Understanding the Federal Poverty Level and Health Insurance Subsidies

Each January, the Department of Health and Human Services issues that year’s federal poverty guidelines to define the income level above which a person is not considered to be in poverty, and below which, they are.

These guidelines are commonly referred to as the Federal Poverty Level (FPL), and they're used to determine eligibility for various public programs, including health insurance premium subsidies and cost-sharing subsidies in each state's exchange, as well as other programs like Medicaid and the Children's Health Insurance Program (CHIP).

This article will explain what you need to know about the FPL numbers and how they affect your eligibility for financial assistance with your health insurance.

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.

2021 and 2022 Guidelines

You can see the poverty guidelines for previous years here. The guidelines for 2021 are here; they are used to determine eligibility for premium subsidies and cost-sharing reductions for plans with 2022 effective dates. This includes people who enrolled during the open enrollment period in late 2021/early 2022, as well as people who enroll in 2022 coverage during special enrollment periods triggered by qualifying events.

Even though the 2022 poverty level guidelines have now been published—they're available here—they won't start to be used for subsidy eligibility determinations until November 2022, when people begin enrolling in coverage for 2023.

However, eligibility for Medicaid and CHIP is based on real-time poverty level rules. So once the new numbers are published in January, these programs switch over to the updated poverty level guidelines at that point.

The 2022 poverty level rules began to be used for Medicaid and CHIP eligibility determinations as of early 2022. But the 2021 numbers are being used to determine subsidy eligibility for marketplace plans (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 2022 Federal Poverty Level numbers shown in the table below are being used to determine Medicaid and CHIP eligibility, and will be used to determine subsidy eligibility during the open enrollment period in the fall of 2022.

2022 FPL for the 48 Contiguous States and Washington DC:

2022 FPL for Alaska:

2022 FPL for Hawaii:

A Few Things You Should Know About Subsidy Eligibility

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

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. But they'll compare that number with your income for the year your coverage will be in effect. 

So if you’re applying for health insurance coverage for 2022, the exchange will use the 2021 FPL guidelines—compared with your projected 2022 income—to determine your subsidy eligibility. This is because open enrollment for 2022 health insurance coverage began in the fall of 2021, before 2022 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.

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 which differs from the MAGI used for other tax purposes. Health insurance subsidies are based on a percentage of FPL, so the exchange does some basic math to determine how much your subsidy will be.

The premium tax credit health insurance subsidy is normally available to people making no more than 400% of FPL, but the American Rescue Plan (ARP) eliminated this upper cap on income for 2021 and 2022. As a result of the ARP, premium subsidies can be available to people with income above that level if they would otherwise have to spend more than 8.5% of their income to buy the benchmark silver plan. (These enhanced subsidies may or may not be extended by Congress to last past the end of 2022.)

(Note that even in prior years, when there was a subsidy eligibility cap equal to 400% of the FPL, a person with income below that level would sometimes find that they weren't eligible for subsidies because the unsubsidized cost of coverage was already considered affordable.)

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 the continental US and applying for 2022 health insurance coverage, your FPL (from the 2021 FPL table) is $26,500.

To find out what 250% of FPL is, multiply the guideline by 2.5. For example, $26,500 x 2.5 = $66,250. If your family’s MAGI is no more than $66,250, 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).

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. 

Summary

Various social safety net programs rely on Federal Poverty Level (FPL) numbers to determine eligibility. They include premium subsidies and cost-sharing reductions for marketplace/exchange health insurance, as well as Medicaid and CHIP.

The previous year's FPL numbers are used to determine premium subsidy and cost-sharing reduction eligibility, although they are compared with the household's income projection for the year that the health insurance will be in effect. The current year's FPL numbers are used to determine Medicaid and CHIP eligibility.

A Word From Verywell

Premium subsidy eligibility in the marketplace extends well into the middle class. Although subsidy eligibility is based on how your household income compares with the Federal Poverty Level, the subsidies are actually only available (in most circumstances) to people with income that's higher than the FPL (below that, Medicaid is generally available instead, although it varies by state and by circumstances).

So don't assume that you earn too much money to be subsidy-eligible. You might find that you're actually eligible for a subsidy even with a fairly high income. That's why it's so important to check the exchange in your state to see what's available to you and what it would cost based on your income. You can find your state's exchange by starting at HealthCare.gov; if your state uses another site, HealthCare.gov will point you there.