Skip to comments.ObamaCare: Should You Pay the Premium or the Tax?
Posted on 09/22/2013 5:44:23 AM PDT by Kaslin
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.
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!...
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.
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.
Just vote them all out in 2014 and 2016; clean the DC sewer and screw the DeathCare, IMO.
either way they are scamming the American people and they should be jailed along with all the scumbags on both sides who allowed this to happen. What this is saying is we need you to pay for this so pay up!
You will be reading about me being jailed for non-payment. I will not submit and will not go away quietly.
“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?”
Neither. Call your reps and demand that deathcare be defunded.
“You will be reading about me being jailed for non-payment. I will not submit and will not go away quietly.”
Actually, you won’t be. There is no provision in the law for criminal penalties. They can’t even collect the tax unless you’re otherwise owed a refund.
Look it up. There have been several stories on it. And a few on FR.
It’s not a ‘real’ choice. The Architects of Obamacare are not designing a system that is designed to last. They are attempting to tax, gather data, and otherwise collapse what remains of the private healthcare delivery system. What remains will be an expensive, well-entrenched single-payer system.
Whichever choice you make will hasten the collapse.
Medicare Part B was $3 per month when it started...about one hour in wages..if you made a good buck.
Today, it is $105 per month...I don't know anyone in my circle who makes $100 per hour.
The problem with this is if you do that you don’t know if the new ones will keep their promises or not? It’s easy to promise anything just to get elected, but once they are in office they “forget” their promises, or are unable to keep them. I wished there would have been a better candidate in 2012 when my senator ran for reelection. Unfortunately I have to vote until 2018 to vote against that RINO.
Now THIS is extortion.
What do you think the House did on Thursday?
Call your reps and tell them you want the taxpayers to pay 75% of your premium.
That little tidbit alone should have people from all walks of life storming D.C. But nothing happens.
Neither. I’m under the radar.
WAVING AT NSA FREAKS!
Mass civil disobedience. They can’t put tens of millions of people in jail.
You got that right.
Obamacare is not about healthcare or even insurance coverage, it is about centrally controlling from DC every aspect of your life. Your doctor will be their informant on how you live, work and eat while their IRS agents will monitor every financial aspect of your life in the guise of keeping you healthy. There will not be one part of your life they will not only know but control through the Unaffordable Healthcare Act. This is a dream come true for the central planners who run the Communist....er, I mean.... Democrat Party and the worst nightmare for your average American.
Vladimir Lenin / 1945 pamphlet
Socialized Medicine is the Keystone to the Arch of the Socialist State.
How to finger the O/Crats---below.
save for later
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 ...
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.
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.
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 governments argument that Oklahoma lacked standing to challenge the law, allowing us to proceed with this pivotal case, Were 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 theyre using the IRS to push through provisions that Congress did not pass.
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.
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.
I thought it was even a bit more than that. Maybe location is a factor. Anyway, I looked at what "part B" covers, and what the pharmaceutical program covers, and for me it isn't worth it.
With non-seniors it's a different consideration. Part A Medicare does cover hospital stays, after all.
Pay the penalty until you get really sick then sign up for insurance.
Being penalized by the government for not buying some thing!
Something is terribly wrong here and America needs to wake up.This shouldn’t even be talked about!
Something is terribly wrong here and America needs to wake up.This shouldnt even be talked about!
It's been wrong since the New Deal, when the USSC ruled that Roscoe Filburn could be penalized for growing his own wheat instead of buying it from someone else.
I prefer the third option...defund and repeal. Vote out ALL ObamaCare supporters on BOTH sides of the aisle.
That is with no prescription coverage. Also, I have to buy a supplement which is $40 a month. I spend more on this “insurance” than I do on food. Insane...
In Muslim countries, this tax is called jizya.
Pay whichever is cheaper. No matter what you do, when Obama’s death panel decides you are no longer of use to the regime, you ain’t gettin’ treatment anyway!
How many "spaces" are available in those neat little FEMA camps?
That's basically the choice I had to make. I've had good results following a "pure foods" diet. It's about eating less, but very high quality foods. If I got the insurance, I couldn't afford the diet, and I'd need medications and therapies and all kinds of stuff to stay healthy.
A few million people just refusing to comply should end this altogether at least that is the argument applied to illegal immigration. You can’t possibly prosecute millions of Americans for non healthcare law compliance no more than you can possibly deport millions of illegal aliens. :-)
There is no penalty in the law other than the fax. The IRS can confiscate your refund. Don’t have a refund, no confiscation. There aren’t enough jail cells to hold everyone. The judicial system would crash under the strain. Single payer is the goal. The crooks in DC could care less if this works.
Where on earth do you get a Medicare supplemental policy for $40 a month? I have a plan F, which covers all my deductibles plus whatever Medicare doesn’t pay and it is $230 a month (United Healthcare). My Part D is $15 a month thru UH as well. In total I pay $350 a month for insurance. I’d like to get something cheaper but since I have a chronic auto-immune disease and have had frequent hospitalizations, I’m afraid to change my coverage.
Ping for later.
One other thing how is the IRS going to penalize non insurance holding citizens when they have no bank account? Most of my low income tenants have no bank account, so how does the IRS get their health insurance "tax"?
Wifey and I have a Blue Shield Plan F.....$287 monthly for the two of us. It’s the only way to fly; in the 18 months of being on Medicare with that supplemental, we’ve had a combined four cataract surgeries, one gallbladder, two angioplasties, two colonoscopies -— and not one additional cent copay to anybody or any place.
Ping for later.
the roberts decision gave us the answer...
pay the tax, and then sue the feds...
the tax is inequitable under the constitution (too many exemptions for it to be equitable)...
the libs and the unions (who got their exemptions) know this..
why do you think implementation is being delayed???
(hint, the pubs know this too, why do you think THEY are trying to delay implementation???)
if it goes before the supreme court, fubocare is DOA in regards to funding...
I don’t know about FEMA camps. I’ve seen many references and lists over the years, and IIRC they all come from one source; people on FR and elsewhere have gone to many of the locations and they are not camps. Some could be, some are old airports, yards with stored school buses, etc etc.
Regarding the gov’s nefarious intentions, in order for their plans to work, we have to be disarmed first.
Hasn’t worked and it won’t.
No need to. Just enough to get the, ahem, attention of the rest of them.
They could shut down your internet access.
How'd ya like THAT!!??
I’ve been on Medicare for almost 8 years and the only things I have had to pay out of pocket is for the glaucoma test you get during an eye exam. Everything else has been covered by Medicare and the supplemental ins. I have no complaints about Medicare. I have also had 3 hospitalizations plus umpteen tests and sonograms and ultrasounds.
Free stuff is awesome is what you meant.
How is it free if my total health insurance premiums run to $350 a month? Plus, considering I paid into Medicare from 1965 when it was enacted up to Jan 2013 when I retired at the age of 72, I don’t feel as though I’m getting something I’m not deserving of. Or are you one of those people who thinks that those of us who had no say about Social Security shouldn’t be getting that either?