Is $20,000 Per Year “Affordable” Health Care?

Many people seemed to miss the news these past two weeks about how the Internal Revenue Service came out with a calculation estimating that the cheapest health insurance plan available in 2016 will cost the average family of five $20,000 for the year. Maybe that is because the liberal media doesn’t want to broadcast it, like they don’t want to tell Americans the truth about a lot of things regarding this legislation.

Remember that “Obamacare,” as the legislation is often called, really stands for the “Affordable Care Act.”  By 2014, Americans are required to purchase health insurance or pay a tax (or a “penalty” as the legislation prefers to word it) to the IRS.  Are you currently paying $20,000 for your health care premiums?  Wasn’t the whole point of this legislation to make it more affordable to everyone?

Many people currently have health insurance through their employers, but don’t expect for that to remain the same.  The next year is going to bring about an upheaval in health care plans and policies.  If you find yourself without coverage anymore thanks to an employer who decides to take the cheaper route and pay the fines instead of providing your healthcare any longer, you might be shocked at the sticker price when you have to go purchase your own coverage.

Be glad if you still have a full-time job and a reason to even believe you will still be covered by your employer next year.  After the joy wore off from discovering we had survived the Mayan calendar’s prediction of doom, many Americans woke up facing 2013 only to find that their employers had reduced their work weeks from 40 hours down to 29.5 in order to escape  healthcare fines and penalties.  Good luck finding a second job that just hires workers for 10.5 hours a week, so expect less income unless you do (that’s a cut of 25% in pay, by the way).

By the year 2014, the number of part-time workers will increase significantly.  Most government and university workers will find themselves having their hours reduced, along with restaurant and retail employees.  The cost to provide healthcare or pay the $2000 per employee fine is just too much, and the only way around it for many employers is to reduce hours.

So back to that IRS figure of $20,000.  They calculated that number based on a family of five obtaining what is called the “Bronze Plan,” and this is the cheapest plan available.

There will also be Silver, Gold and Platinum plans, which will cost much more.

In the original Obamacare laws that were passed, there was supposed to be a cap of $2,085.00 in penalties per families who chose not to purchase insurance in 2016.  However, according to the new IRS rules and regulations, this same family who would have to spend $20,000 for the year in insurance would now pay $2,400 in penalties for not doing so.  Remember, Obamacare gave the IRS the power to change the rules if they want, so expect much more of that in the future.

This is exactly how the regulation is worded in the example used by the IRS to calculate the $20,000 annual national average for a family of five under the bronze plan premium:

“(i) In 2016, Taxpayers H and J are married and file a joint return. H and J have three children: K, age 21, L, age 15, and M, age 10. No member of the family has minimum essential coverage for any month in 2016. H and J’s household income is $120,000. H and J’s applicable filing threshold is $24,000. The annual national average bronze plan  premium for a family of 5 (2 adults, 3 children) is $20,000.

(ii) For each month in 2016, under paragraphs (b)(2)(ii) and (b)(2)(iii) of this section,  the applicable dollar amount is $2,780 (($695 x 3 adults) + (($695/2) x 2 children)).   Under paragraph (b)(2)(i) of this section, the flat dollar amount is $2,085 (the lesser of $2,780 and $2,085 ($695 x 3)). Under paragraph (b)(3) of this section, the excess income amount is $2,400 (($120,000 – $24,000) x 0.025). Therefore, under paragraph (b)(1) of this section, the monthly penalty amount is $200 (the greater of $173.75 ($2,085/12) or $200 ($2,400/12)).

(iii) The sum of the monthly penalty amounts is $2,400 ($200 x 12). The sum of the monthly national average bronze plan premiums is $20,000 ($20,000/12 x 12).  Therefore, under paragraph (a) of this section, the shared responsibility payment imposed on H and J for 2016 is $2,400 (the lesser of $2,400 or $20,000).”

Of course, there are certain people who will be entitled to exemptions  (like people who are incarcerated, and illegals who use all the benefits of the healthcare system but will still not be required to pay anything into it).

Perhaps if you have a PhD in mathematics, you can read the other examples used in the regulation and see how to calculate what your family might owe based on percentages of household income in relation to the U.S. Federal Poverty Line and credits allowable.  Here is one example used by the IRS to see what a married couple with two children will pay if they are eligible for government sponsored coverage:

“Example 3. Family with some members eligible for government sponsored coverage. (i)     In 2016 Taxpayers U and V are married and file a joint return. U and V have two children, W and X. U and V are ineligible to enroll in minimum essential coverage other than coverage in the individual market for all months in 2016; however, W and X are eligible for coverage under CHIP for 2016 at an annual cost of $1,000 per child. The annual          premium for U, V, W, and X’s applicable plan is $20,000. The adjusted annual premium for the second lowest cost silver plan that would cover U and V (the applicable benchmark plan (within the meaning of §1.36B-3(f)) is $12,500. U and V’s household income is $50,000, which is 217 percent of the Federal poverty line for a family size of 4  for the taxable year. W and X do not enroll in CHIP coverage.”

Under paragraph (e)(4)(ii)(C) of this section, the credit allowable under section 36B is determined pursuant to section 36B. With household income at 217 percent of the Federal poverty line, the applicable percentage is 6.89. Each month in 2016 is a coverage month (within the meaning of §1.36B-3(c)) for U and V, but no months in 2016 are coverage months for W and X because they are eligible for CHIP coverage. The maximum credit allowable under section 36B is the excess of the premium for the applicable benchmark plan over the product of the household income and the applicable percentage ($9,055). Therefore, under paragraph (e)(4)(ii)(A) of this section, the required contribution is $10,945. Under paragraph (e)(1) of this section, U, V, W, and X lack affordable coverage    for 2016 because their required contribution ($10,945) exceeds 8 percent of their household income ($4,000).”

So when people begin to realize what this means to the average family, the liberals will protest and reassure Americans that only the “rich” will have to pay the exorbitant costs while the people who make less money will pay far less.

So let’s see…. according to the first example, a family of five making $120,000 pays $20,000 per year on the cheapest plan available.  That is 16.7% of their income.  Being pre-tax dollars, the family falls into the 25% tax bracket, so after tax payments and health insurance premiums, the family is left with just under $70,000 of take-home pay to take care of their family of five.

According to the second example, a family of four with certain credits making $50,000 per year pays $10,945 per year on the cheapest plan available.  That is 22% of their income, even more than the first example if you look at the percentages.  You add their tax payment to that of $7,500 (being in the 15% tax bracket), and that leaves this family of four with less than $32,000 a year in take home pay.

So the numbers are relative.  It’s obvious to me that more and more families will choose to pay fines and go without insurance because they will need the money for living expenses.  Whether it’s $20,000 saved for a family making $120,000 per year, or $11,000 saved for a family making $50,000 per year, there will be fewer and fewer families who will opt to spend the money for coverage.

Instead of “affordable coverage for all Americans,” we are about to have less people insured than ever before!

To read the entire IRS regulation, go to http://www.irs.gov/PUP/newsroom/REG-148500-12%20FR.pdf