The Affordable Care Act’s subsidies—both tax credits and cost-sharing reductions alike—are based on one’s income in relation to the federal poverty level. This also applies to Medicaid eligibility in states that expanded their programs.
What is the federal poverty level? Who sets it? And how does it factor into Obamacare subsidy and Medicaid eligibility?
Here are some frequently asked questions about the federal poverty level, often referred to as the FPL, and answers to help you understand what it is and what it means to you.
The federal poverty level is another way of referring to the federal poverty guidelines. It is one measure of poverty within the United States and is released annually. There is one set of guidelines for the 48 contiguous states and the District of Columbia. Alaska and Hawaii each have their own set.
The U.S. Department of Health and Human Services issues the federal poverty guidelines annually to determine financial eligibility for certain federal programs and benefits. In addition to Obamacare subsidies and Medicaid, such programs and benefits include Medicare, the Children’s Health Insurance Program, Migrant Health Centers, Community Health Centers, Family and Planning Services, to name a few.
These guidelines are published and become effective each January.1 They are calculated based on the previous calendar year and updated to reflect price levels in the year to come, according to an HHS FAQ differences on poverty guidelines and poverty.
No. Family or household size is used to determine poverty guidelines.
No. They are the two main ways poverty is measured in the United States and serve different purposes.
As stated above, HHS issues poverty guidelines, which serve an administrative function. The U.S. Census Bureau issues poverty thresholds for statistical purposes.2
Preliminary poverty thresholds are released in January and final poverty thresholds are released in September the year after the year for which poverty is measured and are adjusted to the price level of the year for which poverty is measured, according to HHS.3
Characteristics used to determine poverty thresholds include family size, number of children and whether or not those in 1- or 2-person units are elderly.4 The same poverty thresholds apply to 50 states and the District of Columbia.
How an income is compared to federal poverty guidelines varies from agency to agency. HHS suggests contacting the office or organization administering the program to determine eligibility.5
First of all, premium tax credits are only available to those who purchase health insurance through the Health Insurance Marketplace—the state-based and federally facilitated exchanges established under the Affordable Care Act.
Those who buy health insurance through the Health Insurance Marketplace can apply for premium tax credits as well as cost-sharing reductions—you must buy a silver plan to qualify for cost-sharing reductions. When you enroll in a qualified health plan, you must supply financial information to prove your eligibility.
In general, Obamacare subsidies are available based on the following income limits:
As for the term "poverty line," it joins the ranks of poverty level as yet another casual reference to the federal poverty guidelines.
Medicaid eligibility criteria varies by state. However, starting as early as Jan. 1, 2014, several states have expanded Medicaid to include individuals under 65 years of age with income below 133 percent of the federal poverty level.
To calculate your percentage of poverty, divide your income by the poverty guideline for your household size. Carry the decimal two places in your result; add a percentage sign, and you have your answer. Again, you can click here for the 2015 poverty guidelines.
Income ÷ poverty guideline for household size = percentage of poverty guideline
Use the Health eDeals Health Care Reform Calculator to estimate your annual health insurance premium and tax credit when you purchase health insurance from a state-based or federally facilitated health insurance exchange.
Tax credit eligibility for 2016 will be determined by 2015 poverty guidelines.
1 Office of the Assistant Secretary for Planning and Evaluation. U.S. Department of Health & Human Services. “Frequently Asked Questions Related to the Poverty Guidelines and Poverty.” Sept. 3, 2015. http://aspe.hhs.gov/frequently-asked-questions-related-poverty-guidelines-and-poverty
4 Institute for Research on Poverty. “What are Poverty Thresholds and Poverty Guidelines?” http://www.irp.wisc.edu/faqs/faq1.htm
5 Office of the Assistant Secretary for Planning and Evaluation. U.S. Department of Health & Human Services. “Frequently Asked Questions Related to the Poverty Guidelines and Poverty.” Sept. 3, 2015. http://aspe.hhs.gov/frequently-asked-questions-related-poverty-guidelines-and-poverty
6 Internal Revenue Service. “Questions and Answers on the Premium Tax Credit.” Last reviewed or updated July 13, 2015. http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Questions-and-Answers-on-the-Premium-Tax-Credit
7 The Henry J. Kaiser Family Foundation. “Explaining Health Care Reform: Questions About Health Insurance Subsidies.” Oct. 27, 2014. http://kff.org/health-reform/issue-brief/explaining-health-care-reform-questions-about-health/
8 Office of the Assistant Secretary for Planning and Evaluation. U.S. Department of Health & Human Services. “Frequently Asked Questions Related to the Poverty Guidelines and Poverty.” Sept. 3, 2015. http://aspe.hhs.gov/frequently-asked-questions-related-poverty-guidelines-and-poverty
This document is for general informational purposes only. While we have attempted to provide current andaccurate information, this information is provided "as is" and we makes no representations or warrantiesregarding its accuracy or completeness. The information provided should not be construed as legal or taxadvice or as a recommendation of any kind. External users should seek professional advice from their ownattorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.
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