Here’s How New ‘Obamacare’ Works

Editor, News-Register:

I have read a lot about ObamaCare (Patient Protection and Affordable Care Act). I have not seen some specific information in the news media about its financial structure. Therefore, I decided to write this article. This writing is not an opinion. They are only the facts.

In 2014, U.S. citizens and legal residents will be required to obtain health insurance. Persons who are not insured through their employers will be required to obtain insurance through exchanges. But how much do we pay and how much does the government pay toward this insurance? These two parts are based on our Modified Adjusted Gross Income (Adjusted Gross Income plus tax-exempt interest plus nontaxable Social Security benefits plus foreign income equals Modified Adjusted Gross Income). This MAGI is matched against the federal poverty limit (published every year by the Department of Health and Human Services).

Persons whose MAGI is up to 132 percent of the federal poverty limit will be eligible for Medicaid assistance. Persons whose MAGI is 133 percent to 400 percent of the federal poverty limit will be eligible for a government subsidy of their insurance premium. If your income is greater than 400 percent, you are on your own to buy insurance, meaning that you are rich enough to afford it.

The amount a person pays is a percentage of his MAGI relative to the federal poverty limit. For example, for a family of four, the federal poverty limit is $23,550 (2013 dollars). But if their MAGI is $31,322, this income is 133 percent of the federal poverty limit. They will then have to pay 2 percent of $31,322 ($626.44 per year or $52.20 per month) towards their insurance premium. Now, the ObamaCare plan will subsidize that insurance up to a plan that is the second lowest cost plan, called the Silver Level, or benchmark premium.

Another example: If a family of four has a MAGI of $35,000, this is equal to 148% of the federal poverty limit. They will then have to pay 3.9 percent of $35,000 ($1365 per year or $113.75 per month) for their insurance. The percentage you pay is calculated on a sliding scale of 2 percent up to 9.5 percent maximum of your MAGI and up to 400 percent of the federal poverty limit. Please note that MAGI, also called household income, is your adjusted taxable income, not your actual income (gross income).

The next question is: How is the government financing the subsidies? Starting this year, persons filing joint tax returns and whose income is greater than $250,000 ($200,000 for single filers), any amount greater will be subject to nine-tenths of one percent additional Medicare tax. Thus, for income of $300,000, additional tax is nine-tenths percent of $50,000, or $450.

Next, an additional tax of 3.8 percent is imposed on either your net investment income or your MAGI that is greater than $250,000 ($200,000 for single filers), whichever is less. Example, if you have MAGI (household income) of $300,000 and your investment income included is $40,000, the tax is 3.8 percent of $40,000, or $1,520.

This is only one part of the plan addressed here. Other provisions are tax credits for small employers of up to 35 percent of insurance premiums for their employees, and penalties for big employers (greater than 50 employees) and individuals who do not provide or buy insurance. There are many more details of the plan than what I have written here.

I obtained this information from The Tax Institute of H&R Block, the book “Dominate ObamaCare” by Paul J. Winn, WV for Affordable Health Care and the Patient Protection and Affordable Care Act.

I wrote, you decide.

Jonathan Samaroo