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federal poverty level

What is the federal poverty level?

What is the federal poverty level?

The federal poverty level (FPL) is commonly used to refer to the federal poverty guidelines that HHS issues each year. (Although HHS notes that “federal poverty guidelines” is actually the correct terminology, and that “federal poverty level” should be avoided, the latter tends to be more frequently used.)

It’s specified as an income amount that is used to determine eligibility for various income-based public programs, such as Medicaid, premium tax credits, and cost-sharing reductions. The specific dollar amount varies based on the number of people in the household and whether the household is in Alaska, Hawaii, or the continental U.S.

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How is the federal poverty level used in health care?

The federal poverty level is used to determine eligibility for Medicaid and CHIP (the Children’s Health Insurance Program); to determine eligibility for ACA’s premium tax credits and cost-sharing reductions (subsidies); and eligibility for Medicare Savings Programs (MSPs).

Medicaid and CHIP:

  • In states that have expanded Medicaid, Americans under the age of 65 will qualify for Medicaid if they earn up to 138 percent of the federal poverty level. (Note that although you’ll often see this written as 133 percent, there’s a 5 percent income disregard that effectively brings it up to 138 percent).
  • In states that haven’t expanded Medicaid, the eligibility guidelines are stricter, with much lower income limits for parents and coverage generally not available at all to non-disabled childless adults, regardless of how low their income is.
  • For people who are disabled or 65+, Medicaid eligibility also depends on assets.
  • CHIP eligibility is also based on the federal poverty level, but the specific thresholds vary from one state to another.

Premium tax credits:

  • If you’re in a state that has expanded eligibility for Medicaid, premium tax credit (premium subsidy) eligibility in the marketplace/exchange starts at 139 percent of the federal poverty level (ie, where Medicaid ends) and continues up to 400 percent of the poverty level. (Premium tax credits might end before that level, if the coverage is already considered affordable without a subsidy.)
  • If you’re in a state that has not expanded Medicaid, premium tax credit eligibility starts at 100 percent of the federal poverty level and continues up to 400 percent. So a person who earns 120 percent of the poverty level would qualify for Medicaid in some states (ie, states that have expanded Medicaid) and for premium subsidies in others (ie, states that have not expanded Medicaid).
  • It’s important to note that children are eligible for Medicaid or CHIP at much higher household incomes than the Medicaid eligibility limits for adults. So it’s common to see households where the kids are eligible for Medicaid or CHIP, while the parents are eligible for premium tax credits instead. If the family chooses to enroll the kids along with the parents on the private plan in the exchange, they have to pay full price for the kids’ coverage, since they could have enrolled in Medicaid or CHIP instead.
  • If you’re a recent immigrant who is not eligible for Medicaid due to your immigration status, eligibility for federal premium tax credits extends down to 0 percent of the poverty level. But the upper limit is always 400 percent of the federal poverty level. (Note that California offers its own state-based premium subsidy that extends to 600 percent of the federal poverty level, but this is separate from the ACA’s federal premium subsidy.)
  • Use our calculator to estimate how much you could save on your ACA-compliant health insurance premiums.

Cost-sharing reductions:

  • Cost-sharing reductions are available to marketplace/exchange enrollees who select Silver plans and whose income doesn’t exceed 250 percent of the federal poverty level.
  • As is the case for premium tax credits, the lower eligibility threshold is 100 percent of the poverty level in states that have not expanded Medicaid, and 139 percent in states that have.
  • For coverage effective in 2021, 250 percent of the federal poverty level in the continental U.S. is $31,900 for a single individual, $54,300 for a family of three, and $87,900 for a family of six. (These amounts are higher in Alaska and Hawaii, since they have higher federal poverty levels).

Medicare Savings Programs:

Which federal agency determines the federal poverty guidelines?

The federal poverty guidelines are set each year by the Department of Health and Human Services (as opposed to the poverty threshold, which is set by the Census Bureau and used for statistical purposes rather than for the administration of income-based federal programs).

Does the federal poverty level vary from one state to another?

The federal poverty level is higher in Alaska and Hawaii. HHS sets three different amounts each year: One for the continental United States, a higher level for Hawaii, and an even higher level for Alaska. But within the continental U.S., the federal poverty level does not vary.

When does the federal poverty level change each year?

HHS publishes updated federal poverty level numbers in mid-January each year. This new amount starts to be used immediately for determining eligibility for Medicaid and CHIP. But the prior year’s federal poverty level numbers continue to be used to determine eligibility for premium tax credits and cost-sharing reductions until open enrollment starts again in the fall.

So for example, if a person applies for Medicaid in March 2021, their current household income would be compared with the 2021 federal poverty level amount. But if they qualify for a special enrollment period and apply for an individual market plan through the marketplace, the marketplace will compare their projected 2021 household income with the 2020 federal poverty level amount for their household size.

Medicaid and CHIP eligibility are checked first when a person applies for a plan in the marketplace. If a person is eligible for Medicaid or CHIP, they are not eligible for premium subsidies for a marketplace plan. But assuming they’re not eligible for Medicaid or CHIP, the marketplace will then determine whether they’re eligible for premium subsidies, and if so, how much the subsidy will be.

What is the federal poverty level in 2021?

HHS published the federal poverty guidelines for 2021 on January 13, 2021. For a single person, the 2021 federal poverty level is $12,880 in the continental U.S. For each additional person in the household, the federal poverty level increases by $4,540 (so for a household of three, for example, the 2021 federal poverty level is $21,960).

So in a state in the continental U.S. that has expanded Medicaid (which includes most, but not all, states), a single adult is eligible for Medicaid in 2021 with an annual income of $17,774. Medicaid eligibility is determined based on current monthly income, so that amounts to a limit of $1,481 per month.

Premium subsidy eligibility in 2021 is based on a cap of 400 percent of the 2020 federal poverty level numbers. For a single person applying for 2021 health coverage in the continental U.S., that’s an upper income limit of $51,040. For a family of four, it’s an upper income limit of $104,800. In both cases, the marketplace will look at the applicant’s projected 2021 income, and compare it with the 2020 federal poverty level amounts.

The 2021 federal poverty level for a single person in Hawaii is $14,820, with an increase of $5,220 for each additional member of the household. And for a single person living in Alaska, it’s $16,090, with an increase of $5,680 for each additional person in the household. Both Alaska and Hawaii have expanded Medicaid under the ACA, so Medicaid is available to adults under the age of 65 if their household income doesn’t exceed 138 percent of the federal poverty level. Premium subsidy eligibility in both states starts at 139 percent of the poverty level (different dollar amounts in each state, since they have different federal poverty levels), and extend to 400 percent of the poverty level.

When and why was the federal poverty level established?

The federal poverty thresholds were first introduced in 1965, based on the work of the Social Security Administration’s Mollie Orshansky. The amounts were tied to the bare minimum amount that people needed in order to have adequate food, with a multiplier used to account for other necessary expenses. Orshansky noted at the time that the poverty thresholds were a measure of the amount of income that would be inadequate for people to live, as opposed to a minimum adequate amount.

By the late 1960s, the federal poverty guidelines began to be indexed based on the Consumer Price Index. And other changes have been made over the years as well, such as eliminating the separate poverty level guidelines for farm families in the early 1980s.

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