Subsidies for ACA health insurance, including premium tax credits, and cost-sharing reductions, are based on household modified adjusted gross income (MAGI) relative to the federal poverty guidelines, also commonly referred to as the Federal Poverty Level (FPL).
Along the way, you’ll find out if you’re subsidy-eligible, and your subsidy-adjusted premiums and out-of-pocket costs will be displayed along with available plan options.
In the remainder of this article, we’ll discuss:
- What the federal poverty guidelines are and who sets them
- How to determine your % of FPL based on your household income
- The FPL as it relates to your ACA subsidy amount or Medicaid eligibility (including a quick reference Income Limits to Qualify chart)
- How the 2021 COVID Relief Bill impacts your ACA subsidy eligibility
- Health insurance options if you don’t qualify for an ACA subsidy
What is the Federal Poverty Level and Why Does it Matter?
The FPL is one measure of poverty within the United States.
These guidelines are released annually by the U.S. Department of Health and Human Services (HHS) and are used to determine financial eligibility for federal programs and benefits, including:
- Children’s Health Insurance Program (CHIP)
- Migrant Health Centers
- Community Health Centers
- Family and Planning Services,
- ACA Subsidies
The federal poverty guidelines are established for and apply to the 48 contiguous states and the District of Columbia. Alaska and Hawaii each have their own set of poverty guidelines.
2020 Federal Poverty Level
- For ACA Subsidies, use the 2020 Federal Poverty Guidelines
- For Medicaid eligibility, use the 2021 Federal Poverty Guidelines
Using the numbers in the table below, you can calculate your % of FPL using your MAGI and the income level associated with your household.
MAGI ÷ Poverty Guideline based on Household Size = % of FPL
2020 Federal Poverty Guidelines
|Number of People in Household||48 Contiguous + D.C.||Alaska||Hawaii|
|More than 4||+$4,480 per person||+$5,600 per person||+$5,150 per person|
ACA health insurance subsidies are determined based on a percentage of FPL as follows:
|Percent FPL||Subsidy or Program Eligibility|
|Above 400% FPL||Eligible for expanded income-based premium tax credits if you enroll in any metal level plan from the ACA Marketplace|
|100 to 400% FPL||Eligible for income-based premium tax credits if you enroll in any metal level plan from the ACA Marketplace|
|100 to 250% FPL||Eligible for cost-sharing reductions if you enroll in a Silver level health plan from the ACA Marketplace|
|Below 138% FPL||In a state that expanded Medicaid, you qualify for Medicaid based on income alone|
|Below 100% FPL||In a state that did not expand Medicaid, you likely won’t qualify for Marketplace savings or income-based Medicaid|
You can jump right to the Poverty Guidelines Chart to see if your income level could qualify for one or both ACA subsidies or Medicaid. Below are a couple of examples demonstrating how to calculate your % FPL and determine subsidy eligibility using the information in the tables above.
How to calculate your % FPL
Example 1: A single individual residing in Iowa with a MAGI of $25,000. Based on the chart, the 2020 annual poverty level for a one-person household is $12,880.
- Divide: $25,000 ÷ $12,880 = 1.9409
- Move the Decimal Point: 1.94 x 100 = 194
- At 194% of the federal poverty guidelines this income could qualify for a premium tax credit and a cost-sharing reduction via a Marketplace Silver plan.
Example 2: A married couple with three kids living in Illinois with a MAGI of $130,000. Based on the chart, the 2020 poverty level for a five-person family or household is $31,040.
- Divide: $130,000 ÷ $31,040 = 4.188
- Move the Decimal Point: 4.188 x 100 = 419
- Rounding up, at 419% of the federal poverty guidelines and due to the expanded premium tax credits under the 2021 COVID Relief Bill, this income is eligible for a premium tax credit based on a rate of 8.5% of benchmark Silver premium.
These are general estimates (especially if you’re just using a rough household income estimate in your calculations). Your actual subsidy amount will be determined when you apply for coverage through HealthCare.gov or your state-based health insurance exchange.
2020 Income Limits (to Qualify for 2021 ACA Subsidies)
Use the chart below to locate the number of people in your household and see if your income could qualify for one or both of the ACA federal subsidies (or Medicaid):
- Orange = You could qualify for Medicaid depending on your state. (More on Medicaid eligibility below.)
- Green = You could qualify for a premium tax credit and cost-sharing reduction (if you enroll in a Silver metal level health plan through an ACA public Exchange).
- Blue = You could qualify for a premium tax credit (enroll in any ACA metal level plan through an ACA public Exchange).
Minimum Annual Income Limits to Qualify for 2021 ACA Subsidies
(48 Contiguous States + D.C.)
Number of People in Household + Income
400% FPL and Subsidy Eligibility
Because of the provision in the 2021 COVID Relief Bill that removed the subsidy eligibility cap for those over 400% FPL, for plan years 2021 and 2022, you could now receive a premium tax credit relative to 8.5% of your household income even if your income is above 400% FPL.
Medicaid Expansion and 100% FPL, 138% FPL
As you can see from the table above, if your MAGI is at 400% or less of the FPL you definitely qualify for a subsidy if you purchase health insurance from the ACA Marketplace. That is until you get to either 100% or 138% of FPL (depending on your state), at which point, your income is low enough that you may qualify for Medicaid.
In every state, you could qualify for Medicaid based on income, household size, disability status, family status, and other factors.
However, if you live in a state that expanded Medicaid as part of the ACA, you could qualify for a premium tax credit based on income alone at 138% FPL. If you live in a state that has not expanded Medicaid (a “non-Medicaid expansion state”), then your income level to qualify is 100% FPL and you must meet other eligibility requirements in order to qualify.
Find out if your state expanded Medicaid or use HealthCare.gov’s “Income Levels + Savings” tool to quickly find out if you could qualify for Medicaid based on income using the current year FPL income limits, state and household size.
The 2021 COVID Relief Bill Expanded and Increased Subsidies
Because of the 2021 COVID Relief Bill, more people than ever now qualify for ACA premium tax credits, and many who were already receiving them now qualify for $0 premium plans.
- 8 million middle-income households are eligible for premium tax credits for the first time
- 3.4 million lower-income households are eligible for $0 premium Silver plans with additional cost-sharing reductions that bring their deductibles down to $177 on average
It’s important to check your eligibility status now to determine if you qualify for premium savings and take the necessary steps so you can start to receive them. It’s especially important if you haven’t validated your eligibility since before April 1, 2021, which is when the expanded subsidies became available on HealthCare.gov.
During the COVID-19 Special Enrollment Period (Feb. 15 through Aug. 15, 2021 for HealthCare.gov), you can newly enroll in a subsidized ACA plan if you qualify, or re-select your current plan to access additional advance premium tax credits you’re now eligible for.
If you miss the COVID-19 Special Enrollment Period, your next opportunity to access a subsidized ACA plan is during an individual special enrollment period if you experience a qualifying event, or the 2022 ACA Open Enrollment period.
See if you’re subsidy-eligible.
Options Away From the ACA Exchanges
You must enroll in an ACA plan on HealthCare.gov or your state’s Exchange to take advantage of subsidies. If you don’t qualify for an ACA subsidy, you may want to consider other plan options away from the ACA Exchange, especially if you can find lower-premium ACA plans elsewhere.
You might look at offerings directly from a health insurance carrier or a private health insurance marketplace website. Learn more about shopping off the Exchange.
Another insurance option is non-ACA-qualifying coverage like short-term medical insurance, though there are some important differences between ACA plans and short-term plans to be aware of before applying.
Non-ACA Health Insurance – Short Term Medical
Short-term health insurance is one non-ACA option that could provide you coverage for unexpected illnesses or injuries for 30 to 364 days depending on your state (or possibly up to 36 months depending on the policy renewal rules in your state).
Plans typically provide benefits for hospital room and board; emergency room, anesthesiology and surgical care; diagnostic services (x-rays, lab tests and analysis); ambulance and surgical services; doctor office visits.
Some benefits of short term medical plans include:
- There’s no open enrollment period so you can apply year-round in most states
- Plans are highly customizable so you don’t have to pay for coverage you don’t need
- No provider network limitations mean you can visit your preferred healthcare provider
Some drawbacks of short term medical plans include:
- They are not guaranteed-issue, you must be approved by the carrier in order to enroll
- They are not considered minimum essential coverage and have less coverage than major medical plans
- Pre-existing conditions are not covered
See if a short-term medical plan is available for you and start comparing costs and coverage.
Dental, Vision, and Medical Gap Insurance
If you are able to save money with expanded premium tax credits, obtaining them as advance premium tax credits leaves more money in your bank account each month.
Depending on your healthcare needs and financial situation, it may make sense to direct some of your ACA premium savings towards dental, vision, or medical gap coverage (which can help with out-of-pocket costs).
Summary + Next Steps
It’s helpful to understand what the FPL is and what it’s used for. But it’s easy to figure out if you qualify for an ACA premium tax credit (or cost sharing reduction) by using an online subsidy calculator tool.
Now that the 2021 COVID Relief Bill has increased and expanded subsidies, it’s a good time to validate your eligibility for Marketplace coverage and take advantage of any premium savings that are available to you (in some cases, a $0 premium ACA plan).
If you don’t qualify for a subsidy, you could consider enrolling in a qualifying major medical plan away from the federal and state Exchanges where you may have more options, or applying for a non-ACA health policy like short-term medical insurance to help cover some of your medical costs.
Get a short-term medical quote to find out if plans are available in your area and compare costs.
If you’d like one-on-one assistance determining your subsidy eligibility and health insurance options, work with a licensed agent. Call us at 888-855-6837.
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