- Comment: A blog commented on an article about the “subsidy cliff” for individual policies under Obamacare. First, excerpts from the Heritage article:
“Beginning in 2014, when the new health insurance exchanges will open for individuals and small businesses, subsidies will become available for those whose income falls between 134 percent and 400 percent of the federal poverty level (FPL)…”
“The problem is that as income increases, families will experience large reductions in government assistance, which will discourage striving to earn a higher income…If a member of a family of four living at 400 percent of FPL earns just $1 more, they would receive no subsidy at all, making the family almost $15,000 poorer…[This] “creates incentives for individuals to engage in unproductive activities, such as working less and retiring early…””
Blogger: “The ‘cliff effect’ described here is something I’ve been worrying about for more than a year now. Based on Kaiser’s calculator using my age, earnings and location, I’m in a spot where a tiny increase in income will have a dramatic effect on the subsidy [sic] I might get. But what scares me is that it isn’t just me, it is that everyone like me will be faced with this… [A] small shift of an annual income, say an additional $500 per year, or even $5 if I were that close to the marker (which shifts constantly), could push someone like me into the next bracket for subsidy, reducing the subisdy by thousands. The situation [described in the article] below is extreme, but possible. When I calculated it out… I found that the subsidy drop off was much more drastic than the increase of income needed to produce it. … Only those who have benefits through their employer are safe from this cliff.”
The Cliff Effect: Obamacare Takes a Double Shot at the Economy and the American Dream
Posted on May 2, 2011 by Medi-Chick
http://www.medibid.com/blog/2011/05/cliff-effect-obamacare-takes-double-shot-economy-american-dream/