Like it or not, in less than a year – January 2014 – the core of U.S. President Barack Obama’s healthcare reform goes into effect – and recent data show the cost of Obamacare will be quite high.
The statistics are startling, seeing as the intent of Obamacare was to reduce overall medical costs in the country – one big reason government spending is running wild – by improving access to treatment for Americans. An additional 30 million Americans are expected to be covered under Obamacare.
But new reports estimate the new healthcare system could cost about $1.3 trillion over the next 10 years.
That means the original outcome – which President Obama said would be to “cut the cost of a typical family’s premium by up to $2,500 a year” – is far from reality.
Here’s a breakdown of what Obamacare will really cost you – and your job could be included.
The Real Cost of Obamacare
By 2014, all Americans will be required to obtain health insurance coverage, or pay a penalty to the Internal Revenue Service. Exchanges or marketplaces will be set up in all 50 states by January 2014 so both individuals and businesses can shop for health coverage.
The IRS, in a final regulation issued Jan. 30, estimated that under Obamacare the cheapest plan for a family of four or five will cost $20,000 per year by 2016. The government will subsidize those who cannot afford to pay for the coverage.
That’s more than $4,000 higher than what families pay now.
Annual premiums for employer-sponsored health insurance for a family of four averaged $15,745 in 2012, with workers paying $4,316 toward the cost of their coverage, according to a survey by the Kaiser Family Foundation and the Health Research & Educational Trust.
The penalties for individuals who don’t obtain health insurance are to be capped at either the average annual bronze premium, 2.5% of taxable income or $2,085 in 2016.
Businesses face steep costs as well, especially since the fiscal cliff deal, which eliminated some of the tax breaks for employers to provide health insurance. That means fewer companies will choose to provide work-based coverage, which means insurance costs for many will increase as they have to buy their own plan or pay a penalty.
According to a recent report by the Congressional Budget Office, 7 million people will lose their job-based health insurance – up from the previous estimate of 4 million, thanks to the eliminated tax breaks.
Businesses with 50 or more full-time employees will be required to get health insurance for their employees or face fines of at least $2,000 per employee. Small businesses may therefore be tempted to stay under the 50 full-time employee limit to avoid the harsh penalties.
Businesses and public-sector employers also will cut employee hours to avoid providing health insurance. Virginia plans to limit part-time state employees’ work weeks to 29 hours, to avoid providing coverage for those working 30 hours or more per week. The added insurance coverage would cost the state tens of millions of dollars a year.
Obamacare will also have wide-ranging cost effects well beyond the requirement for individuals and businesses to have insurance.
Drug and medical device companies will also pay more in additional taxes. Health insurance firms will have limits on how much profit they can make from charging premiums. Any health insurance price hike above 10% will be automatically reviewed by authorities in each state.
By TONY DALTORIO, Contributing Writer, Money Morning
February 11, 2013