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Your Guide to the Federal Poverty Level

Your Guide to the Federal Poverty Level

What it is, how it determines your Obamacare subsidy and other frequently asked questions

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.

What are the federal poverty guidelines for 2016?

On January 25, 2016, the Department of Health and Human Services poverty guidelines were released. They account for last calendar year’s increases in price as measured by the Consumer Price Index.[1]

View the 2016 federal poverty guidelines

You can also refer to U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal Programs for more in-depth information on the guidelines and how they are established. 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.

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 FPL[6]
  • Cost sharing reductions – 100 to 250 percent of FPL; you must also purchase a silver plan[7]

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.

2016 federal 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 2016 poverty guideline for a one-person household is $11,880.[8]

$20,000 ÷ $11,770 = 1.68

You are at 168 percent of the federal poverty guidelines and likely qualify for the tax credit in 2017.

Example 2 – You are married with three kids, and your household’s annual income is $150,000. The 2016 poverty guideline for a five-person family or household is $28,440.[9]

$150,000 ÷ $28,410 = 5.28

You are at 528 percent of the federal poverty guidelines and are unlikely to qualify for the tax credit in 2017.

Example 3 – Yours is a 10-person household with an annual income of $75,000. According to the 2016 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 likely qualify for the tax credit in 2017.

How will my 2017 Obamacare subsidy be calculated if guidelines aren’t released until January 1?

Federal poverty guidelines are published annually and become effective each January.[11] 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.

As such, when 2017 open enrollment begins, subsidy eligibility will be determined based on 2016 FPL.

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 producer. Call the number at the top of your screen for assistance.

 

 

Originally posted Feb. 22, 2013. Last revised and updated on September 9, 2016



[1] Update of the HHS Poverty Guidelines. Federal Register. January 25, 2016. https://www.federalregister.gov/articles/2016/01/25/2016-01450/annual-update-of-the-hhs-poverty-guidelines

[2] 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.” Form Approved OMB# 0990-0379 Exp. Date 8/31/2017. http://aspe.hhs.gov/frequently-asked-questions-related-poverty-guidelines-and-poverty

[3] Ibid.

[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.” Form Approved OMB# 0990-0379 Exp. Date 8/31/2017. 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 April 21, 2016. 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.” Form Approved OMB# 0990-0379 Exp. Date 8/31/2017. http://aspe.hhs.gov/frequently-asked-questions-related-poverty-guidelines-and-poverty

[9] Ibid.

[10] Ibid.

[11] 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.” Form Approved OMB# 0990-0379 Exp. Date 8/31/2017. http://aspe.hhs.gov/frequently-asked-questions-related-poverty-guidelines-and-poverty

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