ObamaCare: Should You Pay the Premium or the Tax?

When it comes to ObamaCare, should you pay the premium for buying health insurance on your state's exchange, or would you be better off skipping it and paying the "penalty" tax instead?

In two weeks time from this writing, you may find yourself having to answer that question, and the answer may not be what you think. In setting up the its system for mandating that all Americans have health insurance, the Patient Protection and Affordable Care Act (PPACA) actually creates some really perverse incentives that may make it more desirable for people to dump their health insurance coverage instead. At least, until they might actually need to have it.

You see, ObamaCare actually mandates that Americans who aren't covered by their employer's health insurance either choose to buy costly policies on their state's newly established health insurance exchanges and perhaps benefit from a tax credit subsidy to do so, or choose to "self-insure" and pay a potentially much less costly tax instead.

Here's how the self-insurance part of that works. Because the PPACA prohibits health insurance providers from denying coverage to people with pre-existing conditions, healthy people can choose to go without any coverage and only buy it when they actually need it. If the amount of any penalty tax they have is considerably less than the cost of the health insurance they might otherwise choose to buy, they might have a powerful incentive to do just that.

For healthy Americans, the self-insurance aspect of their choice would mean that they would simply pay out of pocket for the health care they actually consume - just the same as those covered by health insurance will do through the co-pays and deductibles for the coverage they have available to them. And while you might be surprised at how inexpensive medical care can be if health insurance is not involved, even for major surgical procedures, the real challenge would come if they suddenly find themselves faced with health care costs that are considerably higher than what they might be able to pay out of pocket using their income, savings and credit accounts.

In the worst case scenario, they might have to get their health care provider to delay billing them for up to the maximum 90-day limit that the law mandates health insurers to provide coverage after they enroll, or perhaps just pay their health care costs out of pocket during that short period of time. But they will still be able to get insurance coverage, and if the incentive to drop it remains after they no longer need it, they are free to choose to do so, because the law permits it and because they are honest taxpayers who cannot be denied their rights.

Some might say that these Americans are wasting money on taxes that they could be using to buy insurance instead. But then, those people are ignoring that healthy people can go many years without needing any more than basic, low-cost health care, and that in the year where might might first need health insurance coverage, any tax they might have to pay would be pro-rated for the portion of the year they went without any coverage, reducing any potential waste to a minimum.

Our tool below is the first that's designed to help Americans find out which option under the ObamaCare law, paying a premium or the penalty tax, specifically is better for them. Beginning on 1 October 2013, you will be able to start here to find out how much the plans that will be available on your region's health insurance exchange may cost you.

In doing that, we'll need you to identify the monthly premiums associated with three of the plans that will be available to you: the second-lowest cost "Silver" plan, which is used to find out how much of a tax credit subsidy you might receive, the monthly premium of the lowest cost "Bronze" plan, which sets a limit for how much you might have to pay in ObamaCare taxes, and the monthly premium for the plan you would actually consider purchasing.

Until the exchanges officially open for business, you might consider getting the information for your state from the Commonwealth Fund's links to each state's exchange or scanning news reports for your state to find out what these values might be as they become public. The default values we've entered in our tool below apply for a 21-year old who lives in California. There's more to the default values that we've entered, but we'll cover that in a separate post in the future....

Also, if you're accessing this tool on a site that republishes our RSS news feed, you'll want to click here to access a working version of our tool.

If the checking we've done with other sources is any indication, our tool turns out to be surprisingly accurate. And although it's not designed to do this particular math, we've validated the "loss-of-subsidy" effect on the out-of-pocket cost of health insurance for making one penny more than ObamaCare's subsidy eligibility level that CNBC described here.

In running the numbers from CNBC's example, we see our hypothetical household would get a subsidy of $5,362.56, which would lower their out of pocket cost for their annual premium from $12,783.96 to $7,421.40.

We then ran the numbers again, this time increasing the total household income by one penny to $78120.01. We find that this hypothetical household would lose out on that $5,362.56 subsidy and have to pay the full cost of $12,783.96. That's one heck of an out-of-pocket cost jump for the mistake of earning just one penny more....

But what CNBC missed in its analysis is that in both cases, if the potential health insurance buyers don't expect to have any significant health care expenses in the near term, it makes far more sense for them to choose to self-insure themselves and pay the ObamaCare income tax than it does for them to pay their state's ObamaCare exchange's health care insurance premiums!

After all, for healthy people, having an extra $7,421.40 or $12,783.96 can buy an awful lot of health care if and when they actually might need it, not to mention whatever else they would rather do with that kind of money if they don't.

Elsewhere on the Interwebs

We suggest that you take advantage of the Manhattan Institute's "Know Your Rates" site so you can compare how your state's average insurance premiums compare to what identical health insurance plans would have cost before the implementation of the Patient Protection and Affordable Care Act's provisions, paying close attention to the rates that apply for the age nearest your own.

Meanwhile, Chris Conover demonstrates that ObamaCare is a deal that never gets better as you get older!...

About This Tool

In building this tool, we've made a handful of assumptions. Here they are, along with links to our references for data:

Beyond this, we've assumed that for some people there may be a "gray area", who would only have a small incentive to not purchase health insurance, where any benefit in doing so is not very large with respect to their household income, and where the decision to buy or not buy should instead be based upon an assessment of what the buyer's actual health care needs for their household will be in the near term, rather than purely upon its cost with respect to the ObamaCare income tax.

Mathematically, we've defined that gray area as being equal to the difference between the penalty tax they might choose to pay or an amount equal to 3.1% of their income before taxes, which closely corresponds to the average expenditure of U.S. households for health insurance, according to the just-released Consumer Expenditure Survey report for 2012.

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.

The pols know the O/Care ship is listing---ready to heave--- maybe do a Costa Concordia into the Potomac.

THE BAD NEWS KEEPS COMING Reuters reports the US government on Wednesday scaled back its projections for Obamacare's impact in 2014, saying the law would generate slower healthcare spending growth and provide coverage to only half as many of America's uninsured as anticipated last year.

The biggest factor in the change stems from the U.S. Supreme Court verdict last year allowing each state to decide whether to expand the public Medicaid program for the poor under Obama's healthcare reform law. Republican leaders in nearly half of the nation's 50 states have rejected the expansion.

HHS now expects 11 million uninsured Americans to obtain coverage next year, down from about 22 million projected a year ago, according to the report, which appeared in the journal Health Affairs. (Excerpt) Read more at reuters.com ...

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There's also lawsuits and state problems.

HERE'S HOW THEY'RE STOPPING OBAMACARE A West Virginia nonprofit has turned down a federal grant it received to help residents navigate new health insurance options under the Affordable Care Act after it received an inquiry from Attorney General Patrick Morrisey about how it would protect consumer information. Clarksburg-based West Virginia Parent Training Inc. did not respond to a letter it received from Morrisey directing it to answer 26 questions about the group's personnel and hiring practices, including employee background checks and employee monitoring programs, the Sunday Gazette-Mail (http://bit.ly/17M1QVe) reported. (Excerpt) Read more at sanluisobispo.com ...

YOUR TURN--Contact your state AG---ask him/her to issue a letter of inquiry to groups receiving federal "Navigator" grants. The inquiry should center on questions WRT how the group intends to protect consumer data.

In particular, the questionnaire should ask if the tax-funded "Navigator" program intends to transfer personal/ financial/medical data of the insured to the local/county/national Democrat Party, relevant Unions, banks, investment companies, drug companies, insurance companies. Trial Lawyers' associations and whether "Navigators" have sub rosa contracts with these, and other groups, plan to profit, to provide significant info to enrich databases for pecuniary purposes.

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PLANNED PARENTHOOD WILL HAVE ACCESS TO SS#, TAX, MEDICAL INFORMATION
Breitbart Big Government ^ | 8/23/2013 | William Bigelow / FR Posted by markomalley

EXCERPT Planned Parenthood is about to obtain access to your Social Security number, tax form, bank account, and medical records.

With the advent of ObamaCare, consumers buying health insurance through health care exchanges will be required to speak to “navigators.” “Navigators” are supposed to help consumers find the best coverage and ascertain whether they are eligible for a federal subsidy.

Any “navigator” will have access to the federal data hub, which holds information from the Department of Health and Human Services, the IRS, the Social Security Administration, the Department of Homeland Security (DHS), the Defense Department, the Office of Personnel Management, the Veterans Health Administration, and the Peace Corps.

Planned Parenthood received $655,000 from the Obama administration to hire navigators. In Iowa, Planned Parenthood of the Heartland received $214,427; in Montana, Intermountain Planned Parenthood, Inc. got $295,604; and in New Hampshire, Planned Parenthood of Northern New England raked in $145,161.

And there is not much scrutiny over who these “navigators” will be; HHS will not require background checks or fingerprinting, and a previous criminal conviction, even if it was for identity theft , will not trigger a rejection. To make matters worse, the administration has cut the new employees’ training from 30 hours to 20 and reduced screening.

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OKLAHOMA WINS FIRST OCARE BATTLE: Quoting AG Pruitt--- "Obamacare was meant to be so open-ended that it could mean anything. We are seeing thousands of pages of new rules being written, both by HHS and the IRS. The open-ended interpretation of Obamacare enables this.....if the law doesn't contain a particular provision, no problem. They just make it up as they go along."

"Such is the case that involves the OK lawsuit."

“The court rejected the federal government’s argument that Oklahoma lacked standing to challenge the law, allowing us to proceed with this pivotal case,” “We’re optimistic the court will recognize what states have known for months that the IRS disregarded the law by making the large employer mandate effective in Oklahoma or in any of the 33 other states without a state health care exchange.”

REFERENCE Oklahoma challenged implementation of the Affordable Care Act after the IRS finalized a rule that would allow the federal government to punish “large employers,” including local government, with millions of dollars in tax penalties in states without state health care exchanges, which is not allowed under the health care law.

“Congress provided a choice for Oklahoma and other states in implementation of the health care law, and the IRS is attempting to take that away by rule,” General Pruitt said. “The administration miscalculated how many states would support this law, so now they’re using the IRS to push through provisions that Congress did not pass.”

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PROTECT YOURSELF---Obamacare is easy pickins for identity thieves. Steps to take to minimize risk of identity theft:

1. Contact the IRS Identity Protection Specialized Unit at 1-800-908-4490

2. Order a tax account transcript from the IRS that verifies basic personal data along with details of your tax return filed, which may come in handy if you are checking to see whether someone else filed a fraudulent return on your behalf

The Federal Trade Commission (link at website) also lists several steps you must take if you have been a victim of identity theft.

SOURCE http://www.cnbc.com/id/100918004

AS FREEPER PAJAMAMAN COGENTLY POSTED: Ads need to be run---the public needs to be told of the magnitude of the invasion of their privacy, that will occur under OBamacare. They need to be made to understand this.

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