My household of four currently pay $2,300 a month, or $27,600 a year, in healthcare premiums for a low deductible gold healthcare plan despite both of us being healthy with no pre-existing conditions.
Paying $27,600 a year in healthcare premiums is a ridiculous amount since we hardly ever go to the doctor. But, the reason why we pay so much is because neither of us are employed.
Most Americans who are employed get the majority of their healthcare premiums covered by their employer. Is there any wonder why so many Americans are afraid of leaving their soul-sucking job?
Bet you will be surprised to hear that the average healthcare premium paid in America is about $19,600 a year. Most people don’t realize this because their employer foots most of the bill.
Let’s first learn how we can all get healthcare subsidies and then find out what the average and maximum healthcare subsidy is in America under Obamacare.
How To Get Healthcare Subsidies
In order to be eligible for healthcare subsidies under the Affordable Care Act, you must earn no more than 400% of the Federal Poverty Limit (FPL) by household size. Each year, these limits will go up by ~2% to account for inflation.
In the chart below, you will see the latest FPL limits under the 100% column. The 400% column shows the maximum amount you’re able to make per household size until you no longer qualify for healthcare subsidies.
If you make less than 100 percent of the FPL, you also don’t qualify for the Affordable Care Act. You qualify for Medicaid. In some states, the income percentage is up to 139 percent of the FPL, so make sure to check.
The amount of healthcare subsidy you will receive will depend on how much over the FPL your household income is and the type of healthcare plan you want e.g. deductible amount, bronze, silver, gold, platinum etc.
The chart below shows how much of your household income you are expected to contribute to your healthcare plan. The percentages are caps.
Using my household of three as an example, we’re allowed to earn up to $83,120 and still be eligible for the Affordable Care Act.
We would be expected to pay $83,120 X 9.86% = $8,196 a year in healthcare premiums at most. That’s a nice $12,804 in subsidies compared to our current cost of $21,000.
If our three-person household somehow managed to only earn $41,560, or 200% of the FPL limit, then we would only have to pay $41,560 X 6.54% = $2,718 a year in healthcare premiums for our same plan thanks to $18,282 in subsidies.
Unfortunately, we will have a difficult time making ends meet on only $41,560 a year in expensive San Francisco or any other expensive coastal city. The median home price in San Francisco is a whopping $1,500,000. Meanwhile, private grade school can easily run $20,000 – $30,000 a year in tuition.
The Average Healthcare Subsidy Amount Under Obamacare
Based on the contribution chart, the poorest households (sizes 1-6) must pay a minimum of $253 – $702 a year in healthcare premiums under the ACA. The richest of households (sizes 1-6) that still qualify for ACA must pay $4,788 – $13,307 a year in healthcare premiums.
In other words, the maximum healthcare subsidy per person is about $7,000 – $8,000 depending on plan, household size, and household income.
The average healthcare subsidy per person is around $5,000 depending on the same variables.
In our three-person household’s case, we would receive a $4,268 per person subsidy if we earn 400% of FPL. But losing out on $150,000 a year in passive income to receive $12,804 a year in healthcare subsidies doesn’t seem like a great trade.
If you are getting the maximum healthcare subsidy, that’s great. However, the also probably means you are financially struggling the most.
Ideally or strategically, you want to earn close to 400% of FPL so that you still receive healthcare subsidies, but aren’t struggling too much financially.
Note: If you become a business owner, you can deduct the premiums you pay for your employees.
Related: Here are the Winners And Losers Of Obamacare Hooray!
How To Apply For Obamacare
To receive healthcare subsidies based on your own situation, you would simply:
- Earn a modified gross income (MAGI) up to 400% of the FPL based on your household income size
- Restructure your investments so they produce less income
- Stop working full-time or find a lower paying job
- Throttle down your freelance income or entrepreneurial income
- You must be ineligible for health insurance coverage through an employer or government plan
- You do not file a Married Filing Separately tax return (unless you meet the criteria in section 1.36B-2T(b)(2) of the Temporary Income Tax Regulations)
- You can’t be claimed as a dependent
- Apply for the Affordable Care Act at Healthcare.gov
Who Should Apply For Obamacare?
Everybody has the right to Obamacare if they legally qualify. But who should apply for Obamacare? Given Obamacare care eligibility is determined based off income, even multimillionaires can qualify so long as their income is lower than 400% of the Federal Poverty Limit.
At the moment, I draw the line at taking advantage of Obamacare if you are a millionaire and are purposefully unfit. We can define people who are purposefully unfit as those who don’t have a genetic disorder or disability that prevents them from eating healthy and working out regularly.
If you are millionaire, you can afford to eat healthier foods. You can afford to even get a personal trainer and expensive exercise equipment if you want.
Once your BMI goes over 25, you’re considered overweight. Being overweight is the number one cause for heart disease, which is the number one cause of death. What’s sad is that over 70% of Americans are now overweight. Is there any wonder why the healthcare system is getting crushed?
Not only is the millionaire taking advantage of the system that was intended to help the financially vulnerable, the unhealthy millionaire is also burdening the system through his or her poor health.
Let’s let the people who are financially struggling the most get subsidies from those of us who can pay more.
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If you’re looking to get disability insurance check out PolicyGenius as well. They are a marketplace that aggregates free disability insurance quotes all in one place so you don’t have to go looking around. If you have dependents, getting supplemental disability insurance is a good idea.