Beginning October 1 you may qualify for tax credits, that may make your health insurance more affordable. However, the law favors individuals over families in many ways, so you may not qualify for as much as you expect.
Tax Subsidies for Individuals
Tax subsidies are on a sliding scale based on annual income. If your individual income falls between $32,500 and $41,500, subsidies are supposed to ensure you don’t have to spend more than 9.5 percent of what you earn for health insurance for the whole year.
An income between $27,000 and $32,500 means your annual health insurance costs would range from 8.05 to 9.5 percent of yearly earnings. If you earn between $21,600 and $27,000, you’re looking at spending from 6.3 to 8.05 percent. Earnings from $15,500 to $21,600 mean the cost of health insurance should be limited to from four to 6.3 percent of income. And, an income of $14,000 to $15,500 keeps spending down to three or four percent. If your earning are less, spending should be down to about two percent of annual income.
Different Standards for Families
If you are covered through an employer’s group plan, you know dependent coverage can get expensive. In fact, it’s not even affordable for some families.
That’s not taken into consideration when subsidy eligibility is determined. Whether your family will be eligible for a subsidy depends on whether your individual coverage meets the affordability standard. If your employer offers you coverage but not your family members, you will still have to pay full price for the coverage you get for your family.
Cost of Family Coverage May Be Triple the Cost of Individual Coverage
The Kaiser Family Foundation has reported on 2012 premiums for employer-sponsored health insurance. The say individual coverage averaged $5,615 and family coverage averaged $15,745.
It gets worse. The foundation reported that the employee’s share of individual premiums averaged $951. For family coverage, the cost was $4,316. That’s between four and five times greater than the cost of individual coverage.
According to the IRS, that cost would be classified as affordable for a family with a total annual income of $35,000, even if they had to spend 12 percent of their total income for full group coverage.
Family Exemptions from Mandate to Get Health Insurance
If annual coverage costs more than eight percent of family income, the spouse and children will not face any penalty for going without health insurance. This is one of the few exemptions from the requirement to carry health insurance. Of course, going without health insurance is still a large risk that I would not recommend anyone take.
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.