As you likely know, the health insurance subsidies established under the Affordable Care Act (ACA)—both tax credits and cost-sharing reductions alike—are based on your income in relation to the federal poverty guidelines).
But what exactly are the federal poverty guidelines? Who sets them? And how does the federal poverty level factor into determining your subsidy amount, if at all?
Here are 10 frequently asked questions about the federal poverty level, along with answers that will help you understand what it is and what it means to you.
1. What is the federal poverty level?
The federal poverty level (FPL) is just another way of referring to the federal poverty guidelines.2 As defined at the start of this article, federal poverty guidelines are a measure of poverty that is used to determine financial eligibility for federal programs and benefits.3
And what about the term “federal poverty line”? Yet another commonly used (but less preferred) way of referring to the federal poverty guidelines/federal poverty level.
2. Are federal poverty guidelines and poverty thresholds the same thing?
No. These terms are, in fact, different. They refer to the two main ways poverty is measured in the United States.
- HHS issues poverty guidelines, which serve an administrative function (i.e., determining financial eligibility for federal programs and benefits).
- The U.S. Census Bureau issues poverty thresholds for statistical purposes.4
3. Are there national poverty guidelines or do they vary by state?
There is one set of poverty guidelines for the 48 contiguous states and the District of Columbia.5 Alaska and Hawaii each have their own set.
4. Are poverty guidelines the same for everyone?
No. Poverty guidelines are based on your family or household size.6
5. What is poverty level income for 2019?
Poverty level for the 48 contiguous states and the District of Columbia is $12,140 for a single-person household.7 However, each agency measures and defines income a bit differently (e.g., pre-tax or after-tax) when determining your program or subsidy eligibility for 2019.8
6. Who determines the federal poverty guidelines and how are they used?
The U.S. Department of Health and Human Services (HHS) issues the federal poverty guidelines.
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.9
7. What are the federal poverty guidelines for 2018 subsidies? 2019 subsidies?
Federal poverty guidelines are published annually and become effective each January.10 They are calculated based on the previous calendar year and updated to reflect price levels in the year to come.
|Health Insurance Coverage Year||Poverty Guidelines Used for Subsidies|
8. How is FPL used to calculate Obamacare subsidies?
Health insurance subsidies, including premium tax credits and cost-sharing reductions, are available based on the following income limits:
- Premium tax credits – 100 to 400 percent of FPL12
- Cost sharing reductions – 100 to 250 percent of FPL; you must also purchase a silver plan13
In addition to meeting income guidelines, you must also purchase your health insurance through HealthCare.gov or a state-based exchange to qualify for subsidies. You will be asked to supply financial information when you apply for coverage.
9. Is my pre-tax income used to determine my Obamcare subsidy?
When it comes to determining FPL percentage for health insurance subsidies, HealthCare.gov and state-based exchanges use your modified adjusted gross income (MAGI), which is not a line on your tax return.14
How your income compares with federal poverty guidelines varies by agency.15 HHS suggests contacting the office or organization administering the program to determine your eligibility.
10. How do I calculate my percentage of FPL?
To generally calculate where you fall in terms of percentage of FPL:
- 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.
Example 1: You are a single individual with an income of $25,000. The 2018 poverty guideline for a one-person household is $12,140.16
- $25,00 ÷ $12,060 = 2.05
- 2.05 x 100 = 205
- Rounding up, you’re at 205% of the federal poverty guidelines and may qualify for the tax credit in 2019. You could qualify for a cost-sharing subsidy as well if you purchase a silver plan.
Example 2: You are married with three kids, and your household’s annual income is $150,000. The 2018 poverty guideline for a five-person family or household is $29,420.17
- $150,000 ÷ $29,420 = 5.09
- 5.09 x 100 = 509
- Rounding up, you are at 509 percent of the federal poverty guidelines and are unlikely to qualify for a subsidy.
These are general estimates that don’t accurately reflect your FPL in terms of ACA subsidies. For an ACA-specific estimate, you may want to use an online subsidy calculator such as the one available at HealtheDeals.com.
Leave the math to us! Use our Obamacare Calculator to estimate your 2019 subsidy.
Your actual 2019 subsidy amount will be determined when you apply for coverage through HealthCare.gov or a state-based health insurance exchange.
Summary + next steps
While you may be interested in knowing what the federal poverty guidelines are and how they are used, you won’t necessarily need to make any calculations for yourself. Online tools, such our Obamcare Calculator, can help you estimate your subsidy eligibility.
Learn the basics of Obamacare subsidies.
Not subsidy eligible? Find out more about your 2019 health insurance options.
If you need one-on-one help determining your subsidy eligibility and health insurance options, work with a licensed agent. Call us at 866-278-1464, or use Agent Finder to search for an agent near you.