Confusion and frustration are the emotions felt by thousands of East Texans signing up for health insurance during this year’s open enrollment. Read this important report from KTRE.
Rules and regulations Obamacare imposes on insurance plans sold in the individual market make means narrower networks and drug formularies. The participating insurance companies are curtailing these coverage aspects to keep premiums lower.
Narrow Provider Networks. An analysis by the consulting firm McKinsey & Co. found that 48 percent of all exchange networks nationwide are narrowed. This significantly reduces provider choices for those who purchase insurance through the Obamacare exchanges.
Limited Drug Formularies: In addition to limited access to providers, a lot of Obamacare’s plans offer more limited drug coverage. This means that those insured through the exchange may find that they do not have the ability to fill prescriptions without significant cost sharing that would burden them with thousands of dollars of out of pocket expenses, even after they had exhausted their deductible.
It’s not surprising that plans are more focused on meeting government targets and dictates than competing based on consumer demands that would result in better quality and lower cost. Thus, as The Heritage Foundation has noted, “[A] precondition to any well-functioning, consumer-centered market is that lawmakers avoid unduly restricting either the options available to consumers or the scope for supplier innovation.”
The IRS grants an exemption from the Shared Responsibility Payment (tax penalty for being uninsured with a MEC plan) if the lowest premium of an available Bronze plan exceeds 8% of a Household’s Income. The median household in the US is roughly $52,000, so for the average American individual or family, their annual premium would have to be less than $4160 (8% of $52,000) to avoid being subject to the tax penalty. As a result of Health Insurance premiums increasing by double digits in most places, many people who would have been subject to paying the penalty for the plan year of 2015 would no longer have to pay the penalty in 2016.
Example 1: Male:45 Female:45 Children:2, ZIP:53217
Lowest cost Bronze Plan = $1054/ month, or $12,648 annually.
For the example 1, as long as this family’s household income is < $158,100, they will not be subject to the tax penalty, as the premium of $957/ month exceeds 8% of their household income.
Example 2: Male:45 ZIP:53217
Lowest cost Bronze Plan = $370/ month, or $4,440 annually.
For the Example 2, as long as this Individual’s income is < $55,500, he will not be subject to the tax penalty, as the premium of $370/ month would exceed 8% of his household income.
Example 3: Male:45 Female:45 Chlidren:2 ZIP:53217
Lowest cost Bronze Plan = $1000/ month, or $12,000 annually.
Let us assume for this example that this family’s income in 2015 is $155,000. For this year, they will be subject to the tax penalty, as the premium of $1000/ month does not exceed 8% of their household income. If premiums increase by 20% for the 2016 plan year, however:
Lowest cost Bronze plan = $1200/ month, or $14,400 annually
For 2016, this same family would not have to pay a penalty, despite the fact that they would have had to if they went without a MEC plan in 2015.
Effectively, ACA tax penalties are leveled as a function not only of a Household’s Income, but also of their Individual Medical plan’s premium! There has literally never been a better time to market low-cost, high-benefit Short Term Medical Insurance plans as an ACA alternative, as Individual Medical premiums are making fewer Americans than ever subject to the ACA tax!
Want to see for yourself? Follow these links to government sponsored Shared Responsibility calculators:
- The Individual Shared Responsibility Provision Payment Estimator: http://www.taxpayeradvocate.irs.gov/estimator/isrp/
- Tools to help you claim the affordability exemption and calculate your premium tax credit: https://www.healthcare.gov/taxes/tools/