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Study: You’d Have to Put $3,381,818 in a Savings Account to Cover Your Obamacare Bill

Now that Obamacare has officially rolled out, and we finally have hard numbers surrounding its cost, debate over whether plans under what’s officially known as the Affordable Care Act are truly affordable is beginning to heat up.

According to data released by the Department of Health and Human Services for 47 states and Washington D.C., the average lowest-cost “silver” premium is $310 per month — certainly affordable to some, who previously might have paid a much higher premium or not qualified for coverage at all. For others, this represents a sharp increase.

However, regardless of what the federal government does to bring down the cost of healthcare, one glaring issue still remains unresolved: The ability for Americans to save, whether for an emergency, for retirement or even for health insurance premiums, has all but been wiped out. Until the administration seeks to address the non-existent interest rates on savings we’ve suffered through for more than five years now, few things in life can be considered affordable for a large population of the country.

Click here to see average premiums compared against average savings account rates by state

obamacare costs

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Obamacare Costs

The cost of health insurance under Obamacare will vary widely according to a number of factors like age and marital status. Income determines whether individuals and families qualify for federal subsidies or newly-expanded Medicaid in some states, while location also plays an important role; based on rates for lowest-cost silver plans, for which federal subsidies are available, the lowest average premiums are found in Minnesota, Tennessee, Utah, Oregon and Arizona.

Conversely, the highest-cost states according to average monthly premiums are Wyoming, Alaska, Mississippi, Connecticut and Vermont. In fact, the annual difference in cost between Minnesota and Wyoming is $3,564.

Average Savings Account Rate

Compare this with the average savings account rate: Nationally, savers can expect to earn just .11% APY in their accounts, on average. In order to save up enough interest over the course of a year to cover annual heathcare costs, you would have to deposit $3,381,818 and leave it untouched for all 12 months.

However, like Obamacare heath insurance premiums, where you live makes a difference.

In New York, the average savings account rate is .20% APY, which equates to a $1,914,000 annual deposit to cover the yearly average premium cost of $3,828. On the other hand, the average savings account rate in North Dakota is only .04% APY, which means residents would need to save a whopping $10,500,000 in an account for one year in order to earn enough interest for the annual plan cost of $4,200.

obamacare costs

What these numbers show us is that Obamacare has done more to ensure Americans are covered by health insurance, not necessarily that they can afford it. A large portion of adults are still lacking the tools needed to build financial security, such as a stable job market and a source of safe, consistent earnings on savings. How can we expect anyone to afford health insurance if their paychecks are stretched thin and savings efforts go unrewarded?

If the Obama administration would like to see more Americans with the financial means to buy insurance and remain healthy, it will first need to address the root of the problem — not the cost of health care in America, but the absence of opportunity to build wealth in the first place.

About This Study

Savings account data was compiled from the GoBankingRates interest rate database, which in partnership with Informa Research Services, Inc., aggregates interest rates belonging to more than 4,000 local, national and online banks and credit unions. Although the information has been obtained from the various financial institutions, the accuracy cannot be guaranteed.

All rates are as of October 10, 2013 and based on a $10,000 deposit. Please note that rates are subject to change at any time at the discretion of individual banks and credit unions, and rates may have changed since the date of publication.

The lowest-cost silver-tier monthly premiums under Obamacare were collected from Marketwatch.com, which supplied weighted averages by state based on data released by the Department of Health and Human Services in September. According to the Marketwatch report, rates in 47 states and Washington, D.C. (Hawaii, Kentucky and Massachusetts have yet to disclose their rates) were analyzed and the rating area weights are constructed based on county-level population under the age of 65.

Note: An earlier version of this study included total deposit projections based on an incorrect Excel formula. Calculations have been reviewed and updated to reflect the correct deposits required to earn interest equivalent to healthcare premiums in each state.

Photo: danielmoyle

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  • Mike

    I don’t mean to be rude but you blaming that error on Excel is pathetic. Per your profile you are a “prolific personal finance writer” but yet you didn’t notice that every single calculation was off by millions of dollars before publishing your article? That is beyond scary.

    • GBR Casey

      Yes, I published incorrect data which I have been working for the better part of the day to ensure has been corrected and revised data is disseminated. While I’m sure you have never made a mistake, I can assure you they do happen — unfortunately mine was on a very public scale. However, everything is now revised and accurate.

      By the way, prefacing a statement with “I don’t mean to be rude” doesn’t make everything that follows not rude…but I do appreciate where you’re coming from in your criticism.

      • Mike

        I apologize for my previous comment, it was rude and I could have made my point in a much more tactful way. I do make plenty of mistakes and shouldn’t have been so quick to judge upon reading your article. Thanks for taking the time to respond to my comment.

        • Bill Smith

          Wow, Mike. Class. I tip my hat to you.

      • cwcw

        Casey I do mean to be rude, this is a disgusting ridiculous attack on a law that will help great numbers of Americans!! My wife currently has insurance only because of the ACA our pastor has a daughter that will need expensive heart surgery their insurance kept raising their rates until they were over 2500 per month they could not afford it. you are a subhuman piece of scum that would rather let children die that cut into corporate profits

        • Timoteo Hiroshima

          Everyone dies. That is how life works. No matter how much money you throw at it, EVERYONE dies.

  • Henry

    Thanks for the revised numbers — it sounds even more less likely I will get Obamacare for free… let’s see either congress can pass single payer or I could win the lottery… where would you put your money.

  • Jeff

    This seems to ignore the subsidy altogether.

    • dmccaff

      In the words of one Arthur Fonzarelli: Exactamundo. It also ignores what’s expected to be a decline in pricing as the fair market competition kicks in.

      • Mike

        fair market competition? The ACA is forced upon the population with the threat of fines, imprisonment, and much more and you want to start talking about a fair market? If the free and fair market had been allowed to do its job there would have been no jumping off point for the ACA in the first place. Libs created a problem and then came up with a bigger one to solve it.

  • dmccaff

    Casey: Thanks for responding and correcting the information. That said, as a professional journalist, your response to Mike’s comments — regardless of what he wrote (which is actually rather tame by today’s ‘anything goes’ standards in comments-section land) — comes across as overly defensive and sarcastic. Yes, mistakes happen and are understandable. But I’ve taken more than my fair share of shots in comments sections based upon content I’ve posted … You just learn to post replies that take the high road, explain your position in a professional manner, and move on.

    Anyway, enough about that. My greater question about the article/research is its entire premise — one that can be easily manipulated/distorted by the usual suspects out there by pundits who eagerly selectively use and omit “facts” to state incredibly misleading/false characterizations of “the truth.” I’m far, far from an ACA fan. But I am a fan of insightful and fair-minded journalism, and, respectfully, I feel this entire concept here fell a bit short, easily leading to potential mischaracterizations from the pundits (whether they’re paid network pundits or the amateurs in social-media land). To wit:

    * The premise is to see how much you’d have to earn from a bank savings account to pay for ACA entirely out of the resulting savings. How exactly did you (or your editors) come up with this premise? Do you feel it’s reasonable to believe that there are any Americans out there who expect to pay for ACA costs entirely out of a bank savings account interest? Is this even a realistic scenario at all, even when savings interest rates were “good”? Healthcare is a monthly expense that you budget for out of your earnings, like paying for groceries.

    * If the premise was: Well, we weren’t targeting ACA here … We were trying to demonstrate how difficult it was to build wealth via savings account interest … OK, as a saver, I’m all for that. But most of us who do save realize there are other ways to build wealth. You’d be doing more than fine by parking at least 70 percent of your total available funds in an S&P index fund ever since Obama took office, for example. (I’m sure you know what the annual returns there have been.)

    * I do not have a copy of the version of this article from yesterday, but I seem to recall that there was language throughout that was far, far more “loaded” in terms of describing the ACA (or, to use your preferred phrasing, Obamacare) as unaffordable, based upon the “you can’t really pay for it out of savings interest premise.” Is the current version a toned-down version of what was posted yesterday? Because I appreciate the more straightforward approach here (albeit, I will respectfully agree to disagree about the validity of the premise). However, I also feel that — once the fringe pundits ‘grab what they want and leave the rest’ — the damage here (or at least the potential to supply them with the ammo they need) will already have been done.

    * Even with the toned-down content today, the headline is still incredibly misleading (and ripe for the pickins’ among the fringe pundits). No, you do NOT need in excess of $3.3 million to pay for ACA care. You need roughly $3700 socked away for a year. As the supposive free market concept kicks in here, it should go down. Besides, there are subsidies in play for those in lower income brackets. As a content professional, you know very well that all a pundit needs is a good headline to “take the ball and run with it” in whichever direction the pundit wants to take it.

    • Mike

      You have the nerve to attempt to defend the ACA by discussing how it will improve over time because of the free market? The ACA is the anathema to the free market. You have no credibility

      • dmccaff

        See above comment about not being a fan of ACA. This wasn’t about debating the merits of this law … I think that’s been done to death by now. My summary above is more about my issues with the overall journalistic intent/execution here of this story. As for free market aspects of ACA, neither you nor I can say with 100 percent certainty as to what will happen. However, that is in theory what is supposed to happen. We’ll see. Thanks.

        • Mike

          I can appreciate what you are trying to say but I can say for certain what the ACA had done to the free market. It has eliminated it from the equation. That is how socialism works.

          • dmccaff

            We will agree to disagree then. I’m not going to call something a “done deal” when it’s literally in its infancy. In theory, many companies will be competing for the same customers, which brings down prices. We’ll see if that happens.

            Your interest in this is about politics. I’m more interested as an emotionally detached detached business observer. As far as I’m concerned, my only vested interest in the ACA hysteria and the shutdown and the looming default “crisis” was the splendid opportunity it created in the stock market over the last couple weeks. It was a great chance to buy index funds on sale, knowing very well in advance that, somehow, a last-minute, heroic “rescue” would take place and the “crisis” would be avoided in the 11th hour. Wonderful stuff. And it gets to happen again after the holidays too!

          • Mike

            It’s wonderful that you stand to make a few dollars from this but as an American I’m more concerned with the direction more socialism takes this country. I think you should be as well. Have you considered that as socialism grows, opportunities for private business and associated profits tend to decrease? The political ramifications should concern us all.

          • dmccaff

            As a fellow capitalist, how can you take me to task for taking advantage of what’s clearly a residual opportunity, Mike? I’m perfectly capable of compartmentalizing my disappointment in my elected leaders, to position myself to put more muscle in my portfolio by taking advantage of their attempts at bad theater. All politics is theater anyway. If you see it for the sideshow it is, it helps you sleep better at night. (And all the fringe-right TV network pundits who scream “socialism!” and liken ACA to an economic suicide pill are the same ones slapping backs and having drinks with the opposing fringe-left pundits whom they just sparred with on camera, Mike … So the truth is, they really take this stuff only so seriously too. The passion they convey when the camera red light is on? That’s just theater too. Trust me.)

            As for the merits of the socialism tag here? Meh. That’s what our system of checks and balances are for, with a conservative House to balance everything out. Besides, the same “S” word accusations were made for other programs that now are considered part of the common fabric of America. Certainly, they can all use tinkering, as Clinton did with the Republicans on welfare. But they are here to stay. ACA most likely is too.

            My GOP friends should stop tilting at windmills here, cut their losses and focus on the next elections. Because if they don’t, I fear what could be the unthinkable: A Democratic White House, Senate and House. (In which case I’ll be looking to park more of my portfolio on the sidelines. Or bury it in a jar somewhere in my backyard. Whatever. You should consider the same.) Anyway, the spirit of American capitalism survived Medicare, Medicaid, Welfare, the Great Society, etc. Somehow, I think it will survive ACA.

          • Mike

            Did America survive all these programs? That story is still being written and with debt greater than 17 trillion I suspect we will find out in less than a decade.

  • Wendt Alan

    It’s clear that banks are not really interested in consumer deposits because they can borrow all they want from the Fed at that “close to zero” rate that the Fed doesn’t reveal anymore. Remember when we used to get precise numbers? And they are not really interested in lending to us riff-raff because they can lend to Treasury at around 3%. After buying a bunch of T-bills, they can use those as collateral to borrow more back at the Fed. Since T-bills are “risk-free”, there’s really no limit as to the amount of leverage a bank can get with almost no deposited money.

  • alwaysthink

    The White House did propose The Jobs Act that would have spent this very “cheap” money on rebuilding our Infrastructure and put Americans back to work. But it’s sitting on the GOP shelf in the House. We also need to reverse the trend of off shoring everything.

  • alwaysthink

    Very disappointing article about the real problem of low interest rates for savers. Trying to hang this problem on Obamacare is ridiculous.

  • Red Squid

    Casey, jumping on the Obamacare bandwagon was great click bait, but you fail completely to note the real problem – banks don’t need your retirement dollars and they are paying you next to nothing for them. An even better point could have been made for the poor return when it comes to just paying for groceries, or the rent, or utilities.
    On the other hand, my wife just had a biopsy done for a suspicious breast lump – which would have moved us into the “pre-existing condition” bucket and made health insurance un-affordable before the Affordable Health Care act. Now, we can at least just get on with dealing with it rather than worrying about having the health insurance gone.

    I don’t like the way the ACA was setup because I believe in Single payer and eliminating the double dealing insurance companies from the equation. But it is better than the current system where you get sick, lose your job, and lose your health insurance. Since you are sick, no reasonable cost insurance was available.