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Your Guide to the Federal Poverty Level

Your Guide to the Federal Poverty Level

 

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.

What is the federal poverty level?

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.

Click here to view the 2015 federal poverty guidelines. Past HHS guidelines are available here

Who determines the guidelines, and how are they used?

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.

Are the poverty guidelines the same for everyone?

No. Family or household size is used to determine poverty guidelines.

Are the poverty guidelines and poverty thresholds the same thing?

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.

Is my pre-tax income used to determine if I fall within poverty guidelines?

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

I understand that Obamacare tax credits are available to help make health insurance affordable to families with income between 100 and 400 percent of the poverty line. What does this mean?

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: 

  • Premium tax credits – 100 to 400 percent of FPL6
  • Cost sharing reductions – 100 to 250 percent of FPL; you must also purchase a silver plan7

As for the term "poverty line," it joins the ranks of poverty level as yet another casual reference to the federal poverty guidelines.

What about Medicaid eligibility?  

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

How do I calculate my percentage of federal poverty?

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

  • Example 1 – You are a single individual with an income of $20,000. The 2015 poverty guideline for a one-person household is $11,770.8

    $20,000 ÷ $11,770 = 1.699

    You are at 169 percent of the federal poverty guidelines and likely qualify for the tax credit.
  • Example 2 – You are married with three kids, and your household’s annual income is $150,000. The 2015 poverty guideline for a five-person family or household is $28,410.9

    $150,000 ÷ $28,410 = 5.27

    You are at 527 percent of the federal poverty guidelines and are unlikely to qualify for the tax credit.
  • Example 3 – Yours is a 10-person household with an annual income of $75,000. For the 2015 poverty guidelines, you add $4,160 per additional person after the eight-person guideline of $40,890.10

    Step 1: Determine the federal poverty guideline for your household size.

    $40,890 + (2 x $4,160) = $49,210

    Step 2: Determine your percentage of poverty.

    $75,000 ÷ $49,210 = 1.52

    Your household is at 152 percent of the federal poverty guidelines. You would qualify for the tax credit.

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 2017 will be determined by 2016 poverty guidelines.

If you need one-on-one help determining your subsidy eligibility and health insurance options, work with a licensed health insurance adviser. Call the number at the top of your screen for assistance.


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

2 Ibid. 

3 Ibid.

4 Institute for Research on Poverty. “What are Poverty Thresholds and Poverty Guidelines?” http://www.irp.wisc.edu/faqs/faq1.htm

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

9 Ibid. 

10 Ibid.

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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