Health Insurance Cost Estimation

There is no federal penalty for being uninsured (the federal mandate penalty was reduced to $0 starting in 2019). However, five states and the District of Columbia impose their own penalties: California, Massachusetts, New Jersey, Rhode Island, and DC.

State-level penalties vary. California charges the greater of 2.5% of income above the filing threshold or a flat amount ($900 per adult, $450 per child, maximum $2,700). Massachusetts uses a monthly penalty schedule tied to income and the cost of the lowest available plan. New Jersey and Rhode Island follow a structure similar to the old federal penalty (greater of 2.5% of income or a flat per-person amount). The District of Columbia charges the greater of 2.5% of income above the filing threshold or $695 per adult ($347.50 per child). Vermont has a mandate requiring coverage but imposes no financial penalty. If you live in one of these states and choose to go without coverage, the penalty is collected through your state tax return.

The calculator takes what you currently pay for health insurance annually and subtracts the typical employee share (~$1,925/year). The difference is your net savings from employer-sponsored coverage, which is included in the Benefits Value.

Employer-sponsored health plans cost approximately $9,325 per year total for single coverage. Employers pay about 79% ($7,400) and you pay about 21% ($1,925). If you currently pay $5,400 per year on the marketplace, your savings as an employee would be $5,400 minus $1,925 = $3,475 per year. This savings is built into the Benefits Value shown in your results. Note that actual employer plans vary in cost and contribution percentage, so your real savings may be higher or lower than this estimate.

Your premium tax credit equals the cost of the Second Lowest Cost Silver Plan (SLCSP) in your area minus a percentage of your income. For 2026, that percentage ranges from 2.1% for the lowest eligible incomes to 9.96% for incomes between 300% and 400% of the Federal Poverty Level.

The Affordable Care Act (ACA) subsidy formula works in three steps. First, your household income is measured as a percentage of the Federal Poverty Level (FPL). For 2026, a single person at 100% FPL earns $15,960. Second, the IRS Applicable Percentage Table determines what share of income you are expected to pay toward insurance, ranging from 2.1% (under 133% FPL) to 9.96% (300-400% FPL). Third, the subsidy equals the benchmark plan cost minus your expected contribution. You can apply the credit to any metal tier plan, not just Silver. If you choose a cheaper Bronze plan, the same dollar subsidy applies and your net premium drops further.

COBRA (Consolidated Omnibus Budget Reconciliation Act) typically costs 4 to 5 times what you paid as an employee because you now pay the full premium (your share plus your employer's share) plus a 2% administrative fee. For the average single plan, COBRA runs about $793 per month. Marketplace coverage with subsidies can be significantly cheaper depending on your income.

COBRA lets you keep your employer's group health plan for up to 18 months after leaving a job, but at 102% of the total premium. For example, if your employer was paying $667/month and you paid $167/month, COBRA costs ($667 + $167) times 1.02 = $850/month. Meanwhile, a marketplace plan with subsidies could cost $128 to $500/month depending on your income and location. The key factor is income: if your income drops after a job loss, you may qualify for a substantial subsidy on the marketplace. Losing employer coverage is a qualifying life event that allows you to enroll in a marketplace plan outside of open enrollment. You have 60 days to elect COBRA, so you can compare options before deciding.

Marketplace health insurance cost depends on your income, age, state, and plan tier. For a 35-year-old in Texas earning $126,000, a Silver plan costs approximately $500 to $650 per month before any subsidy. Many contractors earning above 400% of the Federal Poverty Level ($63,840 for a single person in 2026) do not qualify for a premium subsidy.

The calculator estimates your marketplace health insurance cost using the Affordable Care Act (ACA) subsidy formula based on your projected contractor income. Bronze plans with Health Savings Account (HSA) eligibility are a common strategy for healthy contractors who want lower premiums and tax-advantaged savings. Health insurance is often the single largest new expense when leaving employment, because employer plans typically cover 79% of the premium cost that you must now pay in full.

The average employer pays approximately $7,400 per year toward a single employee's health insurance and $20,000 per year toward family coverage (KFF 2025 survey). This is real compensation that does not appear on your paycheck but would cost you that amount or more if you bought equivalent coverage on your own.

Employer health insurance value has three components. First, the premium contribution: your employer pays 79% of single coverage (averaging $7,400/year) or 75% of family coverage (averaging $20,143/year). Second, the tax advantage: your payroll deduction is pre-tax, saving you roughly 30% (federal income tax plus FICA) compared to buying the same plan with after-tax dollars on the marketplace. Third, group pricing: employer plans negotiate rates based on the entire workforce, often getting better coverage per dollar than individual market plans. When evaluating a job offer or considering self-employment, add the employer's health insurance contribution to the salary for an accurate total compensation comparison.

In most cases, employer coverage is the better deal because your employer pays 75-79% of the premium and your share is pre-tax. However, marketplace coverage may win if your income qualifies for a large subsidy, your employer's plan is expensive relative to your income, or you need a specific provider network.

The IRS "affordability" test for 2026 says employer coverage is considered affordable if your required contribution for self-only coverage does not exceed 9.96% of your household income. If your employer plan fails this test, you can buy marketplace coverage with subsidies instead. Even when the employer plan is technically affordable, compare total costs: employer plan premium plus deductible plus typical copays versus marketplace plan premium (after subsidy) plus deductible plus copays. Also consider that employer premiums are pre-tax while marketplace premiums are after-tax (unless you are self-employed). One important rule: if your employer offers affordable coverage, you generally cannot receive marketplace subsidies, even if the marketplace plan would cost less.

For 2026, earning even $1 above 400% of the Federal Poverty Level ($63,840 for a single person, $132,000 for a family of four) eliminates your entire premium tax credit. This is the "subsidy cliff" that returned when the enhanced credits expired after 2025.

The subsidy cliff creates an extreme marginal cost at the 400% Federal Poverty Level (FPL) threshold. A single person earning $63,840 might receive $3,000 or more in annual subsidies, while someone earning $63,841 receives nothing. This effective marginal tax rate can exceed 17% on the additional dollar of income. Strategies to manage the cliff include maximizing traditional 401(k) or IRA contributions (which reduce Modified Adjusted Gross Income), timing capital gains realizations, and using Health Savings Account (HSA) contributions if enrolled in a qualifying plan. The enhanced credits (2021-2025) eliminated this cliff by extending subsidies above 400% FPL, but they expired after 2025.

The Second Lowest Cost Silver Plan (SLCSP) is the benchmark plan used to calculate your premium tax credit. It is the second-cheapest Silver tier plan available in your county. Your subsidy amount is based on this plan's premium regardless of which plan you actually choose.

The SLCSP varies by geographic area (county and rating area) and age. For 2026, the national average SLCSP for a 40-year-old is approximately $625 per month, but state averages range from $401 in New Hampshire to $1,299 in Vermont. The second-lowest cost plan (rather than the cheapest) is used because it provides a stable benchmark: if one insurer offers an unusually cheap plan or exits the market, it does not dramatically shift everyone's subsidies. You are not required to enroll in the SLCSP. If you choose a Bronze plan that costs less than the SLCSP, the full subsidy still applies, potentially reducing your premium to near zero.

Metal tiers describe what percentage of healthcare costs the plan pays on average: Bronze covers 60%, Silver covers 70%, Gold covers 80%, and Platinum covers 90%. Higher tiers have higher monthly premiums but lower out-of-pocket costs when you use care.

The actuarial value (percentage the plan pays) determines the tier. Bronze plans have the lowest premiums but the highest deductibles (typically $7,000 to $9,000 in 2026). Silver plans are the benchmark tier for subsidy calculations and the only tier that offers Cost-Sharing Reductions (lower deductibles and copays) for incomes between 100% and 250% of the Federal Poverty Level. Gold plans have higher premiums but deductibles of $1,000 to $2,500, making them better for people who use care regularly. Platinum plans are rare on the marketplace and have the highest premiums with the lowest out-of-pocket costs. A Catastrophic plan (below 60% actuarial value) is available only to people under 30 or those with a hardship exemption. For 2026, the average marketplace deductible across all tiers is $3,786, up 37% from 2025.