Federal poverty level (FPL) acts as a guide to see whether someone can qualify for cost assistance when they’re buying insurance either through the state or federal health insurance marketplace. Additionally, these levels are also used to determine whether someone can qualify for certain programs and other benefits. The levels are determined by the Department of Health and Human Services which they release each year.
A person’s eligibility for Medicaid and the Children’s Health Insurance Program (CHIP) is also determined by FPLs. Here’s a general overview of how this works:
1. You can qualify for premium tax credits on the health insurance marketplace if you earn between 100 to 400 percent of the FPL.
2. You can qualify for Medicaid of CHIP if what you make is less than 138% of the FPL and the state you live in has expanded Medicaid (keep in mind that not all states have opted for Medicaid expansion).
3. You can qualify for out-of-pocket cost assistance on plans on the Silver level that are sold through the marketplace if what you earn is between 100 to 250% of the FPL.
4. Eligibility guidelines differ between assistance programs.
5. Your household or family income determines whether you can qualify for cost assistance. The equation followed for this is adding both the modified adjusted gross income (MAGI) of your household and the adjusted gross income of those claimed as dependents. If your status is single, then you only need to consider the MAGI.
6. You can take tax credits in advance based on FPL. These are then adjusted at the end of the year on your form 8962.
The 2015 FPL Guidelines
If you live in a household with more than 8 members, every person is an additional $4,160. Also important to note is that Hawaii and Alaska follow different guidelines. Or in other words, the levels tend to be more expensive in both places. There are no guidelines given for US territories such as Puerto Rico, the US Virgin Islands, American Samoa, Guam, the Republic of the Marshall Islands, the Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands and Palau.
Note: The 2016 guidelines will be available by January 20, 2016. Just check the Federal Register website.
Finding the Percentage of the Federal Poverty Level
The table above provided values for 100% FPL but from there, you can determine the dollar amount for poverty levels each year. For instance, if you want to know what 400% of the poverty level is, simply multiply any value above by 4. In the case of 250% FPL, use 2.5; and use 1.38 for determining 138% FPL.
If you want to know the monthly poverty levels, divide the annual value by the number of months you are calculating. Let’s say you are calculating for a single year for one person. This means the 100% FPL value you’re working with is $11,770. Divide this value by 12 (a year) and you’ve got $980.83 per month.
How to Determine Household Size?
Your household size includes you and the people you count as dependents on your income tax return. Your dependents can include your children, your parents or relatives who qualify as dependents.
Children of parents who are divorced count as members of the one who claims them as a dependent. This is true even if it’s the other who is paying for their health insurance.
Children who are earning enough to support themselves are excluded as part of your household. Being able to support themselves means they are no longer eligible as dependents. This is true even if they still live in your home or are part of your health insurance plan.
What Constitutes Income?
Your gross income (which is what you made before deducting taxes) include wages, net profit from self-employment, tips, interest, rental income, investment income, pensions, social security payments and alimony. All of these fall under the MAGI.
You also have to include the income of all of your dependents. So if your child earned money during the summer, you have to count this as your household income; the same thing goes for the social security of a dependent – and you have to count all of these even if they have filed separate tax returns.
How to Calculate Federal Poverty Levels?
You have to know where you stand on the FPL to know what subsidies you qualify for. This value is calculated by dividing the expected MAGI of your family by the 100% FPL of your household size, then you multiply the result by 100.
For example, let’s say you are a family of four and your total household income is $90,000. Using the FPL table above, your 100% FPL level is $24,250. So:
$90,000 / $24,250 = 3.7
3.7 x 100 = 371
Based on the calculation above, your FPL is 371%.
Other Uses of Federal Poverty Levels
Obamacare isn’t the only place where FPLs are used. They are also used by these branches:
- Department of Health and Human Services
- Department of Agriculture
- Department of Energy
- Department of Labor
- Department of the Treasury
- Corporation for National and Community Service
- Legal Services Corporation
Subsidies allow you to save money on your premium as well as for out-of-pocket expenses. These subsidies are only available through the marketplace, and are based on income. Here’s some facts about Obamacare subsidies:
1. People in most states can get some form of subsidy on plans bought on the marketplace if they earn less than 400% FPL.
2. If your state didn’t expand Medicaid, the maximum assistance you get is 100% FPL. In case your state did expand Medicaid, your FPL has to be over 139% in order to qualify for subsidies.
3. 400% is the “subsidy cliff” because if you go over, you’re the one who will be paying back tax credits.