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The Costs and Choices of ObamaCare

Friday February 1st, 2013   •   Posted by Craig Eyermann at 5:30am PST   •  

The IRS has released its first regulations related to how it will determine the penalty tax for not having “affordable” health insurance under ObamaCare.

In those regulations, the IRS projects that the lowest cost “Bronze” plan for health insurance required by the Patient Protection and Affordable Care Act (PPACA) will cost $5,000 for single coverage or $20,000 for family coverage in 2016. For those seeking single coverage, that would represent a decrease of 11% from 2012’s average cost of $5,615, while families would see their cost for health insurance increase by 22% from $15,745. We should note that ObamaCare’s Bronze plan coverage would also be considered a step down in quality from the level of coverage provided by today’s average health insurance plans.

If an individual or family does not have this lowest cost “affordable” health insurance coverage as defined by the PPACA, the IRS will impose a tax, for which the IRS provides several examples of how it will calculate it. Matt Cover of CNSNews discusses the tax that would be imposed on a family of 5 with a joint income of $120,000:

Using the conditions laid out in the regulations, the IRS calculates that a family earning $120,000 per year that did not buy insurance would need to pay a “penalty” (a word the IRS still uses despite the Supreme Court ruling that it is in fact a “tax”) of $2,400 in 2016.

So, this family of 5 would face a choice – they could spend $20,000 for health insurance they might not need or they can pay a tax of $2,400.

Since ObamaCare guarantees that people seeking health insurance will not be denied coverage for pre-existing coverage, and would at most only face a maximum 90 day waiting period from the time they might apply for insurance coverage to the time it goes into effect, the financial incentive for most healthy families will be to drop their health insurance.

Which option do you believe most individuals or families would choose?

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February 2013