We spoke about the tax trap in 2010
2011 and 2012 thru our newsletter. Now that Obamacare is months away CNBC
is finally looked at one of the problems. They looked only at the
difference between the minimum help for people buying Obamacare though.
The subsidies are truly breathtaking for lower wage folks until at 100% the poverty
level the taxpayer funds 100% of any Obamacare plan (up to $30K per family)
plus all copays and other costs. For an individual to jump from a low
paying service company job to a entry level regular career job, as those on
welfare are supposed to do, the career job will have to pay far more than it
currently should. For instance going from a McDonalds clerk to an
apprentice plumber would mean the plumber would have to pay almost $25 per hour
on a 40 hour week just to be equal; Same for engineering, secretarial, nurses,
etc. It pays to be poor under Obamacare. And when you factor in all
the other benefits It really pays to be poor. On the other hand
think of the person who loses the benefits of Obamacare because they make $1
more...Just think, their taxes pay for those making $1 less. If is not
only falling off the cliff it is being pushed off with a lead weight attached
to you. Everything about this was known when it passed the house and
senate in 2010 but neither party even discussed it. Something to think
about if you go to a town hall to meet your candidate. By the way the
costs and losses in California beat the ones in the east.
Anyhow here it the CNBC article. They knew in 10 too. Why now? well it's too late to do anything about it is my guess.
Be careful you don't
fall off the Obamacare "cliff" when the boss asks you to put in some
overtime.
Working more could
ultimately mean thousands of dollars less for you under a quirk in the new
health-care law going into effect this fall. This could prompt some people to
cut back on their hours to avoid losing money.
"It's sort of an
absurd scenario," said Jonathan Wu, ValuePenguin.com's co-founder.
"It's something for people to be aware of."
In that scenario, an
individual or family whose annual income surpasses maximums set by the federal
government—if only by $1—will totally lose subsidies available to buy health
insurance under the Affordable Care Act.
The loss of those
subsidies in some cases will mean that people potentially would have been
better off financially if they had worked less during the year, Wu said. And
they then would have to work significantly more to make up for the lost
subsidy.
"I think they'd
be surprised to see how drastic it is," said Wu. "I'd be kind of
shocked to see if I make $100 less (in total income each year), I get all these
benefits, but if I make $100 more, I get nothing."
"You basically
don't want to fall in that hole," said Wu, adding that he believed contractors
and others with more control over their incomes would be apt to adjust their
hours worked to avoid the subsidy cliff.
He also said that
because of lower insurance premiums often offered younger people, the effect
will more likely be seen by older people. But "you will see it across all
age groups" in the seven states including New York and Vermont where
insurance premiums are either barred from being affected by age, or restricted
from being dramatically affected, he said.
Under the ACA,
federal subsidies in the form of tax credits to buy insurance on new state
health insurance exchanges will be available to millions of people who can
start enrolling on those exchanges Oct. 1. The subsidies are available to
people or families whose incomes total 400 percent above the federal poverty
level or less, and are designed to cap their insurance premiums at 9.5 percent
of their total income.
Doing the math
For a single person,
that FPL income maximum is $45,960 per year. The maximums are adjusted upward for
couples and families until maxing out at $94,200 for a family of four.
Under a scenario that
ValuePenguin.com identified, a couple in Ohio, both age 50, would be eligible
for subsidies worth $3,452 to purchase a so-called silver insurance plan—a
moderately priced level of benefits under the ACA's scheme—that costs $9,346
annually if they made up to $62,040 per year.
But if they made just
$1 more than that, they would lose the subsidy. Wu noted that the couple then
would have to earn at least $65,492 to make up for the lost subsidy.
Maximum
income levels for Obamacare insurance subsidies, and premium maximums
Household
Size
|
400%
FPL
|
Premium
Cap
|
1 (Single)
|
$45,960
|
$4,366
|
2 (Couple)
|
$62,040
|
$5,893
|
3
|
$78,120
|
$7,421
|
4
|
$94,200
|
$8,949
|
Source: ValuePenguin.com
In New York, a family
of three whose annual income totals $78,120, would pay $12,784 for the second-lower-priced
silver plan on that state's insurance exchange. After getting a $5,363 tax
credit, the family's net cost for the insurance would be $7,421.
But if the family
earned even slightly more than $78,120, they would have to pay the entire $12,784
for the insurance because they then wouldn't qualify for the subsidy.
To make up for that,
the family's annual income would have to reach $83,483, Wu said.
The age effect
The stark effect of
peoples' age in determining their risk from the subsidy cliff is seen in two
examples from Connecticut.
There, Wu said, a
27-year-old single man would pay $3,636 annually for the second-cheapest silver
plan—less than the $4,366 cap on insurance premiums for individuals earning
$45,960 or less annually. That person would not be eligible for subsidies, and
thus would see no disincentive in working more hours.
But the annual
premiums for a 50-year-old Connecticut couple buying that plan would be
$12,468. If their combined incomes were $62,040 or less, they would receive
$6,575 in subsidies to offset the cost.
However, if their
income was more than that, they would lose the subsidies, leaving them out of
pocket $6,575. They then would have to earn at least $68,615 to make up for
that lost subsidy, Wu said.
