The Federal Poverty Guidelines (FPL) are published annually and used to determine an ACA client’s subsidy eligibility. Subsidies are based on 400% the FPL, and additional opportunities for your client to list on their health insurance are based on 250% the FPL. Those additional savings are called cost-sharing credits and help your ACA clients with coinsurance, copays, and deductibles. Subsidies and cost-sharing credits are applied to your client’s metal tier plans through the marketplace and are based off of their modified adjusted gross income and the cost of a Silver tier plan.
Many individuals do not understand how the poverty guidelines are determined. Explaining subsidy qualifications to your ACA clients can be difficult. Here is a short overview of how you can simply explain Federal Poverty Guidelines (FPLs) to your clients.
Let’s start with how poverty is determined. There are two ways the government determines poverty: official poverty measure and supplemental poverty measure. These two measures are based on households, therefore excluding people that are homeless, military personnel who DO NOT live with at least one adult civilian, people who are in prison, and people in long-term hospital care or nursing homes. Although these two measures are based on the same thing, they are entirely different. The official poverty measure creates thresholds that show the number of people in poverty. The basic formula for official poverty is made by tripling the inflation-adjusted cost of the lowest amount of food in a diet in 1963 and adjusting the family size, as well as the age of the head of household. Table 1 displays the income percentage above or below poverty and what degree of poverty that would be considered.
|Income Percentage||Poverty Level|
|Above 100%||“Above the poverty level”|
|Above 100% but below 125%||“Near poverty”|
|At or below 100%||“In poverty”|
|Below 50% of their poverty threshold||“Severe poverty”|
The supplemental measure is more complex when compared to the official measure. It takes into consideration money from government programs and estimates legitimate household expidentures. It is not used for program eligibility, but it is a great way to exhibit how poverty can vary from state to state.
Poverty guidelines are published annually, but they differ in which dates the guidelines go into effect. For example, for the year 2018, they went into effect on January 13th, 2018 but were not published until January 18th, 2018. Various departments in the U.S. government use poverty guidelines to establish which people qualify for certain programs. For example, the Department of Health and Human Services uses them for multiple programs like certain parts of Medicaid, Medicare (Prescription Drug Coverage – the subsidized part only), Family Planning Services, and many more.