How much Obamacare will cost you depends on your situation. That's because the Patient Protection and Affordable Care Act provides subsidies for low-income families and small businesses, while it taxes higher-income families, those who don't sign up for insurance, and businesses who don't provide health benefits.
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 10 essential health benefits. The four categories are:
- 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.
- Silver - Pays 70% of your covered medical costs, but the premiums are higher than the Bronze plan.
- Gold - Pays 80% of your costs, with higher premiums than the Silver plan.
- Platinum - Pays 90% of your costs, but has the highest monthly premiums. It would 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. This is 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 most important, is your income. If you make 400% or less of the Federal poverty level (FPL), you will receive a subsidy. In 2013, the Federal Poverty Level was $11,490 if you support just yourself. If you support more, add $4,020 for each additional person. This would be $15,510 for two, $19,530 for three, and $23,550 for a family of four, etc.
Here's basically how the subsidy works. Say you are a single person, and you earn $45,960 (this is 400% of the poverty level). Obamacare promises you won't pay more than $4,368 a year, or 9.5% of your income, for the second lowest Silver plan. Your subsidy is the cost of the plan, minus $4,368. So, if the plan is $5,000, your subsidy is $632.
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 $632 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 $15,282 (or $31,321 for a Family of Four) - If your income is 133% or less of the Federal poverty level, Obamacare costs you zero because you qualify for Medicaid (unless your state didn't sign up. Find out here You won't have to pay the tax, and your insurance won't cost more than 2% of your income for the Silver Plan. Find out more about Medicaid.
I Make Less Than $17,235 ($35,325 for a Family of Four) - If your income is under 150% of the poverty level, you pay no more than 4% of income for the Silver Plan. In other words, your subsidy is the cost of the second lowest Silver Plan minus 4% of your income. Find out more.
I Make Less Than $22,980 ($47,100 for a Family of Four) - If your income is under 200% of the poverty level, you pay no more than 6.3% of income for the Silver Plan. In other words, your subsidy is the cost of the second lowest Silver Plan minus 6.3% of your income. Find out more.
I Make Less Than $28,725 ($58,875 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 more.
I Make Less Than $45,960 ($94,200 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 Get Insurance - If you don't get insurance by March 31, 2014, you pay an extra income tax of 1% of your adjusted gross income (AGI). This tax can't exceed the cost of the Bronze plan. It can't be less than a minimum flat tax of $95 per adult plus $47.50 per child, up to $285 per household. The tax will increase each year. For more, see Obamacare Taxes.
Depending on your income, paying the tax could cost less than getting insurance. Like going without other forms of insurance, you are taking a chance. For example, the average emergency room visit is $1,265, and cancer treatment can cost $30,000 ($7,000 for chemotherapy alone). If you break your foot, it could costs $16,000 for treatment. For more medical costs, 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. Health care 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 medical discount plan, vision care or dental discount 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 special circumstances.
Medicare and Medicaid costs don't change, although your coverage is better. Obamacare doesn't affect Medicare Part D coverage, but it has already begun to lower costs if you fall into the "donut hole" gap in prescription drug coverage. By 2020, Medicare will pay for all these costs, and the donut hole will disappear. For more, see Drug Discounts.
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), you pay these additional Obamacare 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 now excluded as a 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. This starts in January 2015.Find out more about the tax and about what you need to know.
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)
Health Insurance Exchanges Calculate Your Specific Costs
Open enrollment on the health insurance exchanges closed for most people on March 31, 2014. That's the best place to calculate your specific costs, compare plans, and purchase your insurance when they open again next year.
Obamacare Cost Calculator
You can also estimate Obamacare's cost with this Obamacare Cost Calculator from the Kaiser Foundation. Article updated April 17, 2014
More On Obamacare
- How Will Obamacare Affect Me?
- When Does Obamacare Start?
- How Does Obamacare Work?
- Obamacare Pros and Cons
- The 2012 Supreme Court Ruling on Obamacare
- Obamacare Explained - Simple Enough to Explain to Your Kids
- Obamacare Summary
- What's in the Obamacare Bill
- Repeal Obamacare?
- The True Cost of Obamacare to the Nation