November 25, 2015

Subsidies Help Us Obey the Law

richardBy Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

In the complexity of today’s world with the many regulations and requirements it’s easy to get confused. In this last part of the calendar year we are in two very important Enrollment Periods that affect us all. Medicare Enrollment Period AND the Enrollment Period for everyone else.

The Medicare Annual Enrollment period is ending December 7. However Special Medicare Enrollment Periods (SEPs) remain available if you qualify. A change in address generates a SEP. If the change involves relocation to a different Medicare Region, a Special Enrollment Period opens allowing you to evaluate and change your choice of plans. Medicare SEPs are available for relocations or other life changing events; marriage, divorce, death, adoption and others.

Another enrollment period for persons under the age of 65 began November 1 and continues to the end of January. Individuals and families not eligible for employer provided group major medical insurance may elect to choose individual major medical insurance from a variety of companies. This enrollment period was created under provisions of the Affordable Care Act passed into law in 2010 and gradually phased in over the years. This law often referred to as Obamacare mandates everyone to carry major medical insurance or pay a stiff penalty.

One of the huge benefits of Obamacare is the credit or subsidy that is applied to the premium for major medical insurance. This subsidy is designed to help qualifying individuals pay cost of major medical insurance. Premium subsidies help make cost of major medical insurance actually affordable and helps everyone comply with major medical insurance mandate under the Affordable Care Act.

Let me cite several examples of how this premium subsidy helps. I enrolled a family of 4; husband & wife in early 50s and two high school or college age children in one of the Obamacare Plans. The monthly premium on this policy is $1,080. Due to the premium subsidy available to this family they qualified for a $997 monthly subsidy. Their net cost of major medical insurance ended up being $83. What a fantastic savings for this family! Another example is a single male age 30. Prior to the Affordable Care Act this guy did not have major medical insurance. His annual income amounted to approximately $28,000. The normal cost of insurance for this guy would have been $238 monthly. Due to the premium subsidy of $145, he ended up paying $93 monthly for a Cadillac plan of major medical insurance. Similarly a single woman age 38 with 2 dependent children would have had significant monthly premium but due to the premium subsidy she ended up paying a minimal premium.

The important issue with these examples is the individuals mentioned would previously not have carried major medical insurance due to the high monthly premium. These people are now have major medical insurance due to the Affordable Care Act.

There are many options for major medical insurance and many additional ways of structuring these plans and how premiums are paid. The premium subsidy is a huge benefit. For persons qualifying for the subsidy the cost of insurance is minimized. Do you qualify for a subsidy?

In order to determine the amount of subsidy two factors are considered. First factor is household income and second factor is number of people living in that household. Eligibility for qualification for a premium subsidy can be obtained from the www.healthcare.gov website. Encourage you to determine your eligibility for that premium subsidy.
Penalties for non-compliance with the Affordable Care Act are stringent. In 2015 the penalty for a single tax filer is the greater of $325 per adult and $162 per child or 2% of income. For families the penalty is the greater of $975 or 2% of income. Next year (2016) the penalty for non-compliance will almost double.

In my opinion it makes more sense to make use of the generous premium subsidies that are available and to comply with the law. Call us for assistance.


Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJS and Associates, Inc. He can be reached at (563) 332-2200.

Filed Under: Finance, Health & Wellness

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