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Jul 10

How to Calculate Obamacare Subsidies




There is a lot of talk these days surrounding these subsidies that you can get through health care reform (commonly penned Obamacare).  The problem is, how much subsidy can you get?  Well, unfortunately until health insurance premiums get published, we really can’t say for certain.  I did write an article about how to qualify which you might want to review to understand the background of all of this.  It goes into detail on how to calculate your Modified Adjusted Gross Income (MAGI).  This is the number that is used when determining your household income in the following charts.  For most people, it will simply be your adjusted gross income which can be found on line 37 of your 1040, I would consult your tax adviser to verify your individual situation.

Even though I can’t tell you now what your subsidy will be or how much you will be paying for health insurance on the exchange, I can however point to some charts that do a great job of giving some very good examples of estimates you can expect and how everything works together.

Our first chart shows an example of premium and subsidy estimates for a 40 year old individual.  FPL stands for Federal Poverty Level.


FPL 2013

 
 

100%*

133% *

150%

200%

250%

300%

350%

400%

2013 Household Income 

$11,490

$15,282

$17,235

$22,980

$28,725

$34,470

$40,215

$45,960

% of Income Premium Capped at:

0% – 2.0%

0% – 3.0%

4.00%

6.30%

8.10%

9.50%

9.50%

9.50%

Max Amount of Monthly Premium

$0 – $19

$0 – $38

$57

$121

$193

$273

$318

$364

 

Average Silver Monthly Premium 

$321

$321

$321

$321

$321

$321

$321

$321

Average Silver Annual Premium

$3,852

$3,852

$3,852

$3,852

$3,852

$3,852

$3,852

$3,852

                 
Federal Tax Subsidy (Monthly)

up to $302

up to $283

$264

$201

$129

$49

$3

$0

 

Monthly Premium Cost

$0 – $19

$0 – $38

$57

$121

$193

$273

$318

$321

Annual Premium Cost

$0 – $228

$0 – $456

$684

$1,452

$2,316

$3,276

$3,816

$3,852

Penalty for Individuals Not Covered
Annual Penalty 2014

$115

$153

$172

$230

$287

$345

$402

$460

Annual Penalty 2015

$325

$325

$345

$460

$575

$689

$804

$919

Annual Penalty 2016

$695

$695

$695

$695

$695

$862

$1,005

$1,149

Source: Zane Benefits

 

 

This chart shows the same info, but for a family of four with both parents at 40 years old.


FPL 2013

 
 

100% *

133% *

150%

200%

250%

300%

350%

400%

2013 Household Income 

$23,550

$31,322

$35,325

$47,100

$58,875

$70,650

$82,425

$94,200

% of Income Premium Capped at:

0% – 2.0%

0% – 3.0%

4.00%

6.30%

8.10%

9.50%

9.50%

9.50%

Max Amount of Monthly Premium

$0 – $39

$0 – $78

$118

$247

$397

$559

$653

$746

 

Average Silver Monthly Premium 

$962

$962

$962

$962

$962

$962

$962

$962

Average Silver Annual Premium

$11,544

$11,544

$11,544

$11,544

$11,544

$11,544

$11,544

$11,544

 

Federal Tax Subsidy (Monthly)

up to $923

up to $884

$844

$715

$565

$403

$309

$216

 

Employee’s Monthly Premium Cost

$0 – $39

$0 – $78

$118

$247

$397

$559

$653

$746

Employee’s Annual Premium Cost

$0 – $468

$0 – $936

$1,416

$2,964

$4,764

$6,708

$7,836

$8,952

Penalty for Individuals Not Covered
Employee’s Annual Penalty 2014

$285

$313

$353

$471

$589

$707

$824

$942

Employee’s Annual Penalty 2015

$975

$975

$975

$975

$1,178

$1,413

$1,649

$1,884

Employee’s Annual Penalty 2016

$2,085

$2,085

$2,085

$2,085

$2,085

$2,085

$2,085

$2,355

Source: Zane Benefits

 

As you can see, the less you bring home, the less you will have to pay towards your health insurance premiums.  The key component is to see what percentage of income you will be capped at towards your premium.  This will be key in determining your subsidy.  Please note, in Iowa, given that the federal government approves our plan for Medicaid Expansion, those between 100 and 138% of FPL will get fully subsidized health insurance.  Also, those between 138 and 250% FPL will also get assistance paying for other out of pocket expenses such as copays, deductibles and coinsurance.

The actual amount of subsidy you receive will be based on the cost of the second lowest priced Silver Plan.  To figure the subsidy amount from there, you will take your income and multiply it by the percentage in the above chart.  From there, subtract that number from the premium for the second lowest Silver Plan and that result is your subsidy.  Because of this last piece of information, we won’t know how this will unfold for everyone until premiums are released.  I don’t expect that to happen until September or later.

After you get your subsidy amount, you can either buy that Silver Plan, or save money by applying your subsidy toward a Bronze Plan, or upgrade to a higher Gold or Silver Plan.  Regardless of which plan you choose, your subsidy will remain the same.




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