Up until now, when Obamacare’s supporters and reform’s opponents squabbled over what insurance will cost in 2014, they had to rely on estimates and national averages. But now we have real numbers.
Eleven states have announced the rates that insurers will be charging in their exchanges – marketplaces where individuals who don’t have employer-sponsored coverage can shop for their own insurance.
Subsidies will be based on the cost of Silver Plan where you live
Middle-income as well as low-income people buying coverage in the exchanges will be eligible for government subsidies that will come in the form of tax credits. Anyone earning between 100 and 400 percent of the federal poverty level (FPL) (now $11,490 to $45,960 for a single person, and up to $126, 360 for a family of six) will qualify for a tax credit.
Knowing the price of a Silver plan in your region is key to calculating the size of your subsidy. Subsides will be tied to the cost of the second-least expensive Silver plan in your area. The architects of the Affordable Care Act (ACA) wanted to make sure that people who must buy their own insurance can afford that benchmark Silver plan, even in regions where health care is extremely expensive
The graph below shows average Silver plan rates in the eleven states that have disclosed premiums.
It’s worth noting that in these 11 states the least expensive Silver Plan costs 18 percent less than the non-partisan Congressional Budget Office projected.
(Ignore headlines telling you that premiums are higher: fear-mongers are comparing the announced rates to the rates insurers now charge for skimpy “junk insurance.”)
Now that we have solid information about Silver plan premiums, anyone living in California, Colorado District of Columbia, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont , Virginia or Washington can calculate his subsidy by using the price of the benchmark silver plan as his reference point – see “Four Easy Steps” below.
Even if you don’t live in one of these states, the announced rates and the examples below will give you an idea of the range of prices and the size of the subsidies Washington will be handing out.
What exactly is a Silver plan?
In the exchanges, insurers will be selling Bronze, Silver, Gold and Platinum plans. All must cover the ten benefits that Congress decided are “essential” (outpatient care, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse disorder services, behavioral health treatment, prescription drugs, rehabilitative services, laboratory services, preventative care and pediatric services, including oral and vision care for children.)
All plans also must offer free preventive care, and they cannot refuse to cover you or charge you more because you suffer from a pre-existing condition.
The only major difference between the four tiers is that Bronze and Silver plans will boast lower premiums, with higher co-pays and deductibles-up to a maximum of $6,340. After that, the insurer pays for all essential benefits. Gold and Platinum plans’ premiums will be higher, but total out-of-pocket spending will be lower.
Who is eligible for a subsidy?
If your employer offers “affordable” comprehensive insurance, you will not be able to buy coverage in the exchange. You already are receiving a subsidy from your boss. The exchanges will be open only to the self-employed, the unemployed, and employees work for a company that does not offer affordable health benefits.
How to calculate your subsidy in four easy steps
The size of your subsidy will be based on your income, the number of people in your household, and the price of the benchmark Silver plan in your region.
To calculate the size of your subsidy:
1) Use this table to find out whether your income and household size makes you eligible.
For instance, as the table indicates, a family of three with joint income up to $78,120 and a family of five reporting income of up to $110,280 can expect to receive a tax credit.
|Percent of Federal Poverty Level (FPL)|
|For each additional person, add||$4,020||$5,347||$6,030||$8,040||$12,060||$16,080|
2) Find out how much the Affordable Care Act expects you to contribute to the cost of your insurance by consulting Table 2. (If you decide not to buy insurance, you won’t have to make a contribution, but you will have to pay a penalty that begins at $95 in 2014.)
|If you earn||Your expected contribution is|
|Up to 133% of FPL||2% of your income|
|133%-150% of FPL||3%-4% of your income|
|150%-200% of FPL||4%-6.3% of your income|
|200%-250% of FPL||6.3%-8.05% of your income|
|250%-300% of FPL||8.05%-9.5% of your income|
|300%-400% of FPL||9.5% of your income|
The subsidy will make up the difference between the amount an individual is expected to contribute (based on income) and the actual cost of that silver plan.
3) Contact your state exchange and find out how much a benchmark Silver plan will cost in the area where you live. (Some of that information is already available online. See the links to individual states at the end of this post. )
4) See Table 2. Subtract the amount that you are expected to contribute (based on your income) from the cost of your benchmark silver plan. For instance, let’s say your silver plan costs $3000 a year, and you are expected to contribute $1000. You will receive a subsidy of $2,000
In Portland, Oregon, the benchmark silver plan will cost a 40 year-old $221 a month, or $2,652 annually.
If Rick earns $22,980 (or 200 percent of FPL) he would be expected to kick in 6.3 percent of his income, or $1,448 toward his insurance. (0.063 x $22,980 = $1,448)
To calculate his subsidy, he just needs to subtract $1,448 (the amount he kicks in) from $2,652 (the cost of the plan). His subsidy will be $1,204.
If he were younger, the silver plan would be less expensive and his subsidy would be smaller. In Portland, a 21-year-old buying a Silver plan from the same company would be charged $173 a month or $2,076 a year. If he earns $17,235 annually, he would be expected to spend 4 percent of his income, or $689 a year on insurance and would receive a subsidy of $1,387. ($2,076 – 689 = $1,387)
If Rick’s 40-year-old cousin lives in San Francisco – where health care is more expensive – he can look forward to a larger tax credit. In San Francisco, a 40-year-old would have to pay $352 a month, or $4,476 a year for the benchmark (second-least expensive) silver plan.
If he earned $22,980 (200 percent of the FPL) the government would expect him to spend 6.3 percent of his income on coverage, just like his cousin in Oregon. So he, too, would contribute $1,448. But because the benchmark plan in San Francisco would cost $4,476, his subsidy would be $3,028. ($4,476 – $1,448 = $3,028)
|More examples of exchange plan rates in these states:|