# Penalty Calculator - Will You Really Owe Anything If You Have A Better Alternative Than Obamacare?

November 10, 2015

#### Penalty Calculator - Will You Really Owe Anything If You Have A Better Alternative Than Obamacare?

The IRS grants an exemption from the Shared Responsibility Payment (tax penalty for being uninsured with a MEC plan) if the lowest premium of an available Bronze plan exceeds 8% of a Household’s Income. The median household in the US is roughly \$52,000, so for the average American individual or family, their annual premium would have to be less than \$4160 (8% of \$52,000) to avoid being subject to the tax penalty. As a result of Health Insurance premiums increasing by double digits in most places, many people who would have been subject to paying the penalty for the plan year of 2015 would no longer have to pay the penalty in 2016.

### Lowest cost Bronze Plan = \$1054/ month, or \$12,648 annually.

For the example 1, as long as this family’s household income is < \$158,100, they will not be subject to the tax penalty, as the premium of \$957/ month exceeds 8% of their household income.

### Lowest cost Bronze Plan = \$370/ month, or \$4,440 annually.

For the Example 2, as long as this Individual’s income is < \$55,500, he will not be subject to the tax penalty, as the premium of \$370/ month would exceed 8% of his household income.

### Lowest cost Bronze Plan = \$1000/ month, or \$12,000 annually.

Let us assume for this example that this family’s income in 2015 is \$155,000. For this year, they will be subject to the tax penalty, as the premium of \$1000/ month does not exceed 8% of their household income. If premiums increase by 20% for the 2016 plan year, however:

Lowest cost Bronze plan = \$1200/ month, or \$14,400 annually

For 2016, this same family would not have to pay a penalty, despite the fact that they would have had to if they went without a MEC plan in 2015.

Effectively, ACA tax penalties are leveled as a function not only of a Household’s Income, but also of their Individual Medical plan’s premium! There has literally never been a better time to market low-cost, high-benefit Short Term Medical Insurance plans as an ACA alternative, as Individual Medical premiums are making fewer Americans than ever subject to the ACA tax!