The Patient Protection and Affordable Care Act, better known as Obamacare, has a number of complex provisions. But many people see one particular quirk as a complete mistake, and it's one that can cost you thousands in subsidies if you're not careful.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the so-called Obamacare subsidy cliff and how it can be a huge drain on your finances. Dan explains that Obamacare subsidies focus on a number equal to 400% of the federal poverty limit, an amount equal to $44,680 for a single person and which adds another $15,840 for every additional family member. As Dan notes, if you earn less than that amount, you're eligible for whatever subsidy is necessary to bring your health-care costs down to 9.5% of your income. Earn more than that amount, though, and you lose all your subsidies. For those near that income line, a little extra income can cost singles around $2,600 according to Congressional Budget Office estimates, and larger families can lose $10,000 or more in subsidies. Dan concludes by noting the problems not just for participants but for WellPoint (NYSE:ANTM) and other insurance companies, since they'll be the ones to deal with inevitable complaints among customers and a lack of clarity about how subsidies work.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.