Daily Kos: In 400 Days the Health Insurance Cliff will Kick In. For Real.

It's actually not too complicated. A couple multiplications and subtractions (and there's a table just below if you don't care to follow the math). The law says that if you, as an individual, make between 300% and 400% of the federal poverty level, the Federal government will provide a tax credit for any premiums you pay for standard insurance bought on the exchanges in excess of 9.5% of your income. But if you make more than 400% of federal poverty level, no tax credit will be available. (The astute reader may have just figured out the problem.)

The Federal Poverty Level (FPL) in most states is $11,170. Four hundred percent of that is $44680. Nine and a half percent of that is $4245. Suppose you are paying $500/month in premiums for your health insurance (not a particularly high rate if you are an older person but not yet eligible for Medicare) or $6000/year. Assuming you are eligible for the subsidy, then in 2014 the Federal government will effectively pay $1755 of that (the excess above $4245), and you will only have to pay $4245.

But what if you make $44681? Now you make more than four hundred percent of the Federal poverty level. Now the federal government will pay nothing -- $0.00 -- to help you with your health insurance premiums; you will have to pay it all. You just fell over a $1754 cliff.

Who, you might ask, could have written such a stupid law? That's a good question. Unfortunately, I don't have a good answer. Congress.

If you make	If you pay	You'll get	But if you make	You'll get
$44680 individually	$6000/yr in premiums	$1755 in subsidies	$44681 individually	$0 in subsidies
$14856 individually	$4000/yr in premiums	$3703 in subsidies	$14857 individually	$3554 in subsidies
$88200 as a family of 4	$15000/yr in premiums	$6621 in subsidies	$88201 as a family of 4	$0 in subsidies

What will this mean? As far as I can tell, it will mean that a bunch of people are going get shafted. Some will have no idea they've been shafted, and the rest of them are going to be very upset when they realize how they've been shafted.

A lot of people simply don't know exactly how much they will have made in a given year until it's over and it's too late. Maybe you get that $10 you didn't think about in interest from your savings account and it pushes you over the limit, or one of your clients pays you a few days early, or your non-health-insurance-providing company gives you a $100 Christmas bonus... and suddenly you're over the limit. Your boss getting into the Christmas spirit has cost you $1500 or more. Imagine a million people suddenly realizing that if they had made a hundred dollars less they would have made a thousand dollars more...

The effect is most severe at the top, but the cliff doesn't just apply at the top end of the subsidy range (400% of FPL). If you make 133% of FPL the government will pay the cost of your premiums beyond 2% of your income. But if you make 134% of FPL the government will only the pay the cost of your premiums beyond 3% of your income. ?So if you make $14856 and your insurance premiums are $4000/yr the government would pay $3703, but if you make $14857 the government will pay only $3554, about a $150 difference. Which, if you're making less than $15000 a year, is nothing to shrug off.

It gets worse if you're a family. Much, much worse. The FPL for a family of four is $22,050. Four times that is $88,200. Nine and a half percent of that is $8379. A family of four could easily spend $15,000 on insurance premiums, so the federal government would pick up $6621 of that. But if the wage earners in the famiy make a dollar more, $88,201... then SPLAT -- the family has just lost more than $6000.

So be careful come December 31st, 2014 -- do you really want to pick up that $1 bill you see lying on the sidewalk?

Income Level ( % of FPL )	Max Premium as % of Income
Less than 133%	2% of Income
133% - 150%	3% - 4% of income
150% - 200%	4% - 6.3% of income
200% - 250%	6.3% - 8.05% of income
250% - 300%	8.05% - 9.5% of income
300% - 400%	9.5% of income

Kaiser Foundation: EXPLAINING HEALTH CARE REFORM: ?Questions About Health Insurance Subsidies.

Source: http://www.dailykos.com/story/2012/11/25/1164534/-In-400-Days-the-Health-Insurance-Cliff-will-Kick-In-For-Real

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