Surviving The Unaffordable Care Act

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Oh no! Not another “Obamacare sucks!” article. Calm down. I realize that unless you’re part of the blissfully unaware dumb-masses (say it fast) or one of Team Blue’s sycophantic true believers, you’re well aware of the monumental horrendousness of the Affordable Care Act (ACA).

But you may not be aware that there are several ways to lessen the pain of complying with this bit of authoritarian absurdity. Thankfully the law is complex, far too complex for the mendacious pinheads that wrote it to understand everything they were doing. That means it has loopholes, and you can use these loopholes to your advantage.

There are at least 3 ways to avoid shelling out thousands of dollars for unnecessary or useless “mandatory” coverage if you buy your own insurance. Some of you may actually qualify for subsidies, in which case you won’t need this information. If you’re one of these people, feel free to email me a “thank you” note for paying for your insurance. Or, if you are covered through work you probably won’t need this information until next year when the “employer mandate” kicks in and you’re forced to pony up big bucks for your formerly cheap or free coverage, or you lose your health insurance altogether. But if you’re like me, someone who buys their own coverage and now must pay thousands more because FYTW, you’re going to want to read on.

Before I get into the 3 methods, here is a quick primer on the fines for not buying insurance, AKA the penaltax. The penaltax is based on income and will go up until 2016 after which it will be indexed to inflation. There is a minimum penaltax for each person in a family, up to 3 people. In other words, there is NO additional minimum penaltax for the 4th, 5th, 6th, etc. member of a family. So for 2014 through 2016, the minimums are:

1 Person 2 People 3 or more People
2014 $95 $190 $285
2015 $325 $650 $975
2016 $695 $1,390 $2,085

However, these are just the minimum penaltaxes, they can get much higher. In 2014 the penaltax will be 1% of your Modified Adjusted Gross Income, which is roughly your real income minus $10,000 if you’re single or minus $20,000 if you’re married. Thus, in 2014, if you’re single and you make $50,000, the penaltax will be $400 (($50,000-$10,000) x 0.01). If you’re married with the same income the penaltax will only be $300. The penaltax percentage rises to 2% in 2015, and 2.5% in 2016. Using our $50,000 example again, a single guy would have to pay $1,000 in 2016 (($50,000 – $10,000) x 0.025). In that same year a married couple would owe $750 according to the formula, but take a look at the minimum penaltax table. The minimum for 2 people in 2016 is $1,390, therefore the married couple would have to pay at least that much.

So as you can see the penaltax blows, but there may be a way around it! The IRS is not allowed to use their usual Gestapo tactics to collect the penaltax, all they can do is deduct it from your refund when you file your income taxes. If you aren’t due a refund they can’t take your money! So, if you don’t buy Obamacare compliant insurance you should change your income tax withholding so that less tax is taken out of your paycheck. That way you won’t be due a refund when you file your taxes and can ignore the penaltax. However, this is all very theoretical. The IRS is not known for being nice and has repeatedly ignored the law when it suits their purpose. My guess is a lot of people will get away with this while others get sued by the Feds.

Enough about the penaltax. Here are the 3 ways you can take the sting out of Obamacare:

1. Renew your existing insurance policy or buy a new 12 month policy before the end of November.

This will allow you to get pre-Obamacare coverage, with pre-Obamacare premiums, until November 30, 2014. As far as I can tell, you will not be forced into Obamacare until your existing policy year ends. My provider sent letters out to its policyholders offering to cancel their existing coverage so that they could get new policies that would be good until November of next year. The premium did go up by 14%, but the cheapest policy available to me through Healthcare.gov would have raised my rate by 170%. That’s a no-brainer. You can find insurers willing to do this at http://www.ehealthinsurance.com/ . But you need to do this right away. Stop reading this and do it now! I’m serious.

2. Don’t buy any insurance now and just pay the penaltax. Then, when you get sick, buy some Obamacare insurance because the law says they can’t turn you down.

There is some downside to this. First, you won’t have any insurance in case a tree falls on you, you tumble off a cliff, or God smites you with a lightning bolt. But you could squirrel away some money to cover such an eventuality.

Second, if you pay the penaltax you will have spent money for nothing, but consider the case of our single friend who makes $50,000/year. In 2014 the penaltax will cost him $33.33/month. If he lives in Nebraska (the cheapest state for a 25 year old to buy insurance according to Healthcare.gov) Obamacare insurance will cost $84/month. If he made the mistake of living in Vermont he would pay $342/month for insurance! In either state he would save a pantload of money by just paying the penaltax.

Finally, you might face a delay between when you apply for Obamacare insurance and when you get coverage if you get sick, and you might not be able to get insurance through the exchange unless it’s an open enrollment period. However, there are many companies offering insurance outside the exchanges and you can usually get the insurance quicker by avoiding the government do-gooders. But if this last drawback bothers you, there is another option.

3. Buy “short term” insurance.

Incredibly Nancy Pelosi and her merry band of thugs didn’t outlaw this stuff! Short term insurance was meant to cover people who are in-between jobs, just out of college, or any other reason that causes a gap in their regular coverage. These policies can last for a few weeks up to 12 months and the coverage is not as comprehensive as a regular policy, but if you’re a 40 year-old man you probably don’t care that you aren’t covered for maternity or pediatric care. These policies also tend to exclude any preexisting conditions you have and they do have caps on how much they’ll pay out. But if you just want to make sure you can pay the hospital when they save your life after Officer McDoofus accidentally shoots you, this is the insurance policy for you.

Unfortunately these policies are considered “substandard” by the wise bureaucrats in Washington, so you will be subject to the penaltax. Let’s go back to our single friend making $50,000 and assume he is now 50 years-old. According to eHealthInsurance.com he could get short term coverage, $5,000 deductible, in California (the most expensive state) for $174.61. If you throw on the $33.33 penaltax he would pay $207.94/month in 2014. That would save him $1,400 per year over the cheapest Obamacare plan.

Now, you will get dropped by the insurer if you get something nasty, like cancer, but if that happens you can change to an Obamacare plan and probably pay less for the premiums than what your treatment costs.

I will emphasize again that if you go with option 1 you should do something immediately. Don’t delay, do it today!

Hopefully I’ve been able to help some of you who have been wondering how you would afford Obama’s “affordable” insurance. Now you can sit on the sidelines and chuckle as you watch the progressives’ “shared responsibility” ponzi scheme collapse under its own stupidity.

About Author

Wayne Middlesteadt

Wayne Middlesteadt is a 1986 graduate of Georgia Tech and has an MBA from Georgia State University. Currently working as a financial writer and track and field historian, his latest book is Five Ways To Beat The Market.

  • Buzzy Irvin

    why didn’t you mention the religious exemption? Wouldn’t that be the most obvious and easy way?

    • Wayne Middlesteadt

      Obvious? Yes. Easy? You’re dealing with the government, there’s nothing easy about that. But if you can pull it off – go for it! You’re also exempt if you can prove you’re an American Indian, you’re a resident of a US territory (Guam, US Virgin Islands, etc.), or you’re an illegal alien.

  • Evil Betty

    There’s accident-only insurance, and religious collective ins. too.

  • SusyQ

    Officer McDoofus…..love it!

  • Joe Gold

    There is also a provision under exemptions from the penaltax for hardship; if you show a utility shutdown notice you will be exempt. So, basically refrain from paying your electric bill, instead putting the money aside. After a couple of months, when you get your shutoff notice, then you can pay the bill in full. Voila! Instant exemption. 🙂