Why are these two numbers relevant?
- $1,260 is the minimum – the minimum – “insurance premiums for the lowest-cost ‘bronze’ plan for a 27-year-old single person… in 36 states where the federal government will oversee exchanges” (to quote the Wall Street Journal). Note: this does not reflect subsidies.
- $95 is the minimum annual 2014 tax that will be levied on people who do not purchase an Obamacare policy.
Any questions? …Oh, there are? Cool.
- “That’s just the minimum!” Yes. The rule of thumb is, $100 per year tax at $20K a year gross salary and it increases by $100 for every $10K of salary. Single people need to be making a lot of money – as in, six figures – before it becomes cheaper to pay for the insurance.
- “But there will be subsidies!” Yup! The numbers here assume a different average insurance premium (a higher one than the numbers in the WSJ), so they’re not really valid for comparison. However: looking at Kaiser’s calculator it notes that anybody over the federal poverty level (about $11,490) is eligible for the subsidy. A rather… paltry… subsidy.
OK, let’s break that down. According to PBS, the subsidy goes as follows:
The law requires consumers to contribute a specific percentage of income to the premium. It’s a sliding scale based on the federal poverty level. For example, if your household income is at 150 percent of the FPL, you are required to contribute 4 percent of income toward the premium. If your income is at 300 percent of poverty, then you’re required to contribute 9.5 percent. The subsidy then makes up the difference between that amount and the cost of the benchmark plan.
So let’s say that Bob makes $17,200 a year (this is, by the way, a couple of grand more than somebody making minimum wage). Bob is a single male who is 27, so his Obamacare tax is $95 (the minimum). Bob lives in Oklahoma (which has the cheapest premiums, as per that WSJ article). The WSJ estimates that he will be paying $1,260 a year for that policy. Now Bob is making less than 150% of the federal poverty level, so Bob only has to pay 4% of his income towards his insurance premium. 4% of $17,200 is $688. Which means that Bob will either have to pay $577 a year towards his health care, or pay the $95 Obamacare tax. Bob, by the way, feels fine. Bob also knows that he can now get on healthcare whenever he needs to. But what if Bob makes $34K a year? Still lives in Oklahoma, below 300% of the poverty level… so Bob has to pay 9.5% of his income towards his premium. 9.5% of 34K is $3,230… which is, of course, considerably more than the $1,260 that he’d be paying for that policy. So Bob can either pay the full $1,260… or he can pay the $100 Obamacare tax. Again: Bob feels fine.
It has long been my opinion that “And then a miracle happens…” should not be a part of any policy strategy. Apparently, the Obama administration disagrees with me.