How Much Will Obamacare Cost Me?

The 5 Factors That Predict How Much Obamacare Will Cost You

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Obamacare costs depends on your personal situation. Photo: Image Source/Getty Images

How much Obamacare costs you depends on five factors: your age, income, family size, location and the type of plan you choose.  That's because the Patient Protection and Affordable Care Act provides subsidies for middle-income 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).

First, your cost depends on the plan category you choose. All health insurance plans fall into one of four categories. They all offer the same ten essential health benefits. The four categories are:

  1. Bronze - Has the lowest premiums, but only pays 60% of your healthcare costs. Pick this plan if you don't expect a lot of medical bills.
  2. Silver - Pays 70% of your covered medical costs, but the premiums are higher than the Bronze plan. 
  3. Gold - Pays 80% of your costs, with higher premiums than the Silver plan.
  4. 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.

Therefore, you might end up paying more for health costs if you get sick than a plan with a higher premium but lower deductible. Therefore, 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. However, companies can't charge more than three times the premium for younger people. 

Third is where you live. That's because the cost of living, including health care, 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 (FPL), you will receive a subsidy. Here's basically how the subsidy works. Say you are a single person, and you earn $47,080 (that's 400% of the poverty level). Obamacare promises you won't pay more than $4,472 a year, or 9.5% of your income, for the second lowest Silver plan. Your subsidy is the cost of the plan, minus $4,472. So, if the plan is $5,000, your subsidy is $528.

What if you want a more expensive plan? Obamacare bases all subsidies on the cost of the second lowest Silver plan. Therefore, your subsidy is still $528 a year, which you can apply to any plan. You pay the difference. (Source: Kaiser Family Foundation, Health Insurance Subsidies)

Fortunately, the 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 $16,394 (or $33,534 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. However, many states state didn't sign up. Find out here. 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, and it won't cost more than 2% of your income for the Silver Plan. Find out more about Medicaid.

I Make Less Than $29,425 ($60,625 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. Find out exactly how much.

I Make Less Than $47,080 ($97,000 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. Find out more.

I'm Not Planning to, or Didn't, Get Insurance - If you didn't get insurance by February 15, 2015, you'll owe an extra income tax of 2% of your adjusted gross income (AGI) when you pay your 2015 income taxes. It can't be less than a minimum flat tax of $325 per adult plus $162.50 per child, up to $975 per household. It can't be more than the cost of the Bronze plan. 

If you didn't get insurance by January 30, 2016, and you go without for three months, you will owe 2.5% of your AGI on your 2016 return. The minimum flat tax rises to $695 per adult plus $347.50 per child, up to a maximum of $2,085 per household. You read that right. The tax increased a LOT this year. For more, see Obamacare Taxes and Paying the Fee.

Even though it's higher, paying the tax probably still costs less than getting insurance. But your costs will increase dramatically if you run out of luck. For example, the average emergency room visit is $1,265. If you break your foot, it could cost $16,000 for treatment. Cancer treatment can cost $30,000 ($7,000 for chemotherapy alone). For more medical expenses, see HealthCareBlueBook.com.

I Have Insurance - Your health insurance costs stay the same. However, 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. Healthcare costs have been rising, on average, 3-4% a year, so insurance companies are raising their fees to cover their profit margins. Therefore, if your health insurance costs have been rising, they will continue to do so for these reasons.

A discount medical plan, vision care or discount dental plan, or worker's comp is not insurance. Find out How to Get Obamacare.

Catastrophic insurance is considered qualified insurance. However, 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 some other circumstances.

The ACA improves Medicare costs.  It reduced  Part D costs if you fall into the "donut hole" gap in prescription drug coverage. By 2020, the donut 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. See qualifying health plans here.

If you have COBRA, you can keep it. However, you will probably get a better deal on the exchanges. Find out more.

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 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. (Source: IRS Net Investment Tax); Forbes, Will You Pay the New Obamacare Tax?)
  • 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. (Source: INMAN, Demystifying Obamacare Real Estate Tax, February 14, 2013)

I Deduct Medical Expenses - If you deduct your medical expenses that aren't covered by your health insurance, Obamacare will cost you more. You can only deduct costs that exceed 10% of your income, up from 7.5%.

I Use a Health Savings Account (HSA) - 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 increased to 20%. For more, see IRS Guidance on HSAs and Health Savings Accounts. For more, see Obamacare Taxes.

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. Find out here.

Those with 50 employees or less can use the exchange to find lower-cost insurance. Find out more.

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. ​Find out more about the tax.

Businesses offering health insurance to early retirees 55-64 can get Federal financial assistance. Find out how at ERRP. For more resources to help small businesses comply with Obamacare. (Source: Healthcare.gov, The Healthcare Law and You)

I'm a Member of Congress or Staff - You receive $4,900 ($10,000 for family) to pay for Obamacare. (Source: Members Only, Wall Street Journal, August 8, 2013.)

Health Insurance Exchanges Calculate Your Specific Costs

Open enrollment on the health insurance exchanges closed for most people on January 30, 2016. That's the best place to calculate your specific costs, compare plans, and purchase your insurance when they open again next year. You can still use the exchange to look for interim insurance. You might be able to avoid some or all of the penalty. 

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 (2015 - 2016).

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