Explore Alternatives to Obamacare to Save Money - Learning Center

Explore Alternatives to Obamacare to Save Money

Many Americans believe they will save money with a marketplace health plan despite the high cost of premiums. Fearing the threat of the Uninsured Tax penalty, many consumers don't realize that even with the tax penalty they can save money with term health insurance. The six illustrative scenarios below offer a glimpse at the cost of Obamacare plans, term health plans, subsidies and the uninsured tax penalty for families, couples and individuals in two different tax brackets --$100,000 and $40,000 taxable income1 --living in Denver, Colorado. The scenarios are for illustrative purposes only.

Scenario 1: Family of Four2
Taxable Income: $100,000
Silver Plan: $772
Obamacare Subsidy: None
Uninsured Tax: $2,650/year
Term Health Plan: $261.92 ($1,000 deductible; 50% coinsurance; max out of pocket $3500; policy max $2 million)

The family in this scenario is not eligible for a tax subsidy. An Obamacare plan will cost them $510 more than a Term health plan. The family would realize a premium savings of $6,120.96 by choosing a term health insurance plan. If the family does not quality for an exemption from the tax penalty they would still save $3,470.96 with a term health plan.

Scenario 2: Family of Four3
Taxable Income: $40,000
Silver Plan: $772
Obamacare Subsidy: $552/month
Uninsured Tax: $1,000
Term Health Plan: $261.92 ($1,000 deductible; 50% coinsurance; max out of pocket $3500; policy max $2 million)

Under this scenario the family qualifies for a tax subsidy of $552 reducing their monthly premium to $220. With the uninsured tax penalty of a $1,000 the family would not realize significant savings with term health insurance.

Scenario 3: Married Couple4
Taxable Income: $100,000
Silver Plan: $435
Obamacare Subsidy: None
Uninsured Tax: $2,650/year
Term Health Plan(s): $176.80 ($1,000 deductible; 50% coinsurance; max out of pocket $3500; policy max $2 million)

Not eligible for a tax subsidy, a married couple with a $100,000 taxable income would save over $3,098 a year in premiums by purchasing a term health plan for $176.80 month over the silver plan which costs $435 per month. If the couple does not qualify for an exemption to the tax penalty they would still save $448.40.

Scenario 4: Married Couple5
Taxable Income: $40,000
Silver Plan: $435
Obamacare Subsidy: $161
Uninsured Tax: $1,000/year
Term Health Plan(s): $176.80 ($1,000 deductible; 50% coinsurance; max out of pocket $3500; policy max $2 million)

In this scenario the married couple does qualify for a tax subsidy. The reduced premium of $274 on the silver plan is still $97.20 more a month than the term health plan premium of $176.80. This would still save the couple $166 a year even if they had to pay the uninsured tax penalty. Selecting a term plan with a higher deductible would save them even more.

Scenario 5: 30 Year Old Male6
Taxable Income: $100,000
Silver Plan: $218
Obamacare Subsidy: None
Uninsured Tax: $2,650/year
Term Health Plan: $176.80 ($1,000 deductible; 50% coinsurance; max out of pocket $3500; policy max $2 million)

A single male thirty years of age with an income of $100,000 will not qualify for a tax subsidy. A silver plan will cost $218 a month and a term health plan premium will be $176.80, when factoring in the uninsured tax penalty he would not save with a term health plan. Unless he was exempt from the tax penalty the individual would save with the silver plan.

Scenario 6: 30 Year Old Male7
Taxable Income: $40,000
Silver Plan: $218
Obamacare Subsidy: None
Uninsured Tax: $1,000/year
Term Health Plan(s): $88.25 ($1,000 deductible; 50% coinsurance; max out of pocket $3500; policy max $2 million)

In this scenario single male thirty years of age earning $40,000 will not qualify for a tax subsidy. A silver plan will cost $218 a month and a term health plan premium will be $41.20 less. Factoring in the uninsured tax penalty he would not save with a term health plan. Unless he was exempt from the tax penalty or chose a plan with a higher deductible the individual would save money choosing the silver plan.

Conclusion

Families and married couples that do not qualify for a tax subsidy may receive considerable savings purchasing a term health plan over a marketplace plan even if they must pay the uninsured tax penalty. Since health premiums are determined by the region of the country these scenarios are only specific to Denver and should only be used as an illustration for comparative purposes.

In a recent study conducted across the nation, it was found that a twenty-six year old female was more likely to save with a term health plan even with the uninsured tax penalty.6 Millions of American qualify for the tax exemption; consumers should not automatically think they will be subject to the uninsured tax penalty.

  1. Methodology: Obamacare quotes and subsidy determination for Denver, CO zip code 80123 were collected using the Henry J Kaiser Family Foundation Health Insurance Marketplace Calculator on 12/13/2015. The calculator did not factor ages; Obamacare premiums may vary according to age and other demographic factors that were not included in the calculator. Term health quotes for Denver, CO zip code 80123 were collected from nationshealthinsurance.com on 12/13/2015 for an effective policy date of 1/1/2016. The calculator factored ages. Tax penalty was calculated at 2.9% of taxable income.
  2. Adult Male, Aged 30; Adult Female, Aged 30; Male Child, Aged 5; Female Child Aged 3.
  3. Id.
  4. Male Aged 30; Female Aged 30
  5. Male Aged 30; Female Aged 30
  6. Emily Bazar, How to Duck Obamacare’s Tax Penalty, Jan. 30, 2015, Orange County Regiser, www.ocregister.com/articles/tax-649674-exemptions-exemption.html