamacare Cost Me?
The 5 Factors That Predict How Much Obamacare Will Cost You
How much Obamacare costs you depends on five factors: your age, income, family size, location, and the type of plan you choose. The Affordable Care Act provides subsidies for middle-income individuals, families, and small businesses. It also expands free Medicaid for low-income households. It taxes higher-income families, businesses that don't provide health benefits, and people who don't sign up for insurance unless they are exempt.
- Bronze - Has the lowest premiums, but only pays 60% of your health care costs. Pick this plan if you don't expect a lot of medical bills.
- Silver - Pays 70% of your covered medical costs, but the premiums are higher than the Bronze plan.
- Gold - Pays 80% of your costs, with higher premiums than the Silver plan.
- Platinum - Pays 90% of your costs, but has the highest monthly premiums. It will make sense to pick this plan if you have a chronic health condition.
The plans in each category allow you to compare monthly premiums, deductibles, copays, and annual out-of-pocket maximums. That's where it gets tricky. Even within the same category, the plan with the lowest premium may have the highest deductible. You might end up paying more for health costs if you get sick than you would with a plan with a higher premium but lower deductible. So you've got to estimate how much actual health care costs will be, then determine the insurance plan that helps you cut the total cost the most.
Second, your costs depend on your age. Health insurance companies are allowed to charge higher premiums for older people. But they can't charge more than three times the premium for younger people.
Third, is where you live. The cost of living, including healthcare, is higher in some cities than in others.
Fourth and fifth are your income and family size. If you make 400% or less of the federal poverty level, you will receive a subsidy. Here's how the subsidy works. Say you are a single person and you earn $47,520 (roughly 400% of the poverty level). Obamacare promises you won't pay more than 9.5% of your income a year, or $4,514, for the second-lowest Silver plan. Your subsidy is the cost of the plan, minus $4,514. So if the plan is $5,000, your subsidy is $485.
What if you want a more expensive plan? Obamacare bases all subsidies on the cost of the second-lowest Silver plan. So your subsidy is still $485 a year, which you can apply to any plan. You pay the difference.
Fortunately, healthcare.gov figures all this out for you. It lets you choose whether you want your subsidy each month, or the end of the year as a tax break. It even calculates the premium of the plan you choose based on your subsidy.
How Much Will Obamacare Cost Me If:
I Make Less Than $16,753 (or $34,638 for a Family of Four) - If your income is 138% or less of the federal poverty level, you qualify for expanded Medicaid. That means Obamacare costs you zero. But many states state didn't expand Medicaid. If you fall within this income range, and you can't get Medicaid from your state, here's what happens. First, you won't have to pay the tax for not having insurance. Second, if your income is so low that you don't pay taxes, you're exempt from the tax. Third, you can still apply for insurance on the exchange. You won't pay more than 2% of your income for a Silver Plan.
I Make Less Than $30,350 ($62,750 for a Family of Four) - If your income is under 250% of the poverty level, you pay no more than 8.05% of income for the Silver Plan. In other words, your subsidy is the cost of the second lowest Silver Plan minus 8.05% of your income. Use Healthcare.gov's subsidy calculator to find out how much.
I Make Less Than $48,560 ($100,400 for a Family of Four) - If your income is under 400% of the poverty level, you pay no more than 9.5% of income for the Silver Plan. In other words, your subsidy is the cost of the second lowest Silver Plan minus 9.5% of your income.
I'm Not Planning to or Didn't, Get Insurance - If you are without insurance for three months or more, you'll owe an extra income tax of 2.5% of your adjusted gross income when you pay your 2018 income taxes. It can't be less than a minimum flat tax of $695 per adult plus $347.50 per child, up to $2,085 per household. It can't be more than the cost of the Bronze plan. But the Trump administration directed the Internal Revenue Service to ignore this requirement and not assess the tax. The Tax Cut and Jobs Act repealed this tax effective 2019.
Even though you don't have to pay the tax, it's still a good idea to at least have catastrophic insurance. For example, the average emergency room visit is $1,265. If you break your foot, treatment could cost $16,000. Cancer treatment can cost $30,000, with $7,000 going for chemotherapy alone.
I Have Insurance - Your health insurance costs stay the same. But, you might get a better plan for lower costs from Obamacare. Keep in mind, too, that health insurance costs are rising regardless of Obamacare. Businesses have been putting more of the cost onto employees for years, just to keep their profit margins. Health care costs have been rising, on average, 3%-4% a year, so insurance companies are raising their fees to cover their profit margins. So if your health insurance costs have been rising, they will continue to do so for these reasons.
A vision care or discount dental plan, discount medical plan, or worker's comp is not insurance.
Catastrophic insurance is considered qualified insurance. But you may want to compare it to a full-coverage plan on the exchange to see if you can lower your overall health care costs. Remember that if you do switch, you won't be able to go back unless you are under 30 or have some other circumstances.
The ACA improves Medicare costs. It reduced Part D costs if you fall into the "doughnut hole" gap in prescription drug coverage. By 2020, the doughnut hole will disappear.
Similarly, if you have insurance coverage under a retiree plan, CHIP, TRICARE, and other veterans’ health care programs, or the Peace Corps Volunteer plan, your costs don't change.
If you have COBRA, you can keep it. But you will probably get a better deal on the exchanges.
I Make More than $200,000 ($250,000 for Married Couples) - Those making more than $200,000 a year ($250,000 for married couples filing jointly, $125,000 for married couples filing separately) pay these additional investment taxes:
- An additional 0.9% Medicare hospital tax on the income above the threshold.
- An extra 3.8% on the lesser of (a) investment income like dividends and capital gains or (b) adjusted gross income that is above the threshold.
- This tax applies if you sell your home and you make more than $250,000 (singles) or $500,000 (married couples) in capital gains. If you're selling investment property, you don't receive this exclusion. It all counts as capital gains.
I Deduct Medical Expenses - If you deduct your medical expenses that aren't covered by your health insurance, Obamacare initially cost you more. Until 2017, you could only deduct costs that exceeded 10% of your income. The Tax Cut and Jobs Act restored that level to 7.5% of income for tax years 2017 and 2018. In 2019, the level returns to 10%.
I Use a Flexible Health Savings Account - You can only save $2,500 pre-tax. Over-the-counter drugs are no longer eligible FSA medical expenses. If you don't use FSA funds for medical expenses, the tax penalty increase to 20%.
I'm a Small Business Owner - If you have 25 employees or less, you receive a tax credit of 35% of the insurance you provide.
Those with 50 employees or less can use the exchange to find lower-cost insurance.
Those with 50 or more employees must provide affordable health insurance that provides minimum value or pay a tax of $2,000 per employee, for all but the first 30 employees. If a worker finds a lower-cost plan on the exchange, you may be taxed. That started in January 2015.
Businesses offering health insurance to early retirees ages 55-64 can get federal financial assistance. Here are more resources to help small businesses comply with Obamacare.
I'm a Member of Congress or Staff - You receive $4,900, or $10,000 for families, to pay for Obamacare.
Obamacare Cost Calculator
You can also estimate Obamacare's cost with this Obamacare Cost Calculator from the Kaiser Foundation. For more, see my book "The Ultimate Obamacare Handbook."
- Cost of Obamacare depends on your age, income, family size, where you live, and choice of plan.
- Insurance in some states may be more expensive than in others.
- A family plan is more expensive than that covering an individual or a couple.
- The benchmark plan is the Silver plan offered in your area. The government determines your subsidy against this plan.
- Generally, younger and healthier people pay more under Obamacare. Older, less-healthy people pay less.
Policygenius. “What to Know About the Second-Lowest Cost Silver Plan (SLCSP),” Accessed Dec. 17, 2019.
HealthCare.gov. “Medicaid & CHIP Coverage,” Accessed Dec. 17, 2019.
HealthCare.gov. “Income Levels & Savings,” Accessed Dec. 17, 2019.
HealthCare.gov. “How to Save on Your Monthly Insurance Bill with a Premium Tax Credit,” Accessed Dec. 17, 2019.
HealthCare.gov. “No Health Insurance? See If You’ll Owe a Fee,” Accessed Dec. 17, 2019.
CostHelper Health. “Emergency Room Visit Cost,” Accessed Dec. 17, 2019.
HealthCare.gov. “The ‘Metal’ Categories: Bronze, Silver, Gold & Platinum,” Accessed Dec. 17, 2019.
HealthCare.gov. “No Health Insurance? See If You’ll Owe a Fee,” Accessed Dec. 17, 2019.
Inman. “Demystifying the ‘Obamacare’ Real Estate Tax,” Accessed Dec. 17, 2019.
IRS. “Plan Now to Use Health Flexible Spending Arrangements in 2016; Contribute Up to $2,550; $550 Carryover Option Available to Many,” Accessed Dec. 17, 2019.
HealthCare.gov. “The Small Business Health Care Tax Credit,” Accessed Dec. 17, 2019.
HealthCare.gov. “How to Offer SHOP Health Insurance to Your Employees,” Accessed Dec. 17, 2019.
HealthCare.gov. “Affordable Coverage,” Accessed Dec. 17, 2019.
HealthCare.gov. “Minimum Value,” Accessed Dec. 17, 2019.
IRS. “Employer Shared Responsibility Provisions,” Accessed Dec. 17, 2019.
CMS.gov. Centers for Medicare & Medicaid Services. “Successful Support of Early Retiree Health Coverage, Early Retiree Reinsurance Program,” Accessed Dec. 17, 2019.
CMS.gov. Centers for Medicare & Medicaid Services. “Affordable Care Act Requires Insurance Companies to Justify High Rate Hikes, Shining a Light on Health Insurance Rate Increases,” Accessed Dec. 17, 2019.
WSJ Opinion. “Members Only. How the White House is Weaseling Congress out of Obamacare,” Accessed Dec. 17, 2019.
KFF. “Health Insurance Marketplace Calculator,” Accessed Dec. 17, 2019.
The Christian Science Monitor. “Obamacare and You: How Much Does Obamacare Cost?” Accessed Dec. 17, 2019.