(This article was last updated on November 2, 2015)
The Affordable Care Act seeks to help people gain access to better and more cost-effective health insurance, a task that the new law has been steadily accomplishing for millions of Americans since the marketplaces opened in 2013. As insurers joined the health insurance exchange sites and started offering more plans, prices dropped in many areas while competition soared. Unfortunately, some companies have now requested a significant price hike for 2016 that may leave enrollees wondering where their “affordable” coverage went. While these significant price hikes represent a minority of health plans sold on and off the marketplaces, it’s good to keep in mind that your plan may be changing for next year.
Update: November 2, 2015: You Can Use The Form Below To Get Actual Updated Price Estimates For 2016 – Your Contact Information Is Confidential
Reasons for the Sudden Spike
Premium rates typically increase each year due to a number of factors, including inflation and enrollee participation. The problem for many insurers over the past two years of Obamacare has been figuring out just how much health care new enrollees would use. With little data available, some insurers may have undercut initial pricing.
It turns out that people who sign up for health insurance on a marketplace typically use more medical services than people with job-based insurance plans according to one Blue Cross Blue Shield licensee. This may be because many marketplace enrollees had no health insurance before the ACA took effect. As a result, they’re seeking medical services for the first time and need greater care. An upswing in hospital visits, specialty prescriptions and trips to the emergency room also contributes to proposed price increases.
Insurance companies have to estimate each year what the cost of coverage will be from their end. In other words, how much will it cost to insure the beneficiary pool? Taking into account factors like health status, age, frequency of use and potential for future care, insurers must set rates that both cover their enrollees and generate a profit. Under the ACA, insurance companies have until June 1 of each year to submit proposed rate changes that top 10 percent. They submit their proposals to state or federal legislators for review.
Rates for Top Insurers
Some of the country’s top insurers have proposed substantial rate hikes for 2016. United Healthcare, which is the largest single health carrier in the country, has submitted rate increases as high as 60 percent for certain off-marketplace plans in some parts of Florida. In Montana, Blue Cross Blue Shield has proposed a 23 percent increase for individual plans. Many states have yet to release official data, but it’s clear that some of the country’s top insurers are aiming for significantly higher rates next year.
However, these jaw-dropping price hikes aren’t actually the norm across the country. According to analysts with Avalere Health, most of the price increases for 2016 will be consistent with 2014 and 2015. In fact, enrollees on the federal or state marketplaces will only see an average increase of about 6 percent. In the case of Montana and Blue Cross Blue Shield, the company is only requesting a substantial price increase for two of its 50 available plans.
Subsidized vs. Private Plans
Most consumers won’t be affected by the higher rates since nearly 90 percent of people who enroll in a marketplace plan receive subsidies to offset the cost of premiums. Subsidized plans aren’t exempt from price increases, but the tax credits that make these plans affordable should keep them affordable for most people. The real issue will be for people who buy insurance off of the exchange. Off-marketplace plans take the full brunt of price hikes, and private plans can’t offer tax credits to offset the higher costs. It may be more beneficial for some consumers to check out the marketplaces in 2016 to see if there’s a better deal available.
Keeping Costs in Check
The rate proposals are not yet finalized for 2016. Companies had to submit their changes by June 1, but state and federal legislators have a chance to review, modify and deny requests that they feel are unjustified. Insurance commissioners can’t price an insurance company out of the market, but they can work with individual companies to make sure that rates represent a fair estimate of doing business. United Healthcare’s 60 percent price increase in parts of Florida may not actually stay at 60 percent once the submission has been reviewed and finalized. In an effort to keep consumers informed on rate increases of more than 10 percent, the government offers a convenient tracker that allows you to search by state and insurer.
Shopping for Better Deals
What can you do to prevent a substantial price hike for yourself or your family? Shop the marketplace. The annual enrollment period for next year begins Nov. 1 and runs through Jan. 31. The downside is that final rates for many insurers won’t be released until the fall, just before the marketplaces open for business. That means that you won’t have much time to adjust to potential sticker shock before it’s time to re-enroll for 2016. However, you do still have three months to compare plans in your area, talk to an independent broker or speak directly with your insurer about available plans.
Health care officials have urged people since the second open enrollment period to shop around for insurance plans since rates usually increase each year. Plus, your plan may not offer the same level of coverage that it did before. All ACA-compliant plans cover ten essential benefits and afford consumers the same rights and protections, but not every plan is created equal in terms of premiums, co-payments, coinsurance or deductibles. To make sure that you’re getting the best deal, use the next open enrollment period this winter to compare the costs.
(This article was last updated September 1, 2015)
Do You Have Questions About How Much Obamacare Will Cost?
During the debate over healthcare reform and the Affordable Care Act in the United States, one thing that kept coming up was the actual cost of Obamacare in terms of its impact on society and its actual dollar amount. Under the Affordable Care Act, healthcare in America must now offer ten Essential Health Benefits and provide for the protection of consumer rights against dubious practices, and these reforms don’t come without a price tag. Whether you’re for or against the new healthcare law, you will be responsible for supporting it financially. In this article, we’ll go over the cost of Obamacare and how the new healthcare law affects your family’s budget.
Projected Cost of Obamacare To Taxpayers
How much will Obamacare cost taxpayers over the next decade? It’s estimated that the total cost of the new healthcare law will be between $1.36 and $2.6 trillion over the next decade. If that number does not astound you, it should. Healthcare reform will be expensive and difficult at first. However, the Congressional Budget Office also estimates that Obamacare will reduce the national deficit by approximately $200 billion in the same time period and up to $1 trillion within the next 20 years. Over time, the high cost of health reform should help to reduce our national debt while providing better health options for millions of people in the United States.
When discussing the cost of Obamacare, it’s easy to get caught up in the current numbers. However, many people don’t realize how inflated the cost of healthcare had become under old laws and regulations. Prior to the implementation of the Affordable Care Act, patients spent millions of dollars every year on hospital trips, outpatient facilities and other medical providers to get the healthcare they needed. Approximately 45 million Americans lacked health insurance, and this fact placed a huge burden on providers to offer coverage. In terms of premiums, several states indicate an average of lower costs under Obamacare than they had prior to the new law. For example, young adults in New York and Colorado enjoy significantly lower premiums by buying health insurance through the new marketplaces; in New York alone, it was reported that young adults have enjoyed a decrease in premiums of nearly 29 percent.
If you’re curious about how America will pay for the cost of Obamacare, then direct your attention to the Internal Revenue Service. People who don’t obtain health insurance through the Marketplace, their employers or a private source will be assessed a tax penalty. This penalty is called the “Shared Responsibility Payment” and falls under the individual mandate clause of the Affordable Care Act. Because the Supreme Court ruled that the individual mandate is a tax on June 28, 2012, the IRS has jurisdiction over collecting the fee. There are exceptions to the individual mandate, and you can check out the full list of exemptions by reading the Individual Mandate article on this website.
While the IRS collects the penalty fee, they cannot impose any criminal sanctions against you as they might if you fail to pay regular taxes. However, the IRS can assess interest fees on unpaid penalty fees. How much is the penalty? In 2015, the tax penalty was $325 per uninsured adult and $162.50 per uninsured child or 2% of the annual household income, whichever is greater. When calculating percentages, the IRS uses your income after deducting the annual tax-filing threshold for your taxpayer status. The fee is assessed against every month that you don’t obtain insurance.
In 2016, the penalty is $695.00 per uninsured adult and $347.50 per child or 2.5% of your yearly household income, whichever is greater.
In 2016, let’s say that you earn $50,000 in taxable income as a single person without insurance. The penalty for your non-compliance would be approximately $1,000 (calculated by first subtracting $10,150, which makes up the Tax-Filing Threshold, and then multiplying 2.5% of your yearly income because that amount is higher than the flat $695.00). If you obtain insurance in June through your employer, then you’ll owe the prorated portion of that $1,000 fee, which equals approximately $500 for the six months that you lacked coverage. This fee will be taken from any tax refund you might be entitled to or added onto your bill when you file taxes. If you fail to pay the fee, then you will accrue interest indefinitely until you pay your bill to the IRS. Over time, a small non-compliance fee can become a huge headache.
You might argue that it would be more cost-effective to simply pay the non-compliance fee instead of buying health insurance. To some degree and in some cases, you may be right. Young and healthy individuals will pay much higher premiums than other portions of the population, and we’ll discuss the specific numbers in a subsequent section. For these people, paying a $1,000 non-compliance fee may make more financial sense in the short-term because they won’t need as many medical services. However, non-compliance fees increase every year. In 2017, the fee will jump even higher and as the penalty fee increases, you will need to decide whether it would be more beneficial to buy insurance or pay the fine to the IRS.
Obamacare Healthcare Plan Premiums
Keeping up with the cost of Premium can be difficult when it comes to Obamacare because various factors affect your rates. As with private insurance or healthcare coverage purchased through your employer, plans bought via the health insurance exchange or general Marketplace will vary in coverage options and premium prices. Plus, some families will be eligible for subsidies and tax credits that lower the monthly premiums even more. In this section, we’ll give you a couple of examples of the types of premiums available to help you make a more informed decision about Obamacare. Keep in mind that the following information is just a guide and could vary significantly depending on your individual situation.
In an effort to help people become familiar with the cost of premiums available on the Marketplace, we have created a subsidy calculator that can also help you understand the cost of healthcare premiums. Let’s start with a family of four that earns above the federal poverty threshold percentage; in other words, this family would not receive any subsidies on the Marketplace because they earn enough to pay for insurance without assistance.
Real World Cost Of Obamacare For Families
- Meet the Clarks. The Clark family comprises two adults and two children living in Orlando, Florida. The adults are 42 and 38, and both kids are minors. Neither parent uses tobacco.
- The total annual income for the household is $110,000, and the parents cannot obtain insurance through their employers.
- The Clarks have several options on the Marketplace for coverage, but they will not be able to get subsidies or tax credits because they earn more than four times the federal poverty line.
- For a Bronze plan on the Marketplace, the Clarks will pay $8,013 per year or approximately $668 per month for healthcare coverage. This number represents 7.28 percent of the Clarks’ annual income. The Bronze plan includes insurance for the whole family and covers 60 percent of the Clarks’ medical costs.
- For a Silver plan on the Marketplace, the Clarks will pay $9,909 annually or $826 per month. Silver plans cover 70 percent of medical costs.
You can buy four types of plans on the Marketplace: Bronze, Silver, Gold and Platinum. There’s also a “Catastrophic” plan available, but this plan is generally reserved for healthy individuals under the age of 30, who want basic coverage for emergency situations only or people that are experiencing a hardship..
As you can see with the example above, the Clarks will pay higher premiums for more coverage; Platinum plans cover 90 percent of medical costs but require significantly higher premiums. Now, let’s see how much the Clarks would pay if they didn’t have children.
- The Clark family now comprises two adults aged 38 and 42 living in Orlando, Florida; neither adult uses tobacco.
- Together, the Clarks earn $70,000 per year, but unfortunately their employers do not provide health insurance.
- The Clarks’ combined income is more than four times the federal poverty line so they’re unable to apply for subsidies or tax credits to help offset the cost of monthly premiums.
- For a Bronze plan, the Clarks will pay $5,363 per year or $447 per month, which is about 7.66 percent of their yearly income. For a Silver plan, the Clarks will pay $6,633 per year or $553 per month.
As mentioned in an earlier section, some families will pay more in healthcare costs than they would pay in penalty fees. In this scenario, the Clarks are relatively young and healthy, and they have no kids. For them, the penalty fee might be around $700 for the year based on their income versus more than $5,000 in healthcare premiums. The Clarks may choose to forgo insurance and pay the fine instead until they reach an age when they need more medical care. You should also note that the ACA limits out-of-pocket costs to $12,700 per year for families and $5,200 per year for individuals.
You may have noticed that we made a point to mention the Clarks’ tobacco use. Under the Affordable Care Act, tobacco users will pay more for health insurance. The goal of Obamacare is to provide more affordable coverage for more Americans while increasing public awareness for better healthcare management. This means that those who smoke will pay more. If the Clarks were to take up smoking, they could expect an increase in their yearly premium via a “tobacco surcharge” assessed by the government. They might also pay more due to the out-of-pocket costs associated with prolonged tobacco use.
Obamacare Subsides and Cost Assistance for Families
In the examples listed above, the Clarks earned well above the federal poverty line with and without kids. Unfortunately, millions of Americans live and work well under the poverty line and still need the same healthcare coverage as their more affluent neighbors. Obamacare was designed to help low-to-middle-income families get the coverage they need. Through subsidies and a Tax Credit, thousands of lower income families in the United States have access to unprecedented coverage and healthcare options. In this section, we’ll discuss how Obamacare can help offset the cost of monthly premiums and work to your advantage if you fall beneath the poverty threshold.
In 2015, the federal poverty line in the United States is currently set to $4,060 per person after the initial threshold of $11,670 for an individual. In other words, for a family of four the poverty line would be $23,850. The amounts for 2016 are different so check out our 2016 Federal Poverty Level chart for updated information. Under the Affordable Care Act, families that earn between one and four times the federal poverty line are eligible for subsidies and tax credits that help make insurance more affordable by reducing the monthly premiums. Let’s take a look at the Granger family as an example.
- The Granger family lives in Boise, Idaho and consists of two adults and three kids. The adults are 33 and 35, and every kid is a minor. Neither parent smokes or uses tobacco.
- Despite the fact that both parents work, the Granger family only takes in about $60,000 per year and can’t afford health insurance through work or another source.
- Fortunately, the Grangers can receive cost assistance through the health insurance exchange because they make under 250% of the federal poverty line and that amount falls within the boundaries of the Affordable Care Act in order to receive federal subsidy assistance.
- Without cost assistance, the Grangers would pay $7,185 per year for a Bronze-level plan and $9,371 for a Silver plan. With tax credits, the Grangers should only have to pay $1,964 for a Bronze plan or $164 per month – a premium that represents 3.27 percent of the Grangers’ income.
How do the Grangers get such a great deal when the Clarks had to pay full price for their premiums? The Clarks earn almost twice as much as the Grangers do with one less child to support. Obamacare works on the premise that those who can afford insurance should contribute more to the shared responsibility pool. Lower income families will benefit from the new healthcare law in a way that many affluent families were already enjoying. By being able to purchase subsidized healthcare through Idaho’s marketplace, the Grangers will enjoy the same access to healthcare that the Clarks probably already had prior to the ACA.
Obamacare Plan Costs For Single Individuals
If you live without a spouse or any dependents, then you may be wondering about cost assistant for single taxpayers. Can individuals receive cost assistance? The answer to this question depends on where you live, your age, your income level and several other factors, but the short answer is that even single people can apply for cost assistance if they meet the right parameters. For an example, let’s take a look at Cassidy Jones.
- Cassidy is 32 years old and lives in Chattanooga, Tennessee. She works full-time, but her employer doesn’t offer health insurance. Her current salary is $23,000. She lives alone and doesn’t use tobacco.
- Because Cassidy’s income falls within the range set forth by the ACA, she is eligible for a subsidy to offset the cost of her monthly premiums.
- If Cassidy chooses a Silver plan from the Marketplace, then she can expect to pay $1,450 per year or $121 per month after a subsidy of $633. If she chooses a Bronze-level plan, then she would pay around $75 per month or $902 per year. These premium estimates represent 3.92 percent of Cassidy’s annual income.
- Cassidy lives in a state that chose not to expand Medicaid, which means that she can’t apply for Medicaid benefits even though she falls within the expanded guidelines.
Because Cassidy probably won’t make as many trips to the doctor as her older relatives, she may choose to purchase a Bronze plan instead of a more expensive metal plan on the Marketplace. If she were a few years younger, Cassidy might instead choose a “Catastrophic” plan to cover emergencies only. Keep in mind that regardless of the plan you choose on the Marketplace or off, you can expect preventative care and select other benefits to be included in your coverage.
If you qualify for Medicaid or the Children’s Health Insurance Program, then you don’t need to worry about the individual mandate or the health insurance coverage requirement because you meet the minimum essential coverage requirement by enrolling in Medicaid or CHIP. These government systems still exist and still are available to lower income families regardless of the new law. In fact, several states have approved the expansion of Medicaid as set forth by the Affordable Care Act, which means that you may now qualify for Medicaid even if you didn’t in the past. Check out the government’s health insurance exchange site for more information on your state’s participation in Medicaid expansion.
What Is The Cost of Healthcare Without Insurance?
The examples in this article featured relatively young and healthy people who most likely would not need a lot of medical care throughout the year. Some very young people may even get away with paying the penalty fee for non-compliance rather than spending money on health insurance they feel they don’t need. However, the cost of insurance rises for everyone if people refuse to participate in Obamacare. And just because you pay the fine doesn’t mean that you have coverage in case of an emergency. In fact, if you need medical treatment but lack insurance then you will be liable for 100 percent of the cost out-of-pocket.
Did you know that a significant portion of debt in the America comes from unpaid medical bills? In fact, unpaid medical bills are the leading cause of bankruptcy in the United States as of 2013. Even people with insurance can sometimes struggle to pay high deductibles and out-of-pocket expenses, so imagine what people without insurance will pay when they need emergency appendectomies or life-saving vaccines. With so many billions of dollars on the line, it’s important to consider the whole cost of healthcare rather than the upfront cost of increased premiums.
If it works correctly, then Obamacare may lower the cost of healthcare in indirect ways as well. For example, one of the ten essential benefits mandated by the Affordable Care Act is free preventative care. This includes access to yearly screenings for high blood pressure, high cholesterol, breast cancer and colon cancer. If more people have access to these valuable preventative services, then people will stay healthier and reduce the burden on the healthcare industry as a whole. Over time, these costs add up to real savings and better, more affordable healthcare for everyone.
When considering the cost of Obamacare, you need to take into account various factors such as long-term implications, personal contributions and the cost of total healthcare reform in the United States. There’s no easy or straightforward answer to the question of cost, but you can see how the new healthcare law will benefit millions of previously uninsured Americans. If everyone contributes to the total cost of the program, then Obamacare can work to provide better protections and more efficient healthcare regardless of the type of coverage you obtain. And since the goal of the Affordable Care Act is to reduce wasteful spending and strengthen consumer protections, the financial cost of healthcare reform may be offset by its many benefits.