Health Care subsidies

[dm]

I'm wondering how the health care subsidies are going to work. If they are still there in 2014. I have looked at some of the calculators, but I'm not sure if the income is your gross income or taxable income.

If my numbers are correct I can show $58,000 in income, family of two, and only have to pay 9.5% for insurance. Or $5,510, which is much lower than the $13,000 I'm paying now.

I can definatly make this work if it is taxable income.

 

[dgoldenz]

Health Reform Subsidy Calculator - Kaiser Health Reform

 

[Coach]

Health Reform Subsidy Calculator - Kaiser Health Reform

A little playing around with this calculator produces some interesting results. This is what I came up with for my cost at various income levels:

Income $30,000, my cost $2,509
Income $40,000, my cost $3,800
Income $46,000, my cost $4,375
-- cross over 400% of the poverty level --
Income $47,000, my cost $10,172
Income $250,000, my cost $10,172

If this is the way it is really going to work, income tax brackets may pale in significance for some of us.

Coach

 

[dgoldenz]

A little playing around with this calculator produces some interesting results. This is what I came up with for my cost at various income levels:

Income $30,000, my cost $2,509
Income $40,000, my cost $3,800
Income $46,000, my cost $4,375
-- cross over 400% of the poverty level --
Income $47,000, my cost $10,172
Income $250,000, my cost $10,172

If this is the way it is really going to work, income tax brackets may pale in significance for some of us.

Coach

Try it with a 64 year old family with $93,600 income - $24k tax credit and $8k cost of coverage. Then try it again at $93,700 - $0 tax credit and $33k cost of coverage. I guess when you earn that extra $100, you are now "rich" and can afford to pay $2,900/month for health insurance instead of $700/month. What moron would want a raise when they lost a $24k tax credit by earning another $100? Scary for future economic growth.

 

[dm]

Try it with a 64 year old family with $93,600 income - $24k tax credit and $8k cost of coverage. Then try it again at $93,700 - $0 tax credit and $33k cost of coverage. I guess when you earn that extra $100, you are now "rich" and can afford to pay $2,900/month for health insurance instead of $700/month. What moron would want a raise when they lost a $24k tax credit by earning another $100? Scary for future economic growth.

I noticed that also. Overtime could put you over also. How would you get someone to work if it put them over the 400 percent number?

 

[dgoldenz]

I noticed that also. Overtime could put you over also. How would you get someone to work if it put them over the 400 percent number?

You couldn't. I haven't calculated the number but the marginal tax rate going over 400% of FPL is insane.

 

[seabourne]

It's going to make a big difference if that is total or taxable number. If it's taxable, you're going to see me calculating just how much i might need to donate at the end of December to stay at about 399%. Not such a big deal at 35 in 2014 (less than $400 subsidy) but gets ugly in your mid to late 50s!

 

[REWahoo]

It is difficult for me to believe those "off a cliff" provisions will not be modified to a more graduated scale.

 

[ERD50]

It is difficult for me to believe those "off a cliff" provisions will not be modified to a more graduated scale.

My House Rep in Congress mentioned they are going after the 1099 requirement debacle, seeking to get that section removed (they already voted for repeal of the entire bill, but that isn't going to go anywhere). Even Obama cited the 1099 issue in his SOTU address (which got applause - from the people who supported it a year ago? - I need a 'head-scratching' emoticon here - ).

I haven't seen much written about this steep cliff - it really is incredibly bad. I'm not sure it's getting any attention in Congress. It's another example that indicates the people who passed/signed this bill really had no idea what it really meant.

-ERD50

 

[ERD50]

Try it with a 64 year old family with $93,600 income - $24k tax credit and $8k cost of coverage. Then try it again at $93,700 - $0 tax credit and $33k cost of coverage. I guess when you earn that extra $100, you are now "rich" and can afford to pay $2,900/month for health insurance instead of $700/month. What moron would want a raise when they lost a $24k tax credit by earning another $100? Scary for future economic growth.

Here's an even more striking example, down in the more 'average working man' pay scale :

59 YO single -

$46,021 Income = $4,372 premium ($7834 Government tax credit)

Now, our 59 YO worker miscalculates his OT, or gets an unexpected bonus of a SINGLE DOLLAR, and....

$46,022 Income = $12,206 premium ($ZERO Government tax credit)

That SINGLE DOLLAR cost him $7,834 in take home pay! He is going to be mad, mad, mad. Imagine, getting a $7,834 haircut because you made an extra dollar! Employees are going to be asking for, no demanding, caps on their salary! This is just Bat-Sh!t crazy!

-ERD50

 

[ziggy29]

I understand the motivation behind the subsidies, but as implemented, it seems to be an effective "tax bubble" (in the form of reduced subsidy) on the order of 15-18% for middle-income households who buy their own insurance. In a solidly middle class income range, for every $1000 more you earn, you lose at least $150 in subsidies. It isn't a tax per se, but it walks like one and quacks like one -- and it's rather massive.

 

[FIRE'd@51]

It's another example that indicates the people who passed/signed this bill really had no idea what it really meant.

This is the type of egregious thing that happens with a two-thousand page bill that is voted on by people who haven't read it carefully, if at all.

 

[samclem]

There will definitely be creative accounting at the corporate level, too, to take advantage of the subsidy money. Company X will keep all its management folks earning higher salaries and continue to provide health care coverage. They will spin-off Company Y to be the employer of all their lower-income employees. Company Y won't offer health care, will pay the minor penalty, and all the workers will get the government subsidies and will be in the exchanges.

I'm assuming we'll next hear from DC about how these more cumbersome management structures and the previously mentioned government intervention in the labor market through abrupt marginal [-]taxation[/-] subsidy rates will boost US competitiveness and job creation. "The new law created thousands of high-paying jobs for accountants and administrative personnel . . . "

My DD is 21 and, under the new law, will be kept on our employer-provided insurance (Tricare) until she's 26. For that privilege, it looks like she (I) will pay about $200 per month. Given her very low anticipated earnings, she'd be better off without this coverage and going with the government subsidy (the out of pocket premiums would be just $100 per month). Of course, lots depends on the actual policy details, but I think there will be many people and companies finding ways to get those subsidy dollars. Some studies indicate the CBO estimates of the cost of these subsidies were much too low, as they didn't account for people and companies responding to these incentives.

Unanticipated effects and costs--who'd a thunk it?

 

[dm]

It's going to make a big difference if that is total or taxable number. If it's taxable, you're going to see me calculating just how much i might need to donate at the end of December to stay at about 399%. Not such a big deal at 35 in 2014 (less than $400 subsidy) but gets ugly in your mid to late 50s!

This is the info I'm looking for. Is it taxable income or total? That can be a big difference.

 

[M Paquette]

I wouldn't worry about it. The tax credit for health insurance looks like a target for defunding.

Now, if you want something to worry about, think about how far a $491 monthly voucher ($5,900/year) will go in buying individual medical coverage when you hit age 65 (unless you means-test at the poverty line for a subsidy), under the Roadmap for America’s Future Act of [-]2010[/-]2011.

 

[Mulligan]

I prefer what I have today. $735 in annual premiums (with a 5K deductible) and pray I dont get sick or need any treatment, compared to what you are all posting it would cost yearly to purchase on a $75,000 income. Not much good for me to be Er'd if I had no money at all thanks to health premiums.

 

[dm]

I prefer what I have today. $735 in annual premiums (with a 5K deductible) and pray I dont get sick or need any treatment, compared to what you are all posting it would cost yearly to purchase on a $75,000 income. Not much good for me to be Er'd if I had no money at all thanks to health premiums.

I wonder if those planes will still be around. It will be for the government to decied how much insurance we have to buy.

 

[M Paquette]

I wonder if those planes will still be around. It will be for the government to decied how much insurance we have to buy.

I'm fine with seeing some of the more absurd plans drop dead. There were a bunch of, to be blunt, ripoff plans sold to college students and parents. "Pays up to $2,500 for hospitalization!" Yeah. That'll work. "Covers injuries due to student sports activities only." "Does not cover cancer or cancer-related illnesses." (All from campus insurance policies I looked at for the kids when they went off to school. )

Having a minimum level of coverage required to pass off an insurance policy as health insurance is a good thing. It sets a standard, and makes price comparison easier. We can argue about what that level should be. (I think Congress was generous with other people's money again...)

 

[ziggy29]

I'm fine with seeing some of the more absurd plans drop dead. There were a bunch of, to be blunt, ripoff plans sold to college students and parents. "Pays up to $2,500 for hospitalization!" Yeah. That'll work. "Covers injuries due to student sports activities only." "Does not cover cancer or cancer-related illnesses." (All from campus insurance policies I looked at for the kids when they went off to school. )

This is the *opposite* of what insurance should be. Insurance should be protection against catastrophic loss, IMO, not merely paying for a few small things and then leaving you on your own to be bankrupted by the big things. Good insurance should leave you to self-insure smaller, absorbable financial hits while protecting you from the ruinous ones. These plans do the exact opposite.

Dental "insurance" is very much this way, too, which is why it rarely makes sense to purchase unless it's heavily employer-subsidized.

 

[haha]

It is difficult for me to believe those "off a cliff" provisions will not be modified to a more graduated scale.

Well, the government is the planner here......

 

[kramer]

Presumably, if someone is going to buy a policy for the 2014 year, there would be open enrollment at the end of 2013. So 2012 income would go into the subsidy calculation?

Or is it done after the fact on your taxes, in 2015, when you file your 2014 income taxes, and you would get a refund. Presumably, you were paying an estimated premium during 2014 that might have been based on your 2012 income and the subsidy would be corrected one way or another on your taxes.

The distinction is important for those of us able to control our annual income.

Also, is there any kind of net worth test? For instance, in the lower income ranges, it says to enroll in Medicaid. Well, in the state of California, for instance, Medicaid allows a maximum net worth in taxable accounts of $2,000 for individuals and $3,000 for families. Otherwise, you are ineligible.

Kramer

 

[Gone4Good]

Here's an even more striking example, down in the more 'average working man' pay scale :

59 YO single -

$46,021 Income = $4,372 premium ($7834 Government tax credit)

Now, our 59 YO worker miscalculates his OT, or gets an unexpected bonus of a SINGLE DOLLAR, and....

$46,022 Income = $12,206 premium ($ZERO Government tax credit)

That SINGLE DOLLAR cost him $7,834 in take home pay! He is going to be mad, mad, mad. Imagine, getting a $7,834 haircut because you made an extra dollar! Employees are going to be asking for, no demanding, caps on their salary! This is just Bat-Sh!t crazy!

-ERD50

Sure it's stupid, but your 59 year old pays the full premium for six years and then goes on Medicare where he pays something ridiculously small. The size of the "cliff" largely reflects how expensive the policy is, which is largely determined by age. The closer you are to Medicare, the bigger the cliff. But the closer you are to permanent relief, too.

Of course under the current system the 59 year old has to pay $12K regardless of whether he makes $46,021 or $46,022 or $30,000. That's assuming he can get an individual policy at all.

 

[ERD50]

Sure it's stupid, but your 59 year old pays the full premium for six years and then goes on Medicare where he pays something ridiculously small. The size of the "cliff" largely reflects how expensive the policy is, which is largely determined by age. The closer you are to Medicare, the bigger the cliff. But the closer you are to permanent relief, too.

Of course under the current system the 59 year old has to pay $12K regardless of whether he makes $46,021 or $46,022 or $30,000. That's assuming he can get an individual policy at all.

No, the 'cliff' is not explained by any of that. The maximum cost can be explained by what you say. But there is no rationale for a single dollar in earnings to increase a tax bill by $7,834.

And, he goes on Medicare in six years regardless of this bill - how can that be a factor (it's not)?

A 'progressive' slope is defend-able, but not one with a slope greater than 1:1. That's just crazy, and I think I'll write my Reps in Congress that voted for this (the ones that are still there) to explain it (I doubt they even realize it).

-ERD50

 

[M Paquette]

Well, the government is the planner here......

Yah. In my budgeting and planning, I am assuming no subsidies. Since we're looking at a government program that's both a hot potato and subject to the funding whims of Congress, relying on a future promise of compensation strikes me as being imprudent.

They might decide to spend on something really important like the High Energy Laser Future Combat Systems Project (so we can fight al-Qaeda - no, really, its being pitched as a post-StarWars anti-terrorist platform now), or maybe build another 10 or 11 [-]targets[/-] aircraft carriers. (Yes, these are both in the 2011 budget proposals.)

 

[Gone4Good]

No, the 'cliff' is not explained by any of that.

It is in actual dollar terms. The cliff is smaller for a younger person on an absolute dollar basis. And absolute dollars is what I buy groceries with, not proportional ones.

I think I'll write my Reps in Congress that voted for this (the ones that are still there) to explain it (I doubt they even realize it).

-ERD50

That's a good thing to do, and a fair complaint. But what I think you'll find is that this isn't the result of an oversight, but the result of an attempt at giving the greatest subsidy possible to a given constituent subject to a spending constraint. A more gradual phase-out without committing more dollars would necessarily mean cutting subsidies to folks near the top of the 4x poverty threshold and either using the dollars saved to extend them to folks who make more or less. If they're given to those who make less, then we steepen the slope of the phase out, so we're really talking about relocating subsides from people who make less to folks who make more.

The other thing you'll find, is that the folks who wrote the bill are less concerned about the impact of incentives then are the folks who decided they weren't going to participate in the process to craft a better bill. The final bill reflects those choices.