The idea behind Obamacare is to make the young and the healthy overpay for insurance to subsidize everyone else.

In an effort to persuade individuals to purchase insurance, the law provides a scale of escalating penalties starting in 2014 and increasing in 2015, then again in 2016.

Actually, there are two penalty rates, and you pay the higher of the two, not both.

2014 Penalties

1. 1% of your yearly household income. The maximum penalty is the national average yearly premium for a bronze plan.
2. \$95 per adult (\$47.50 per child under 18). The maximum penalty per family using this method is \$285.

2015 Penalties

1. 2% of yearly income
2. \$325 per adult (\$162.50 per child under 18)

2016 Penalties

1. 2.5% of yearly income
2. \$695 per adult (\$347.50 per child under 18)

If you’re uninsured for just part of the year, 1/12 of the yearly penalty applies to each month you’re uninsured. If you’re uninsured for less than 3 months, you don’t have a make a payment.

No Enforcement of Penalties in 2014

By the way, Bloomberg reports … “As Peter Gosselin, a senior health-care policy analyst at Bloomberg Government who worked on the early implementation of the law, explained to me before the change was announced, the IRS has already signaled in Senate testimony that it will use a light hand in enforcing the penalties in 2014. Gosselin says he interpreted the testimony to mean “there isn’t a soul in this country that is going to pay an individual mandate penalty” next year.”

Nonetheless, inquiring minds should be interested in a math table on penalties for all the years.

Income Table

Income 2014 Penalty 2015 Penalty 2016 Penalty
0 0 0 0
20,000 200 400 500
40,000 400 800 1000
60,000 600 1200 1500
80,000 800 1600 2000
100,000 1000 2000 2500
120,000 1200 2400 3000
140,000 1400 2800 3500
160,000 1600 3200 4000
180,000 1800 3600 4500
200,000 2000 4000 5000
220,000 2200 4400 5500
240,000 2400 4800 6000

The table shows that beyond a certain income range, you will be mathematically forced to buy insurance. But non-insurance in upper income groups was not a huge problem in the first place.

It is healthy low-wage to mid-range wage earners, working part-time, or multiple part-time jobs, that is the primary target of Obamacare policies.

In addition to penalties, one needs to consider cost of policies, subsidies, and factor deductibles into the equation.

Subsidies

The Henry H. Kaiser organization has a nice Subsidy Calculator that you can use.

Illinois Single Person

Condition will widely vary, but let’s do an Illinois example, single person, age 25, non-smoking, no children, with income of \$40,000. Here are the results.

Seattle Family of Four

Let’s now try a Seattle family of Four, zipcode selected at random. with household income of \$80,000, parents both age 25.

Out of Pocket Costs

Your out-of-pocket maximum for a Silver plan (not including the premium) can be no more than \$12,700. Whether you reach this maximum level will depend on the amount of health care services you use. Currently, about one in four people use no health care services in any given year.

Deductibles

Bloomberg reports Obamacare Deductibles 26% Higher Make Cheap Rates a Risk

On California’s state-run exchange site, the standard low-premium “bronze” plan carries a \$5,000 deductible per person, a \$60 co-pay to see a doctor and a 30 percent fee, known as coinsurance, on hospital care. In Rhode Island, Blue Cross Blue Shield’s bronze plan has a \$5,800 deductible while Missouri’s U.S.-run exchange offers plans by Anthem Blue Cross with the maximum-allowable \$6,350 in out-of-pocket costs.

Deductibles vary. Silver plan deductibles are more likely to be in the \$2,000-\$3,000 range.

Opting Out

The risk in opting out is a catastrophic healthcare need. Yet, that is precisely what some will do if they feel (and rightfully so), that the Affordable Care Act (Obamacare), is anything but affordable.

I wrote about one family of four already. Please see Reader Explains Why Her Family of Four (with existing coverage) Opts Out of Obamacare

Here is the email again.

Hello Mish!

My husband and I are both 28. (Healthy, non-smokers and no preexisting conditions) We also have two young daughters who are healthy.

Our plan was to sign up for another year of coverage through my husband’s employer. Due to increase costs, they are only offering one plan with an HSA. However, these HSA deductibles are higher than I have ever seen. For our family it is \$12,000 (in-network). The premiums are \$720 per month. \$720 a month for the privilege of getting worse coverage.

The exchange is offering similar coverage and premiums. Thus, we are making a tough decision. We are opting out of coverage. It is cheaper for us to use cash only clinics,  eat organic food and continue to pay for our gym membership.

I believe the Obama administration thought no one with existing coverage would opt out. But when new “affordable” premiums are roughly 25-30% of a healthy, young family’s total income, what do they expect?

Healthcare premiums should not be the same percentage as a mortgage payment.

Thanks for all you do,

Stacie

Several readers did not believe Stacie’s math, but the math is easily explained.

Stacie said “premiums” when she meant to say “premiums plus deductibles” in reference to 25% of [potential] family income.

Stacie decided to opt out and take her chances. There are millions more like Stacie (as well as individuals) who may come to the same conclusion.

Opting Out in Washington and Oregon

In any one year, the odds that things go seriously wrong for healthy, young individuals and families are not very high. This is of course exactly why millions will opt out, possibly even in cases of huge subsidies.

Inquiring minds may wish to consider actual results in Oregon and Washington.

What If Catastrophe Strikes?

What if you opt out and then get diagnosed with cancer. Is all lost?

Not necessarily. If your healthcare renewal is coming up, and you can wait, then you opt back in by purchasing insurance. You can do this easily because you cannot be denied for preexisting conditions.

You may have to pay a higher rate, but you will be able to get coverage.

You can also get insurance if you have a Qualifying Life Event.

QLE Examples

• Moving to a new state
• Certain changes in your income
• Change in your family size such as Marriage, Divorce, Baby, Adoption, Legal Separation, death of spouse or dependent
• Change to or from part-time status

More QLE details can be found at Changes You Can Make Outside of Open Season.

Obamashock! Work More, Get Less!

In regards to a change from or to part-time status, please consider Look out below! Work more, get less in Obamacare ‘cliff’

Be careful you don’t fall off the Obamacare “cliff” when the boss asks you to put in some overtime.

Working more could ultimately mean thousands of dollars less for you under a quirk in the new health-care law going into effect this fall. This could prompt some people to cut back on their hours to avoid losing money.

“Working more can actually leave you worse off,” the price-comparison site ValuePenguin.com notes in a new analysis.

“It’s sort of an absurd scenario,” said Jonathan Wu, ValuePenguin.com’s co-founder. “It’s something for people to be aware of.”

Value Penguin Math

“If your income is at or below the above 400% FPL figure for your household size, the government will subsidize your healthcare so that you spend no more than 9.5% of your income. Earn a dollar above the 400% FPL threshold and the subsidies disappear completely. This obviously creates a problem! If insurance costs substantially more than the capped premium for your family, that extra dollar may actually cost your household a huge amount in actual dollars.”

So Screwed Up Even the Liberals and Socialists Hate Obamacare

I have one final parting thought: Obamacare is so screwed up that even the extreme liberals think it’s worse than what we had before.

For example, please consider these comments by Michael Olenick, a writer on Naked Capitalism.

… This is the sorry state of the Affordable Care Act, the ultimate betrayal of the self-employed middle class who are supposed to magically produce income to single-handedly support those who are uninsurable. As I demonstrated in prior articles this promise, when objectively judged, borders on sadistic. Politicians must have looked towards the student loan system for inspiration and forgotten to tell the public this was their goal. In that system students from families of about the same “rich” income bracket – in Jessica’s case a high-flying \$62,000 a year for a family of two – are forced to take out loans so those slightly poorer can go to school for free, or to skip school altogether. …

ACA supporters – among whom I counted myself until I saw the policies – oftentimes cite the “better” coverage but the facts of the real policies just don’t support this. Mandating residential drug treatment may help some people doing so at the cost of making more mundane medical events affordable is just not fair. Maybe I’m more old fashioned than I thought but jacking up the price for a visit to cure strep throat, to subsidize a person’s seventh stay in drug rehab, seems unethical. …

We were led to believe that the political cost of the ACA was high, that Obama spent a lot of progressive chips to get it. Yet we ended up with something that is arguably worse than the current system.

Ultimate Betrayal

Indeed, Obamacare is the ultimate betrayal of Promises, Promises, all unmet.

Mike “Mish” Shedlock