Because it looks like we’re stuck with Obamacare (unless Chief Justice Roberts grows tired of media adulation before other constitutional challenges to the law reach the Supreme Court), here are some tips to help you make money from the law:
If you’re like most people, you’ll be able to qualify for generous subsidies from the federal government to purchase health insurance. The federal government will pay up to 100% of the cost of health insurance for individuals whose household income does not exceed four times the federal poverty level. Last year, four times the federal poverty level was $44,680 for an individual and $92,200 ($115,280 in Alaska) for a family of four.
If your household income is too high to make you eligible for Medicaid but too low to make you eligible for federal subsidies to purchase health insurance, either try to get another job or reduce your income. Under Obamacare, the federal government will help people purchase health insurance only if their household income is at least 100% of the poverty level for a family of their size. Those with less income will have to do without health insurance if their state Medicaid program doesn’t cover them.
If you can qualify for premium assistance, don’t get a job with an employer that offers health insurance, particularly if you’re married and/or have children. If you take a job with an employer that offers health insurance, you won’t be eligible for federal premium assistance. Worse, employers have to offer health insurance that is affordable for individuals (i.e., costing no more than 9.5% of an individual’s wages) but don’t have to offer affordable coverage for families.
Live with the person you love; don’t get married. If you live with someone, that person’s income won’t count when determining your eligibility for federal premium assistance. But it will count if you get married. For example, if your income is $44,000 and you’re living with someone making $40,000, you each can qualify for federal premium assistance. But if you marry, neither of you can qualify for assistance. Not getting married is good financial advice in general during the Obama administration because the president has been including a marriage penalty with each of his new taxes.
Don’t accept a raise until you’ve talked with your tax adviser. Before accepting a pay raise, make sure the added money won’t disqualify you for federal premium assistance or reduce the amount of assistance by more than the amount of the raise. Whenever possible, get raises in the form of nontaxable compensation (such as employer contributions to a retirement or flexible spending plan or educational assistance).
If you have children who are dependents, keep close tabs on their summer earnings. Although it’s generally not considered a good idea these days to have your children stand out from their peers by showing initiative and a work ethic, it’s a particularly bad idea if you want the federal government to subsidize your health insurance. Money that dependents earn is added to your household income and can disqualify you for premium assistance.
If your state hasn’t established an exchange to sell health insurance, consider moving to a state that has. Obamacare says it won’t pay health insurance premiums for residents of states that haven’t established an exchange. The Obama administration has said that it doesn’t matter what the law actually says, but there’s always a chance that the courts will enforce the law as written.
If it’s going to cost you more for health insurance than the penalty for not purchasing a policy, skip the health insurance. After all, insurers will no longer be able to deny you coverage if you have a pre-existing condition. With careful planning, you can even avoid the penalty for not purchasing insurance. All you have to do is claim enough withholding allowances so that you’re never owed a refund. Unlike other tax penalties, the IRS can’t garnish your wages or seize any of your property to collect what you owe. It can only deduct the penalty from any refund you’re due.
These are just a few examples of the perverse financial incentives offered by Obamacare, which has been intentionally or unintentionally designed to fail if people act in their self-interest. For example, if the number taking advantage of subsidies only doubles from the Congressional Budget Office’s 25 million estimate, that will increase the 10-year cost for Obamacare by trillions of dollars.
The bankruptcy of Obamacare won’t bother people (like the president) who’ve always preferred that the government directly provide health care. But those enamored with government-provided health care like Britain’s should read about Britain’s Stafford Hospital, where as many as 1,200 people died needlessly during a three-year period because of care that an investigative commission described as “appalling” (people denied food and water; wrong medications administered; needed medications denied; medical equipment not used because it was broken or no one knew how to operate it; pleas for help ignored). That governmental care was neither competent nor compassionate.
David Gibberman, a lawyer, writes about legal and financial matters for professionals, college students, and the general public.