Is Obamacare Free?

Posted by Amanda on November 13, 2013

On Halloween my husband was laid off. His job never gave us warm fuzzies in the job security department ever since two years ago when the company was bought out by another that buys companies and sells them at a profit. Over the last two years various people have been let go and fired, and Paul made it through all of those. So even though we planned for the worst (i.e. maintained an emergency fund), we did not expect it to happen. Let’s face it: you or your spouse losing a job is always a bit of a shock.

One of the things that I took for granted is Paul’s health insurance plan. I quit my job this February to pursue writing and blogging full-time, and so now that Paul lost his job we will be losing our plan. In fact, we have until November 30th to decide what to do as that is when we lose our coverage. And quite frankly, I am not happy about being thrust upon the confusing health care market right now.

Obamacare and Health Care

Unfortunately, many of you are in the same boat as us. In fact, my father and several friends are part of the percentage of Americans who are being dropped by their health insurance plans at the end of this year. There is a lot of uncertainty among all of us. In my quest to find suitable health insurance for us, as well as to clarify Obamacare for everyone, I thought I would start by addressing a question readers are asking.

Is Obamacare Free?

In a word, no. Obamacare is not free.

I’m not talking about whether or not Obamacare costs taxpayers money (it does) or the politics behind it. Rather, I am talking about whether or not it costs money to sign up for a health care plan under Obamacare.

Despite what you may hear in the news by angry political figures on both sides, the Affordable Health Care Act does not run like health care plans in European countries where taxes are used to offset the cost of health care, making it free for everyone.

There is a new health insurance premium tax credit that adjusts the premiums you will pay as a percentage of your household income, but it is not free. Based on your income you will pay between 2% and 9.5% of household income for annual premiums if you qualify for the tax credit.

Are There Any “Free” Components to Obamacare?

There are free components to health care plans under the Affordable Health Care Act (though yes, there are quotes around the word “free” as you are still paying your premium amounts). These include (as long as your plan has not been grandfathered in):

  • Free Preventative Care: All plans need to include free preventative care for things like well woman visits and immunizations.
  • Free Screenings: Various free screenings for adults and children are now required to be offered by health insurance plans. These include blood pressure, cholesterol, and depression.
  • Free Counseling: It is now required by law that health insurance plans offer free counseling for various issues, including diet, obesity, alcohol misuse, HIV, etc.
  • Free Certain Medication and Supplements: You cannot get these on your own, but rather through your doctor. They include free aspirin to prevent cardiovascular disease for men and women of certain ages and free folic acid supplements for pregnant women.

Our Immediate Steps

Paul and I do not know how Obamacare health plans stack up to our current one (in both price and quality), but we do know how our own health plan of five years works. As such, we are focusing efforts on scheduling important checkups and other appointments we’ve been putting off so that we can pay for it through our old health insurance plan. This includes taking advantage of our annual $300 benefit for eyeglasses (we both wear glasses), a cavity or two being filled at the dentists’, a physical exam, dermatology appointment, etc. It’s better to get these over with before losing coverage than to risk a rise in costs on our next plan (again, I do not know if our costs would go up or down, but we like to plan for the worst).

We are in a bit of a unique situation, as under this law, minimum essential coverage also includes COBRA. So perhaps we won’t have to figure out the Obamacare system. However, we will definitely be choosing something at the end of this month. This is because not only do we not want to risk going without health insurance, but we also do not want to pay the penalty for being uninsured come January 2014.

Have you lost your health care insurance? If not, has anything on your current plan (type, coverage, premium cost, etc.) changed? Any luck with signing up for an Obamacare plan?

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Comments to Is Obamacare Free?

  1. do the new kind of health savings accounts help you?


    • Hi randy,

      Honestly, I am not sure at all. We’ll be delving into this as soon as our COBRA information comes in (which better be soon!).


  2. I believe the penalty for 2014 is only $95 per person. Hardly catastrophic. No one in mainstream news seems to mention this.


    • Right, but it gives you nothing – you still won’t be covered if you need to see a doctor or go to the hospital.

      Linda W.

    • FYI, it’s $95 or 1% of your income. In other words, if you have adjusted gross income of more than $9,500, you pay the 1%.


  3. Given that neither one of you is earning as of the lay off date, you should qualify for Medicaid on Jan 1, and that should be free – correct ?



    • That would require proof of income, and last year’s tax returns won’t show that they’re not working now. I don’t know how you prove a lack of income, as I ran into that myself – looking for something cheaper based on current income, not when I was employed.

      Linda W.

    • Also if they have other sources of income, that would kill that idea too. I would like someone who has knowledge in this area to reply.

      Linda W.

    • Interesting! I do earn some money with my business, just not a full-time income.


  4. Cobra is no bargain either. I left my job voluntarily, and as a healthy, 54 year old woman, am paying over $600 per month for my coverage. I tried to look into Obamacare/the healthcare marketplace this week to see if ican get a better (cheaper) deal, but wasn’t able to get quotes online. Then I called and spoke with someone who tried to do it along with me on her computer, and she wasn’t able to complete the task either. We ended the conversation with her telling me to try again at another time. Policies won’t go into effect until January 2014, so we still have some time to try and work things out.

    Linda W.

    • Thank you for sharing your experience Linda. Our COBRA paperwork hasn’t come through yet, but I am assuming it’s going to be quite high (yuck!).


    • Cobra premiums are completely dependent on the plan you had under your prior employer. You pay 102% of whatever the existing premium is (the 2% is an administration fee).

      If your employer offered a generous health insurance plan (like mine did), your Cobra premium will be high. When I was laid off back in 2009, the monthly premium under Cobra for my wife and me was $950, in spite of the fact that we were both healthy and still in our late 20s/early 30s. Unfortunately/fortunately, my wife was two weeks pregnant when I was laid off, so we had to stay with for the full term of the pregnancy (I didn’t find a new job until 2 weeks after my daughter was born).


  5. It sounds like you’re confused about what the The Affordable Care Act really is. It is not government health care, nor does the federal government have anything to do with any of the policies offered on any state exchange.

    The ACA is a law – it is not a health insurance plan or policy. You can not and will not buy any sort of health insurance policy from the federal government through the current ACA. That cannot and will not ever happen – because every policy sold on a state exchange is from a private sector, for-profit insurance company.

    If you want something like Europe, the word “single payer” is what would apply – which would be a payroll tax deducted from earnings, which in turn would pay for health care for everyone. Think Medicare for everyone, if that helps defining single payer. This country desperately needs to join the rest of the world and the 21st century and have single payer the law of the land. Hopefully, the ACA is a step in that direction.

    The policies found on the state exchanges are from private, for-profit insurance companies – the same companies that have been selling health insurance in this country for eons. The company that insures you now could very well be offering policies on the exchange. The federal government has absolutely nothing to do with the prices those policies go for, either – it is against federal law for the federal government to set any sort of price for any state exchange offered insurance policy.

    What is offered on the state exchanges will depend on what state you live in, and what and how the state legislators and the state health insurance commissioner did and settled for when bargaining with the insurance companies offering polices on the exchange.

    Florida residents, for example, will be raped when it comes to premiums because the Republican state legislature passed a law that outlawed the state insurance commissioner from working with any insurance company on the state exchange to set prices. That state said, “let the federal government do it” – either being too stupid to realize it was against the law for the feds to do that type of thing, or knowing full well what was in the federal law and throwing the citizens to the wolves anyway.

    The residents of the state of Wisconsin, as another example, will pay premiums 99% higher than the residents in neighboring Minnesota – even though the demographics, both population and geographic, are the same. Why? The fault lies purely at the feet of one person – Gov. Scott Walker.

    United pulled out of the CA exchange because they refused to bargain with the state insurance commissioner and lower their premium prices to be in line with other exchange offerings. The state said fine, don’t need you, there are others to take your place.

    I could go on and on with such examples, as there are many more. 26 states refused to expand Medicaid, which in turn will prohibit close to 20 million people, the majority of those children, from being insured on an exchange through a private policy, or being added to the Medicaid rolls. If you are in one of those states, forget Medicaid even if you would qualify based on income in another year.

    The ACA is alive and working very, very well in the states that willingly adapted to the program and set up their own exchanges. I know people in CA and OR that are self-employed, formerly considered uninsurable due to pre-existing conditions, and they are buying health care policies for less than their cell phone bill each month.

    I know a 60 year old man, self-employed for years, never had health insurance because he couldn’t afford it, and if he picks the Bronze plan, his subsidies will pay 100% of his premiums. He can upgrade to Silver or Gold, apply the subsidies given, and pay some out of pocket – still very affordable.

    Again, it all depends on where you live and who is in control of your state legislature as to whether the insurance policies offered on your state exchange are affordable to you or not. That was all the choice of the states – and they chose to throw millions under the bus all across the country. It’s criminal what has been done on the state level in some of these states.

    And, just an note: The policies being dropped by the companies are policies that do not meet the minimum standards set for health care insurance. If you know anyone whose policy was cancelled, it was poor to crappy insurance for the price, and the company knew they can’t keep selling an inferior product (think pre-existing conditions, refusing well baby care, coverage for children in college, etc., etc.)


    • Wendy,

      There is so much misinformation in this post; I almost don’t know where to begin.

      “If you know anyone whose policy was cancelled, it was poor to crappy insurance for the price”

      False. I am being forced off of my company’s small group plan (we all want to keep it, but ACA eliminated plans for certain partnerships). Not only will my coverage remain the same under one of California’s bronze plans, but my deductible will increase from $4,000 to $5,000, my family out-of-pocket max will increase from $8,000 to $10,000, and my monthly premium will increase from $654 to $876 (for the worst plan available). In other words, I’m getting the same coverage at a dramatically higher price.

      “The federal government has absolutely nothing to do with the prices those policies go for”

      ACA was passed with the explicit intent of affecting prices. Why do you think the President ran round claiming that most people’s insurance premiums would drop by $2,500 under his plan?

      The fact is that the government is mandating that insurers increase coverage (put another way, forcing Americans to purchase a higher level of insurance). In addition, insurers can no longer use pre-existing conditions and have a limited ability to take age into account when determining the price they charge. For example, ACA mandates that an 80 year old can pay no more than 3x what a 21 year old pays for the same policy, even if the cost of insuring the 80 year old is 1,000x more expensive for the insurer.

      All of these factors have direct and indirect impacts on the prices insurers charge. And all of these factors result in higher prices for the majority of us.

      “every policy sold on a state exchange is from a private sector, for-profit insurance company.”

      Not all insurers are for-profit. For example, Blue Shield of California, is a not-for-profit. Any excess earnings are reflected in lower monthly premiums.

      “This country desperately needs to join the rest of the world and the 21st century and have single payer the law of the land.”

      The US health industry is broken. We all know it. But the fact is that a competitive, for-profit system like the US’s is driving innovation. At present, the US system is subsidizing the rest of the world’s single payer systems. Without it, those single payer systems would look very different.

      The fact is that Americans already pay more (as a percentage of GDP) in local, state and federal taxes allocated to government health care programs than any other country in the world. What our government is doing with it is the real question. A single payer system would just give them more money to throw away.

      “I know a 60 year old man, self-employed for years, never had health insurance because he couldn’t afford it, and if he picks the Bronze plan, his subsidies will pay 100% of his premiums.”

      Tell your friend “you’re welcome,” since people like me are now required to pay his bills (both directly through taxes and indirectly through higher premiums).

      “I know people in CA and OR that are self-employed, formerly considered uninsurable due to pre-existing conditions, and they are buying health care policies for less than their cell phone bill each month.”

      Tell these people “you’re welcome” as well. Funny story, one of the partners of my firm is 60 and will see his monthly premiums drop by 35-40% under the CA exchange. As I pointed out before, my premiums will increase by ~35%. And here’s the funny part! Are you ready? He makes 3x as much as me! Hilarious huh?!?!


      • “Tell your friend “you’re welcome,” since people like me are now required to pay his bills (both directly through taxes and indirectly through higher premiums).”

        When are folks with your mindset going to learn that you’ve been paying for those who are uninsured or underinsured long before the ACA became law?

        I’ve enrolled in the ACA after being very patient about the online goat rope that continues to go on. My first bill is due, and although I am not happy with my premium amount, despite wanting a high deductible and health savings account, I will pay it. I will, however, be getting a credit each year because of my income level. And if this is not affordable to pay (I am currently unemployed and going to school full-time), I will look for a lower premium. What counts is that I buy a health plan.

        For those of you whinging about paying others’ health insurance premiums, get over it! It’s been happening longer than you’ll ever know.


      • Jo,

        Just because it has been happening for years doesn’t mean that we should further increase the burden on those that were already carrying the burden.

        In addition, ACA was sold to the American public (at least the minority that wanted it) that it would be more or less budget neutral. I suspect that this will prove to have been a massive lie in the near future. In other words, the government will have to raise taxes to pay for the subsidy you are receiving, which will further increasing the burden on the people actually paying into the system.


  6. Let me mention one other thing, since you are self-employed. Because you are self-employed, you can set yourself up to write off every single penny you spend on health insurance premiums, co-pays, prescription meds, all OTC meds – every single thing health care related that you spend money on you can write off of your income. Tax savings potentially in the thousands, and average tax savings per filer in the country is slightly more than $5000 annually.

    Set yourself up as a C Corp. Make you and your husband employees of that Corp. When I say employees, I mean paychecks and taxes withheld. Set up an HRA, Health Reimbursement Account for the employees of the company. Run your expenses through the HRA. 100% write off.

    The beginning of a new year is the perfect time to start an HRA ☺


    • Thank you for your information, Wendy!

      Amanda L Grossman

    • Before setting up a C-corp, there are questions you should address.

      1) Since administration and other costs associated with being self-employed are generally close to zero, what are the initial set-up and on-going costs of a C-corp?

      In addition to personal tax returns, you will need to prepare tax returns for the C-corp itself. Corporations pay a number of annual state and federal filing fees, and each state also has its own set of regulations. As a result, C-corps are more complicated and expensive from an accounting/tax/legal/paperwork/record keeping standpoint than sole proprietorships, partnerships, and LLCs.

      2) What are the added costs (time and money) of having W-2 employees?

      There are time and monetary costs associated with setting up and preparing payroll. In addition, you will be required to pay into the COBRA program, something that isn’t required of a self-employed person.

      3) How does incorporating affect your retirement savings?

      Setting up a C-corp. eliminates the use of a SEP IRA. Instead, the author would have to set up a 401K if she wants to save for retirement above and beyond the IRA contribution limit. There are considerable expenses associated with setting up and maintaining a 401K. In addition, 401K plans are far less flexible than SEPs, in terms of investment options.

      The advantages of forming a C-corp generally do not offset the pure monetary costs of doing so for someone who is running a small, self-employed business. When you add in non-monetary costs, incorporating probably isn’t the best idea for someone in the author’s situation.


  7. I don’t understand why someone would quit their job knowing that their spouse’s job is in danger.


    • That is understandable, as the reasons why I made the decision to quit my job are beyond the scope of this article.

      A few of the reasons that I don’t mind sharing are because my business was making money and had been for several years (still is growing), and we had/have sufficient savings that will see us through even now that my husband has lost his job (savings + our overall frugal natures).

      Amanda L Grossman

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