Other things you need to know about the subsidies:
- The subsidy is a tax credit, which you can choose to have applied directly to the cost of your monthly premiums when you buy insurance on a state marketplace. It's likely most people will go that route to make the monthly premiums much more affordable.
- The Kaiser Family Foundation has an online calculator (see below) to help you figure out how much of a subsidy you'll get, and has also issued a new report on the topic.
- Keep in mind that you can get a subsidy only if you buy your health insurance on a state marketplace.
Now, remember how we said that whether your employer provides "affordable" health insurance is important? If your cost for an individual (not family) plan at work exceeds 9.5% of your household income, you should buy your insurance on your state's marketplace and become eligible for subsidies.
3. What if you refuse to buy insurance?
Obamacare comes with a mandate that just about everyone must have health insurance. If you remain uninsured and you're not exempt, you'll face a penalty, which you'll pay when you file your 2014 taxes in 2015.
What's the penalty? CNNMoney explains:
For 2014, the flat fee is $95 per adult and $47.50 per child, up to $285 per family. Or the penalty could be 1 percent of family income, if that results in a larger fine. (Income is defined as total income above the filing threshold, which is $10,000 for an individual and $20,000 for a family in 2013.)
By 2016, it will increase to a minimum of $695 per adult and $347 per child but no more than $2,085 for a family, or 2.5 percent of family income, capped at the average cost of a bronze plan sold on the marketplace. After 2016, that penalty will increase with the cost of living.
Some people won't have to pay a penalty for not having insurance. Some examples:
- You are uninsured for less than three months of the year. If you're uninsured longer than that, the penalty will be prorated by month.
- "Uninsured individuals with incomes so low they aren't required to file a federal tax return or who can't find coverage that costs less than 8% of their income do not face a fine," says U.S. News & World Report.
- You would qualify for Medicaid under the new federal income limits, but your state is one of the 25 that decided not to expand eligibility for Medicaid.
- You're a member of a recognized sect that has religious objections to health insurance.
It's been estimated that 24 million people will be exempt from the requirement in 2016.
Of course, the real penalty, the government points out, is that you or your loved ones could be stuck paying a massive medical bill if you become seriously ill and don't have insurance. Once open enrollment ends on March 31, you can't sign up to buy insurance on a state marketplace unless you have a life-altering event, like moving to another state or getting a divorce.
4. What will it cost?
How much insurance purchased on a state marketplace will cost depends on a number of factors:
- Where you live. The cost of health care can vary greatly depending on your state and whether you live in a large city or a rural area.
- Your age. Older people can be charged up to three times the premiums set for younger folks. However, insurance companies can no longer charge women more than men, or charge people more or deny them coverage because of pre-existing conditions.
- Your family size.
- Whether you smoke. There is a big penalty for smokers in the price.
- What level of coverage you get. You'll be able to pick from four levels of care, but even the lowest includes a standard of coverage that's absent from many individual policies now.
- How large a subsidy you'll get based on your income.
Some states have already disclosed how much the policies on their marketplace will cost. (These are the prices before a subsidy is applied.) Some examples:
We've provided some steps you can take to get ready before the marketplaces open for business on Oct. 1.
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