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Recently I got a notice that Health Net was terminating my family’s medical insurance effective Jan. 1. They offered new “Covered California insurance plans” compliant with the Affordable Care Act to replace my existing coverage. Five tiers of service were outlined: Platinum, Gold, Silver, Bronze and Catastrophic. The Silver plan most closely matched our previous coverage.
To calculate the cost of this new plan, a Premium Rate Guide was provided. It is a multi-page chart listing rates for each age and different tables for Los Angeles, San Diego, Riverside, Orange and San Bernardino county residents.
A quick analysis reveals San Diego County was the second most costly, about 10 percent higher than the lowest among them. By adding up the cost for each person on the plan, I determined the new family plan would be $10,523 per year, without a subsidy because our annual household income comes to more than $80,000.
The cost of the Obamacare plan is an astounding 58 percent higher than the existing plan’s cost of $6,828. A $4,000 deductible means that only after paying $14,523 will the health care plan provide financial benefit.
If I choose not to purchase government-mandated health care, the IRS will fine me $285 or 1 percent of my income in 2014, whichever is higher. In 2015, the penalty jumps to $975 or 2 percent of my income, and in 2016, it is a fine of $2,085 or 2.5 percent of my income. (This is the penalty for a family of three.)
Under the Silver plan, my options now are to buy coverage for $10,523 or go without and incur the penalty since I don’t have employer provided coverage. Purchasing a plan means paying $10,523, plus an additional $4,000 deductible I am responsible for even with this coverage.
After I pay $14,523, I’ll incur charges up to an out-of-pocket maximum of $12,700 for a total of $22,700. My family has never spent $10,000 on health care in any one or two-year period. Typically annual outlays would be a tiny fraction of that amount.
As long as family medical expenditures will be $14,250 or less, it would be unwise economically to participate in Obamacare. I’ll incur a fine of $285, but the $10,523 I’ll save on insurance will cover that and $10,000 in medical costs.
Of course without insurance, I will not be covered for any medical conditions and there’s a risk, albeit small, of a medical calamity. If this were to happen, I could sign up for a plan at a later date since insurance companies cannot ban people for a pre-existing condition.
Obamacare is a poor financial proposition for the healthy, semi-healthy or anyone, except for the chronically ill or poor who can receive free or highly discounted coverage. The relatively healthy will find themselves saddled with a hefty effective tax for little direct gain. Like the lottery, this tax will fall largely on the math-deficient who are unable to compute a cost-versus-benefit analysis.
For Obamacare to be financially solvent, the healthy and working must pay in and not make claims to subsidize the unhealthy, old and non-working. Once they realize the true cost, it seems unlikely they will willingly participate.
Michael Robertson is an Internet entrepreneur and the founder of digital music company MP3.com. Robertson’s commentary has been edited for clarity. See anything in there we should fact check? Tell us what to check out here. Want to respond? Submit a commentary.