Cost of ObamaCare: Obama Care Cost
What Does ObamaCare Cost?
What is the cost of ObamaCare? ObamaCare, Obama's new health care law, has a massive impact on health care costs. ObamaCare's cost is estimated at up to net cost of $1.36 trillion dollars by 2023. Although Obamacare's net costs are in the trillions, the law actually reduces the growth in health care spending by tens of billions each year, reduces health care costs for many Americans, helps to insure tens of millions and is estimated to result in an overall net decrease of the deficit.
Obamacare is projected to cut the national deficit by over $200 billion during its first 10 years and over $1 trillion over the next two decades. This helps offset the up-front cost of ObamaCare. Please be aware the cost estimates are changed on a regular basis and are often quoted as being between $1 and $2.6 trillion. Our cost estimate is taken directly from the front page of the official CBO report on ObamaCare's costs. ObamaCare is paid for through collected taxes, penalties, spending cuts and reformations to the health care industry.
What Will ObamaCare Cost Me?
ObamaCare will cost most of us between 3% and 9.5% of our income after cost assistance. Cost assistance is give to low-to-middle income Americans who shop on the Health Insurance Marketplace (an online marketplace for insurance that is established by ObamaCare. See our guide to learn more about signing up for ObamaCare).
(Cost of ObamaCare Image Public Domain)
Here are some quick bullet points on the cost of ObamaCare:
• ObamaCare is slang for our new health care law the Affordable Care Act or ACA for short. The law doesn't sell health insurance, it just creates a marketplace for Americans to buy regulated, subsidized private insurance.
• Everyone has to obtain health insurance by January 1st, 2014 or pay a Shared Responsibility Fee
• If you don't have coverage, you can use the new Health Insurance Marketplace to buy a private insurance plan.
• Many Americans will qualify for lower costs on monthly premiums and out-of-pocket costs via subsidies through the marketplace.
• Cost assistance is based on income.
• The CBO estimates the average marketplace subsidy per subsidized enrollee will be $5,290 in 2014.
• Most young people and low-income Americans can get free or very low cost quality health insurance through the marketplace.
• You can only get cost assistance from the Health Insurance Marketplace!
• The average American will pay between 3% - 9.5% of their income on insurance after cost assistance.
• Insurance costing 8% of your income is considered affordable insurance for individuals. 9.5% is considered affordable for job based insurance.
• If you cannot find affordable insurance, after cost assistance, you may be exempt from the fee.
• ObamaCare says health insurance companies can price your insurance based on location, family size, age and smoking status, but not on health status or gender.
A recent study showed the price for a 21-year-old buying a mid-range policy will average about $270 a month before cost assistance. With cost assistance that 21-year-old could pay much less. Over 80% of 21 year olds in the US will be eligible for cost assistance, meaning they will be paying up to 1/10th of that $270 cost per month for quality health insurance and many may even get it for free.
Wondering What ObamaCare Will Cost You? The Average American will qualify for major cost assistance! To qualify for assistance you must use the Health Insurance Marketplace to purchase your insurance!
How Much Will Health Insurance Cost in 2014?
Everyone's costs will be different in 2014. As a rule of thumb, the less you make the less you pay (assuming you will be using the Health Insurance Marketplace to shop for health coverage). This video will help you understand some of the factors that affect your health insurance costs and the benefits of buying a plan on the exchange:
You can get an estimate of what your health insurance will cost on the marketplace by going to the health insurance premium estimate tool from healthcare.gov.
Factors that Affect What You Will Pay for ObamaCare Health Insurance
Wondering what you will pay for ObamaCare health insurance? ObamaCare does away with pre-existing conditions and gender discrimination so you can no longer be charged more or denied coverage due to your medical history or gender. Factors that still affect what you will pay for health insurance under ObamaCare are location, income, smoking status, and age.
A case study showing how Obamacare's costs work in regards to subsidies through the State marketplaces: "Affordable insurance" is capped at a percentage of your taxable income (the less you make, the lower the cap). While age affects the cost of your premium before subsidies are applied, smoking results in a "tobacco surcharge".
In other words a 27 year old non-smoking male, with no pre-existing condition, living in New Haven CT, making 200% of the FPL will pay the same as a 55 year old female, non-smoker, with a pre-existing condition, living in New Haven CT making 200% of the FPL for the same plan on their State's health insurance marketplace (Access Health CT) after premium subsidies are taken into account. (they will have access to the same out-of-pocket cost assistance as well).
The reason their costs are the same is do to the cap on the percentage of income a heath plan bought on the marketplace can cost (in their case the premium cap is 6.3%, since they make 200% of the Federal Poverty Level). Although the premium cost before subsidies would be higher for the older individual premium subsidies paid directly to the insurance company result in their personal payments being the same. However, if one of them smoked that person would pay more since those costs are considered premium surcharges and are added on after subsidies are calculated.
You can't be charged more for health insurance due to health status or gender, but you can be charged based on income, family size, location, age and smoking status.
Come 2015 smokers can expect to pay up to 50% more than non-smokers for the same health plans. Subsidies are calculated before the "tobacco surcharge" meaning smokers could find their affordable insurance unaffordable.
The following video will give you a simple explanation of what ObamaCare Subsidies are and how they work:
This video explains how ObamaCare Subsidies work in a little more detail:
The Cost of Health Insurance Plans: Types of Health Insurance Plans Offered on the Marketplace and their Actuarial Value
The cost of ObamaCare plans depends upon the quality of plan you choose to purchase. The least expensive plan, the bronze plan, covers 60% of out of pocket health care costs and offers basic coverage (in other words it has a 60% actuarial value). Plans range from the basic "Bronze" (60%) to "Silver" (70%) to "Gold" (80%) and "Platinum" (90%) level plans. Each plan has progressively better benefits and networks and is also progressively more expensive. High-end plans carry a 40% excise tax which helps pay for the program.
The average nationwide price of a Bronze plan is $249 a month before cost-assistance. The total annual fee for not buying insurance can't be more than the average price of a Bronze plan. Learn more about the Individual Mandate.
Please note that the health insurance costs under ObamaCare represented below are the base cost of premiums before subsidies for a Bronze plan. 6 in 10 uninsured Americans will pay $100 or less for their plan and many will qualify for free coverage through the Health Insurance Marketplace.
How Much Does ObamaCare Cost The Average American?
"Bronze" plans for individuals are expected to cost between $4,500 and $5,800 a year in 2016. But if you make less than 4 times the Federal poverty line (about $45,000 for an individual in 2012), you’ll pay less by virtue of receiving tax credits. Someone making up to 133% of the FPL will get credits so that his net payment will be only 2% of income, while those making 300% to 400% of FPL will pay 9.5% of FPL. Please see the FPL chart below for more details.
Please note that while ObamaCare regulates insurance companies, you will still be purchasing private insurance (unless you choose to pay the penalty or are already covered).
You can use the quote tool below to get an idea of what a marketplace coverage will cost you and to request health insurance quotes. Learn more about how to buy health insurance for 2014.
Costs of ObamaCare for Small Businesses
While most people and small businesses in the United States will benefit from Obamacare, Obamacare will cost employers with over 50 full-time employees a penalty if they do not choose to provide their workers with affordable, quality health care. The tax is $2000 per worker or $3000 if they buy insurance through the exchange.
This system is like the current unemployment tax already in effect, which requires American businesses to pay a modest and fair tax to aid the state run unemployment and workers compensation programs. With ObamaCare, the penalty helps pay for workers who will buy insurance through the exchange or need emergency services, both which will drive the cost of health care up for the rest of us.
Types of ObamaCare Cost Assistance: Marketplace Cost Assistance
There are three types of cost assistance offered through the Health Insurance Marketplace tho those making under a certain amount of income who don't have access to employer based insurance. Medicaid / CHIP for those making less than 138% of the Federal poverty level (FPL), help with out-of-pocket costs for those making up to 250% of the FPL and premium tax credits for those making up to 400% of the FPL. You may qualify for both premium and cost-sharing subsidies as they are not mutually exclusive. Cost assistance is only available through your State's health insurance marketplace.
Who Qualifies for Help With ObamaCare Insurance Costs?
The following chart will help you to find out who qualifies with help with insurance costs on the health insurance exchanges under The Affordable Care Act.
|Types of Cost Assistance: Health Insurance Financing
||Individual Annual Income
||Family of Four Annual Income
|Medicaid health coverage, if your state
decides to offer it
||Up to $15,302
||Up to $31,155
|Help to pay your premium, if you buy in
your state's online marketplace
|Subsidies for out-of-pocket costs, if you
buy in your state's online marketplace
||Up to $28,763
||Up to $58,564
Many American families will see a cost reduction under ObamaCare and many more will qualify for Medicare and Medicaid due to the expansion of the program. When the online marketplace opened on OCT 1st, 2013 an easy to use form, cost calculator and an easy to use comparison of insurance options will help you pick the right plan for you and your family.
Employers with under 25 full time employees may qualify for tax credits and tax breaks.
In order to ease the burden of Obama Care's, cost 19 million Americans will receive tax credits to help pay for healthcare.
If you are making over 400% of the poverty line, you can expect to pay just about what you do now, but receive better coverage. If your income is below the poverty line you will most likely save on health insurance costs. Individuals making between $50k and $75k annual gross income (9% of Americans) who don't want insurance and will have to pay the 2.5% penalty (by 2016) will most likely be hit the hardest.
See our page on Calculating Premium Tax Credits for detailed information on how the process of calculating credits works.
ObamaCare Cost-Sharing Reduction: Health Insurance Marketplace Cost-Sharing Subsidies
Cost-sharing subsidies protect lower income people with health insurance from high out-of-pocket costs at the point of service. ObamaCare provides for reduced cost sharing for families with incomes at or below 250% of poverty by making them eligible to enroll in health plans with higher actuarial values. The premium tax credits, discussed above, generally are based on a plan with an actuarial value of 70%. ObamaCare provides that people with lower incomes have their cost sharing reduced so that plan on average pays a greater share of covered benefits. The amount of additional protection varies with income, as follows:
Income Level Actuarial Value
100-150% FPL 94%
150-200% FPL 87%
200-250% FPL 73%
Please use our updated 2014 federal poverty level chart to see if you qualify for out-of-pocket cost assistance.
Cost-sharing reduction lowers the amount you have to pay for out-of-pocket costs like deductibles, coinsurance, and copayments. These are costs you have to pay when you get care.
This video explains how cost sharing works and points out that many preventative services (including your check-ups are covered with no cost-sharing on all new health plans).
ObamaCare Tax Credits: What Are Marketplace Premium Tax Credits?
When and your family apply for health insurance through the Health Insurance Marketplace you'll be made aware if you are eligible for premium tax credits. Tax credits help to subsidize your premium costs resulting in lower monthly premiums for you and your family. The amount you receive in tax credits is based off of your previous years Federal tax return. Tax credits are automatically paid to your insurance provider and are adjusted on your year end taxes based off of change in income for that year. In other words if your income increases, you will be responsible for a larger share of your premium and that will be reflected on your year-end Federal tax returns.
How to Calculate Cost Assistance for Insurance Purchased on the ObamaCare Health Insurance Marketplace
Wondering how to calculate cost assistance offered on the Health Insurance Marketplace. The following chart will help you to understand how cost sharing subsidies and tax credits are calculated. Those between 133% of the federal poverty level and 400% will be eligible for cost assistance. The following chart will give you an idea of what type of cost assistance is available for an average family of four on the "Silver plan". Please use our updated 2014 federal poverty level chart for a more accurate idea of who will qualify for cost-assistance on the marketplace.
Health Insurance Premiums and Cost Sharing under PPACA for Average Family of 4
For "Silver Plan"
|Income % of federal poverty level
||Premium Cap as a Share of Income
||Income $ (family of 4)
||Max Annual Out-of-Pocket Premium
||Additional Cost-Sharing Subsidy
||3% of income
||4% of income
||6.3% of income
||8.05% of income
||9.5% of income
||9.5% of income
||9.5% of income
In 2016, the FPL is projected to equal about $11,800 for a single person and about $24,000 for family of four. Use the Kaiser ObamaCare Cost Calculator or this updated Cost Calculator from Covered California for more information. DHHS and CBO estimate the average annual premium cost in 2014 to be $11,328 for family of 4 without the reform. Source: Wikipedia
ObamaCare Cost Calculator
Use this ObamaCare Cost Calculator from the Kaiser Foundation to get an idea of the estimated cost of ObamaCare for you and your family after subsidies. Please be aware this is a basic estimate for the cost of a "Silver plan" (the second tier plan, as opposed to the basic "Bronze plan" on the Exchange). Also note, the total cost is greatly affected by "regional cost factor" (increasing or decreasing the premium by 20%). Further subsidies may be available depending on a number of other factors.
Please note that the ObamaCare Cost Calculator uses modified adjusted gross income and not total gross income or net income to figure out cost assistance and insurance cost estimates of the "Silver plan"
Also note that as little as a $1 difference in income can exclude you from receiving a subsidy.
Check out the CBO's report on the effects on direct spending and revenues for health care programs to understand how ObamaCare helps to reduce the growth in health care spending by tens of billions each year.
ObamaCare Cost for the Average Family
We know statistics on the cost of ObamaCare for the average family until the marketplaces have been open for at least a month. Common estimates for an average family of 4 range from around $7,000 a year to $30,000 a year depending on factors such as age, health status and region. To get a more in depth look please refer to our sections on the Health Insurance Exchanges, ObamaCare Premiums, ObamaCare Taxes and our study of the recent IRS report on ObamaCare.
Here is a case study of a family of four using the Kaiser Subsidy Calculator. The family has two adults who smoke and two children who don't smoke. They make 149% of the Federal Poverty Level ($35,000). This shows a"Silver plan" costs $4,391 a year (due to cost savings on their premium via tax credits) and has 95% actuarial value (due to out-of-pocket cost assistance). Remember the two types of cost assistance offered through the marketplace are help with out-of-pocket costs and help with premium costs. The family could pay less for a "Bronze plan" for $2,501, but have higher out-of-pocket costs or more could pay more for a "Gold plan" and still receive subsidies. In their case, due to the way subsidies work, a "Sliver plan" probably makes sense since their out-of-pocket assistance drops significantly with a "Bronze plan" (it only pays 60% of out-of-pocket costs) and doesn't increase with a "Gold plan" (although other benefits offered would).
- Household income in 2014:
- $35,000 which is 149% of poverty level
- Unsubsidized annual health insurance premium in 2014:
- $12,887 total
$3,018 of which is due to a tobacco surcharge
- Maximum % of income you have to pay for the non-tobacco premium, if eligible for a subsidy:
(before accounting for the tobacco surcharge)
- Amount you pay for the premium:
- $4,391 per year
(which equals 12.54% of your household income and covers 34% of the overall premium)
- You could receive a government tax credit subsidy of up to:
(which covers 66% of the overall premium)
Your out-of-pocket maximum for a Silver plan (not including the premium) can be no more than $4,500. Whether you reach this maximum level will depend on the amount of health care services you use. Currently, about one in four people use no health care services in any given year.
You are guaranteed access to a Silver plan with an actuarial value of 94%. This means that for all enrollees in a typical population, the plan will pay for 94% of expenses in total for covered benefits, with enrollees responsible for the rest. If you choose to enroll in a Bronze plan, the actuarial value will be 60%, meaning your out-of-pocket costs when you use services will likely be higher. Regardless of which level of coverage you choose, deductibles and copayments will vary from plan to plan, and out-of-pocket costs will depend on your health care expenses. Preventive services will be covered with no cost sharing required.
Cost of ObamaCare: What is Considered Affordable Health Insurance?
Currently, the average American family pays 20% of their income for health insurance. ObamaCare deems insurance that costs 8% of a family's income as "affordable". The less money you and your family make the smaller percentage of your income you will have to pay due to subsidies offered through the Health Insurance Marketplace. The average family's costs are projected to decrease between 7% and 9% due to ObamaCare. We have seen costs range from free to an excess of $30,000 for an older, high-risk, high-income family of 5 in a state with high regional costs.
Graph represents combined health care costs for employees and employers. Employer Based Health care costs for a family of four have doubled in less than a decade from $9,235 in 2002 to over $19,000 in 2011.
The cost of insurance 2007 to 2010, per-capita health care spending rose just 1.8 percent annually. Since then, the annual increase has slowed even further, to 1.3 percent. While the Affordable Care Act has reduced the growth in healthcare spending as intended many attribute some of this reduction to "the weak economy".
Affordable Insurance: How Age and Subsidies Affect Your Insurance Costs
Let's take a look at two case studies. In one scenario a 40 year old single male who makes 250% of the federal poverty level is looking to buy insurance, in the next scenario we see a 60 year old single male who makes 250% of the federal poverty level. As you can see age increases the cost of premiums before subsidies considerably, however since both men have the same amount of income their cost after subsidies will be the same.
The following chart shows what a single 40-year old making 250% FPL will pay a month in 2014 both before and after subsidies. Remember age is a factor when pricing insurance, younger people can expect lower rates while older people, who don't yet qualify for Medicare, should expect higher rates.
This next chart shows what a single 60-year old making 250% FPL will pay a month in 2014 both before and after subsidies. Remember age is a factor when pricing insurance, younger people can expect lower rates while older people, who don't yet qualify for Medicare, should expect higher rates before subsidies.
ObamaCare Cost for The Federal Government / Tax Payers
Obamacare's net cost is estimated to be $1.36 trillion. This number is an updated estimate by a CBO report on ObamaCare's costs from May 2013. However, a number of factors including taxes, fees and penalties will actually reduce the federal deficits by $210 billion over the 2012-2021 period.
Gross additional costs of ObamaCare include $1.5 trillion for Medicaid, the Children's Health Insurance Program (CHIP), as well as tax credits and other subsidies for subsidized marketplace plans for individuals, families, and small businesses, among other things. These costs are offset by penalty payments, health care cost cuts, new health care industry taxes, and a 2018 excise tax on high-premium insurance plans.
About one-fifth of federal spending for the major health care programs (i.e. Medicare, Medicaid, CHIP, and marketplace subsidies for individuals, families, and small businesses) will finance care for able-bodied nonelderly people; about one-fifth will go toward care for blind and disabled people; and about three-fifths will go to care for other people who are age 65 or older.
If you want to know more about the cost of ObamaCare check out the CBO Budget 2013-2014 or our resources page for more official documents detailing ObamaCare's costs and how they fit into the US budget.
Update: A CBO report on the Affordable Care Act from December 2013 shows that over the past five years the Affordable Care Act has actually helped to decrease the growth in healthcare spending (one of the primary goals of the law). Medicare, Medicaid, and Subsidy spending are all projected to be substantially lower than initially projected.
Update as of April 17th, 2014 on the affects of the ACA on healthcare costs from whitehouse.gov:
- Health care costs are growing at the slowest level on record: Since the law passed, real per capita health care spending is estimated to have grown at the lowest rate on record for any three-year period and less than one-third the long-term historical average stretching back to 1960. This slower growth in spending is reflected in Medicare, Medicaid, and private insurance.
- CBO projects the deficit will shrink more and premiums will be lower than expected: CBO previously estimated that the ACA will reduce the deficit by $1.7 trillion over two decades, and, just this week, CBO concluded that lower-than-expected Marketplace premiums and other recent developments will cut $104 billion from our deficit over the next ten years. The CBO report also projects that lower-than-expected premiums will help to save $5 billion this year, and that lower premiums will persist in the years ahead, remaining 15 percent below projections by 2016 (the only year in which CBO provides a precise estimate).
- Medicare spending growth is down: Medicare per capita spending is growing at historically low rates. This week, for the fifth straight year, the CBO reduced its projections for Medicare spending over the next 10 years – this time by $106 billion. CBO projects that Medicare and Medicaid costs in 2020 will be $180 billion below its 2010 estimates. Recent economic research suggests that the ACA’s reforms to Medicare may have “spillover effects” that reduce costs and improve quality across the health care system, not just in Medicare.
How Do We Pay For ObamaCare Costs?
Many sections of the Affordable Health Care Act cover the cost of Obamacare and how we will pay for national healthcare reform over the next decade. Here are some of the measures that will help pay for the Obama's healthcare reform:
• First, in order to help pay for the cost of Obamacare businesses and families will pay an additional .9% tax on taxable income and 3.8% capital gains exceeding $200,000 / $250,000.
• Fees for not purchasing insurance will help to cover some of the cost of the law. If you choose not to purchase insurance (and can afford it) there is a 1% tax in 2014, it raises to a 2.5% tax in 2016 and adjusts for inflation. This tax is the "income tax" you may hear about, and is the only income tax hike in ObamaCare and the only tax most Americans will pay.
• Businesses with over 50 full-time equivalent employees will also pay a fee for not insuring full-time workers starting 2015.
• ObamaCare also cuts $716 billion from Medicare and invests it back into Medicaid, Medicare and the healthcare system, so a lot of the money is coming from cutting waste, not just in Medicare, but in the health care industry as a whole.
• We already pay Medicare and Medicaid taxes, these and other healthcare taxes that are already in place also help to fund the law.
• There is also a $63 dollar fee on insurance plans (it decreases every month until 2017) that covers high-risk pools for pre-existing conditions.
• There are taxes on insurance companies. So all the new policies obtained will help to pay for the cost of ObamaCare.
• Most of the other funding for ObamaCare comes from taxes on the healthcare industry including a tax on companies who manufacturer non-generic drugs and some medical device manufacturers. Read the complete list of ObamaCare taxes and their costs.
• Many American families, making under 400% of the Federal poverty level, will see a reduction in their healthcare costs after tax credits and other subsidies. Of course, the more you make the less you save. The quality of your healthcare and the security of knowing you can't be dropped for being sick or denied for a pre-existing condition is a protection most Americans couldn't rely on before ObamaCare.
• In order to ease the burden of Obama Care's cost, 19 million Americans will receive tax credits to help pay for healthcare.
The Cost of Not Having ObamaCare
The cost of not having ObamaCare?: In a study by FamiliesUSA reported that each week 502 Americans die due to a lack of health insurance. That is 2,175 Americans dead each month. The true cost of Obamacare isn't in healthcare costs and taxes, it's in the lives of Americans like you and me.
The same study showed that between 2005 and 2010 that the number of people who died prematurely due to a lack of health coverage a year rose from 20,350 to 26,100.
(These figures are from 2010, Obamacare was signed on Oct. 1, 2010 and made its first steps toward providing quality affordable health insurance to individuals and families struggling with rising health care costs.)
So while there are costs, it is both economic reform and healthcare reform that will decrease payments of many Americans and only impact those who can afford to pay a little more.
The cost of not having ObamaCare isn't just a human issue. ObamaCare helps to reduce health care spending. Currently the $2.8 trillion U.S. healthcare system costs nearly $9,000 a year for every man, woman and child. Growth in health care spending has long outpaced inflation by wide margins, and following the U.S. recession of 2008 and 2009 has contributed to weak job creation, low expansion of wages and a high level of personal bankruptcies.
The True Cost of ObamaCare Health Care Reform
So what is the true cost of ObamaCare? ObamaCare costs what people can afford. For many Americans this means better coverage for less money. For many it means coverage over no or poor coverage. For others it means paying a little more to ensure healthcare for millions of uninsured Americans. Let us know what ObamaCare costs you and we'll share your story.