Understanding the Federal Poverty Level and Health Insurance Subsidies

There are lots of programs designed to help the poor, but determining who is poor and who isn’t poor can be tough. The United States federal government has a solution for this dilemma.

Each January, the Department of Health and Human Services issues that year’s federal poverty guidelines to define just who, exactly, is poor. These guidelines are commonly referred to as the federal poverty level, and they're used to determine eligibility for premium subsidies and cost-sharing subsidies in each state's exchange, as well as other programs like Medicaid and CHIP.

Effect of Family Size

Since it costs more to feed, house, and clothe a large family than a small family, the guidelines vary by family size. The bigger your family is, the higher an income you may have and still fall beneath the federal poverty level. The guideline tables list figures for family sizes of up to eight family members. What if you have more than eight people in your family? The guidelines include a simple formula to account for each additional family member.

Effect of Location

Since it’s more expensive to live in some places than others, HHS publishes three separate guidelines:

  1. Alaska
  2. Hawaii
  3. The other 48 states and Washington DC

There are no specific guidelines for Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam, the Marshall Islands, Micronesia, the Northern Mariana Islands, or Palau. If you live in one of these areas and are applying for assistance from a program that uses federal poverty guidelines to determine if you’re eligible, you’ll have to ask which guideline the program uses. It’s up to the agency administering the aid program to decide.

There are no health insurance exchanges (and thus, no premium subsidies or cost-sharing subsidies) in the U.S. territories. Medicaid and CHIP are available, and the territories have their own—local and unique—income-based eligibility determinations.

2019 and 2020 Guidelines

You can see the poverty guidelines for previous years here. The guidelines for 2019 are here; they were used to determine eligibility for premium subsidies and cost-sharing reductions for plans with 2020 effective dates. And they will continue to be used for plans that take effect later in 2020 when people enroll during special enrollment periods.

Even though the 2020 poverty level guidelines have now been published—they're available here—they won't start to be used for subsidy eligibility determinations until November 2020, when people begin enrolling in coverage for 2021.

However, eligibility for Medicaid and CHIP is based on real-time poverty level rules. So once the new numbers are published in January, those programs switch over to the updated poverty level guidelines. So 2020 poverty level rules are now in use for Medicaid and CHIP eligibility determinations, but the 2019 numbers are being used to determine subsidy eligibility (Medicaid/CHIP eligibility is determined first; if a person isn't eligible for one of those programs, they can be eligible for subsidies instead).

So the 2020 federal poverty level numbers shown in the table below are being used to determine Medicaid and CHIP eligibility, and will be sued to determine subsidy eligibility during the open enrollment period in the fall of 2020.

2020 FPL for the 48 Contiguous States and Washington DC:

Household Size

Poverty Guideline

1

$12,760

2

$17,240

3

$21,720

4

$26,200

5

$30,680

6

$35,160

7

$39,640

8

$44,120

2020 FPL for Alaska:

Household Size

Poverty Guideline

1

$15,950

2

$21,550

3

$27,150

4

$32,750

5

$38,350

6

$43,950

7

$49,550

8

$55,150

2020 FPL for Hawaii:

Household Size

Poverty Guideline

1

$14,680

2

$19,830

3

$24,980

4

$30,130

5

$35,280

6

$40,430

7

$45,580

8

$50,730

3 Things You Should Know

If you’re comparing your income to FPL to see if you’re eligible for one of the Affordable Care Act’s health insurance subsidies, there are a few things you need to know first.

  1. Eligibility for the premium tax credit (premium subsidy) and the cost-sharing subsidy are based on the FPL from the year before your coverage takes effect, not the FPL for the year your coverage takes effect. So if you’re applying for health insurance coverage for 2020, the exchange will use the 2019 guidelines to determine your subsidy eligibility. This is because open enrollment for 2020 health insurance coverage happened in the autumn of 2019, before 2020 guidelines were published. Eligibility for Medicaid and CHIP start to use the new FPL numbers as soon as they're published. But to maintain consistency for the premium subsidies and cost-sharing subsidies, the new guidelines don't start to apply until the fall, during open enrollment for the coming year.
  2. There are all sorts of income definitions: gross income, net income, etc. The Affordable Care Act’s health insurance subsidies compare your modified adjusted gross income (MAGI) with the FPL for your family size and geographic area. The ACA has its own calculation for MAGI, codified here (on page 30378, first column), and summarized here.
  3. Since health insurance subsidies are based on a percentage of FPL, you’ll need to use some basic math to change the guideline for your family size into something you can actually use. Here are some examples:
    1. The premium tax credit health insurance subsidy is available to people making no more than 400% of FPL. If you’re a single guy living in Miami and applying for 2020 health insurance coverage, your FPL is $12,490. To find out what 400% of FPL is, multiply the guideline by 4. For example, $12,490 x 4 = $49,960. If you make less than $49,960, you may be eligible for government help paying your monthly health insurance premiums (note that even with income below that level, you won't be eligible for subsidies if the unsubsidized cost of your coverage is already considered affordable; here's more on how this works). 
    2. The cost-sharing subsidy to help lower your deductible, copay, and coinsurance is available for people making below 250% of FPL. If you’re a family of four living in Hawaii and applying for 2020 health insurance coverage, your FPL from the 2019 Hawaii table is $32,190. To find out what 250% of FPL is, multiply the guideline by 2.5. For example, $32,190 x 2.5 = $80,475. If your family’s modified adjusted gross income is no more than $80,475, you may be eligible for the cost-sharing subsidy in addition to the premium tax credit subsidy (keep in mind that you have to buy a silver plan to utilize the cost-sharing subsidy, although you can apply the premium subsidy to any metal-level plan).
    3. But never fear... the exchange will do all of these calculations for you! The above examples are just so that you can understand what's involved in terms of eligibility for financial assistance based on your income. 
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Article Sources

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  1. MACPAC. Medicaid and CHIP in the Territories. July 2019.

Additional Reading

  • University of California Berkeley Labor Center. Modified Adjusted Gross Income Under the Affordable Care Act. July 2014.

  • Federal Register / Vol. 77, No. 100 /  Rules and Regulations. May 23, 2012.