Obamacare: Pays Not To Work

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obamacareBe careful you don’t fall off the Obamacare “cliff” when the boss asks you to put in some overtime.

Working more could ultimately mean thousands of dollars less for you under a quirk in the new health-care law going into effect this fall. This could prompt some people to cut back on their hours to avoid losing money.

“Working more can actually leave you worse off,” the price-comparison site ValuePenguin.com notes in a new analysis.

“It’s sort of an absurd scenario,” said Jonathan Wu, ValuePenguin.com’s co-founder. “It’s something for people to be aware of.”

In that scenario, an individual or family whose annual income surpasses maximums set by the federal government-if only by $1-will totally lose subsidies available to buy health insurance under the Affordable Care Act.

The loss of those subsidies in some cases will mean that people potentially would have been better off financially if they had worked less during the year, Wu said. And they then would have to work significantly more to make up for the lost subsidy.

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“I think they’d be surprised to see how drastic it is,” said Wu. “I’d be kind of shocked to see if I make $100 less (in total income each year), I get all these benefits, but if I make $100 more, I get nothing.”

“You basically don’t want to fall in that hole,” said Wu, adding that he believed contractors and others with more control over their incomes would be apt to adjust their hours worked to avoid the subsidy cliff.

He also said that because of lower insurance premiums often offered younger people, the effect will more likely be seen by older people. But “you will see it across all age groups” in the seven states including New York and Vermont where insurance premiums are either barred from being affected by age, or restricted from being dramatically affected, he said.

Under the ACA, federal subsidies in the form of tax credits to buy insurance on new state health insurance exchanges will be available to millions of people who can start enrolling on those exchanges Oct. 1. The subsidies are available to people or families whose incomes total 400 percent above the federal poverty level or less, and are designed to cap their insurance premiums at 9.5 percent of their total income.

Doing the math

For a single person, that FPL income maximum is $45,960 per year. The maximums are adjusted upward for couples and families until maxing out at $94,200 for a family of four.

Under a scenario that ValuePenguin.com identified, a couple in Ohio, both age 50, would be eligible for subsidies worth $3,452 to purchase a so-called silver insurance plan-a moderately priced level of benefits under the ACA’s scheme-that costs $9,346 annually if they made up to $62,040 per year.

But if they made just $1 more than that, they would lose the subsidy. Wu noted that the couple then would have to earn at least $65,492 to make up for the lost subsidy.

In New York, a family of three whose annual income totals $78,120, would pay $12,784 for the second-lower-priced silver plan on that state’s insurance exchange. After getting a $5,363 tax credit, the family’s net cost for the insurance would be $7,421.

But if the family earned even slightly more than $78,120, they would have to pay the entire $12,784 for the insurance because they then wouldn’t qualify for the subsidy.

To make up for that, the family’s annual income would have to reach $83,483, Wu said.

Read more at CNBC.COM

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  1. I don’t see any difference between this and what goes on now. People who get government aid (food stamps Medicaid section 8 etc. ) also lose these benefits if they exceed a certain amount of income.

  2. Depending on family size, the school I work in actually pays some teachers less than what they can afford to give them because they come out ahead taking a pay cut and applying for all the subsidies out there. Its win-win for all because the schools save money and the teachers make more this way because they’re not deducting all these things from their salaries. Teachers get medical assistance, wic, food stamps,hud, energy updates to their homes like brand new windows, school lunches, free membership to the local jewish community center, cell phones, discounts for camp and a whole lot more all of which they would have to pay for out of pocket costing them more in the long run. So it might make sense to ask your employer to pay you less and take advantage of these subsidies. I’ll never understand why its all or nothing and can’t be pro-rated.


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