Why the Middle Class is Becoming EXEMPT From the ACA Mandate—and the Silver Lining for Millions of Americans

Updated on May 8th, 2024

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The Affordable Care Act (ACA) is officially “unaffordable” for millions of middle-class Americans. And it is unaffordable as defined by the rules of the law itself.

More and more middle class Americans are becoming EXEMPT from the ACA individual mandate and its penalties.

The silver lining for them is that they now will have more freedom to purchase health insurance that fits their actual needs and their budgets, including Pivot Health’s short term medical insurance and Pivot Health’s fixed dollar zero deductible insurance.

How and Why Did Obamacare Become Unaffordable for the Middle Class?

It has been a very long and winding road to make the Affordable Care Act unaffordable for the middle class. Here’s the general idea:

  • Premiums for ACA-compliant health insurance continue their rapid and sharp increase.
  • The ACA’s individual mandate that all Americans have health insurance or pay a penalty is still the law of the land and is now being enforced more strictly by the IRS.
  • One of the few exemptions to the individual mandate is the “marketplace affordability exemption.”
    • This means, for 2018, if the lowest-cost marketplace plan available would cost more than 8.05% of the person’s household income, this health insurance is, by ACA definition, “unaffordable,” and the person is exempt from the individual mandate (and thus from the tax penalty).
    •  The government website, healthcare.gov, spells out the “marketplace affordability exemption.”
      For 2018, an analysis of 40 metropolitan markets showed the average family of three needs to earn $110,000 to afford Obamacare, by the ACA’s own definition.

When this analysis was updated with actual average premium increases for 2018, it showed that Obamacare health insurance is “unaffordable” for a non-subsidy-eligible individual earning less than $69,457 in 2018.

A Little History of the “Affordable” Care Act

The main components of the complex ACA were rolled out over six years in pieces and parts.

  • 2010-2011—Market reforms that expanded benefits of ACA-compliant plans
  • 2012-2013—Several taxes and fees added
  • 2014—Individual Mandate effective; 1st year of Exchange policies; more market reforms on plan benefits; more taxes and fees added
  • 2015—Employer Mandate effective
  • 2017—Average monthly premium for individual health insurance had more than doubled since 2013 in the 39 states using the federal Exchange. Some states had even higher increases during the same period.

During the same 2013 to 2017 period, deductibles soared:

  • Average individual health deductibles increased by more than $1,000
  • Average family health deductibles increased by more than $4,000

The Analysis that Makes Unaffordability Crystal Clear

After analyzing 2018 health insurance costs in 40 metropolitan areas served by the federal exchange, a recent study found that the average family of three that earns slightly too much to qualify for subsidies in 2018 would need to increase its income by nearly $29,000 to make health insurance affordable by ACA criteria. And this first analysis was based on a conservative assumption of a 10 percent increase in premiums for 2018, compared to 2017. In fact, average premiums for the lowest-cost plan available will increase 26 percent in 2018.

In contrast, subsidy-eligible individuals, such as many who earn $25,000 or less or individuals age 55+ earning $30,000 or less, will have access to zero-premium health insurance, if they choose to use their subsidy dollars for the lowest-cost bronze plan.

The simple fact is: as premiums increase, so do the subsidies for income-eligible people, as the middle class bears the burden.

The only good news for the middle class is that as premiums increase, Obamacare insurance is defined as “unaffordable” for more and more middle class individuals and families.

Health Insurance Solutions for the Middle Class

With this new-found freedom from the Individual Mandate, large numbers of the middle class can now go back to selecting health insurance that works for them.

They still need health insurance for themselves and their families, but because they will not be subject to a tax penalty for not buying Obamacare type insurance, they have many new opportunities for coverage.

Many of them may choose short term health insurance, which has many of the same types of benefits as Obamacare, but with a wide range of deductible options, lower cost and greater flexibility and coverage that may be more in line with family needs.

Others may choose fixed dollar zero deductible plans as an alternative to major medical. These plans can eliminate the medical deductible and provide defined cash benefits to help pay for health care services whenever you need them.

Pivot Health’s Short Term Medical

Pivot Health’s short term medical plan may be the answer for many of these newly-free middle class. For those who are healthy and without chronic medical conditions, the cost is about half as much as individual health insurance plans.

Important features include:

  • $1 million maximum benefit per coverage period
  • No required medical networks. This plan provides you the freedom to use any doctor or hospital and still have your coverage apply.
  • Coverage for hospitalization, surgery, medical services and treatment, doctor office visits and more
  • Benefits for extended care facilities, home health care and mental health services
  • Local ambulance or air transport
  • Some plans in this product series also lower your out-of-pocket expenses with physician visit copayments and prescription drug coverage
  • There are a wide range of deductible options

Pivot Health’s Fixed Dollar Zero Deductible Plans

There is another opportunity for obtaining important insurance benefits while avoiding the high deductibles that have become all too common.

Pivot Health’s fixed dollar zero deductible plan, called PivotCare Elite, provides you easy-to-use benefits that begin right away when you receive medical care related to a covered illness or injury. There is no deductible because this plan is designed to pay a fixed amount of cash triggered by trips to your doctor’s office, visits to the emergency room, lab tests, x-rays and MRIs, hospital stays, surgeries and anesthesia, and even childhood immunizations.

These cash benefits are paid no matter what doctor you see and no matter how much the facility charges. You don’t have to wait and pay a high deductible before your benefits kick in. This type of plan also is called a fixed indemnity plan.

You are not required to use a specific medical network with PivotCare Elite, but, if you do decide to use the First Health network, you receive an immediate discount on your medical services.

In addition, PivotCare Elite plans offer:

  • Critical illness coverage, for extra financial protection (with benefits that are in addition to the plan’s daily cash benefits), for catastrophic medical emergencies, such as stroke, heart attack, invasive cancer and end-stage kidney failure (certain state restrictions apply)
  • Benefits if you suffer fractures, burns and dislocations
  • A prescription drug discount card to save money on medications
  • Benefits is you need ground and air ambulance
  • Benefits if you need mental health and substance abuse care
  • Accidental death and life insurance benefits (certain state restrictions apply)

The Silver Lining for Millions of Middle-Class Americans

As Obamacare becomes more and more focused on providing coverage for those Americans whose income qualifies them for tax subsidies, the middle class is bearing the burden of rapidly increasing costs if they choose to purchase these same types of plans without the benefit of tax subsidies.

The silver lining for middle-class Americans whose income places them in the “Obamacare is unaffordable for me” category is that they will have new-found freedom to purchase the type of insurance that truly meets their needs. They will not have to bear the burden of the Individual Mandate, since Obamacare is defined as unaffordable for them, and they will not have to pay a tax penalty for not purchasing health insurance that does not work for them.

As Obamacare becomes more and more expensive for those who are not able to use tax subsidies to pay the premiums, there will be increasing numbers of Americans who are freed from the “Un-Affordable Care Act.”

With choices such as short term medical and fixed dollar zero deductible plans, these people can still meet their individual and family needs while they save money on premiums and penalties.

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