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The Federal Poverty Level and Obamacare

Can you explain the federal poverty level? Most of us can’t, but it’s important to understand it if you buy Obamacare health insurance on your own.

In this article we’ll explain what the federal poverty level is and how understanding it can make your health insurance a lot more affordable by saving you money on your monthly premium payments.

What is the federal poverty level?

The “federal poverty level” gets talked about a lot in the media and elsewhere, but it’s a complex thing and few people understand it or could tell you what the federal poverty level is.

The federal poverty level is a set of income guidelines defined by the federal government. These guidelines help you understand where your income is in comparison with the government’s determination of low, medium or high income based on the number of people in your family.

If your income is low according to the federal poverty level, you may qualify for special government assistance. For example, one program you may qualify for is the Supplemental Nutritional Assistance Program (SNAP, otherwise known as ‘food stamps’). Depending on where your income falls relative to the federal poverty level, you may also be eligible for government subsidies when buying Obamacare health insurance.

Each year the federal government issues a revised federal poverty level. The federal poverty level for 2016 is $11,880 of income for an individual person. When you add additional persons in the household, the federal poverty level increases too:

  • $16,020 for a household of two persons
  • $20,160 for a household of three
  • $24,300 for a household of four
  • Etc.
2016 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA
PERSONS IN FAMILY/HOUSEHOLDPOVERTY GUIDELINE 100%POVERTY GUIDELINE 250%POVERTY GUIDELINE 400%
1$11,880$29,700.0$47,520
2$16,020$40,050.0$64,080
3$20,160$50,400.0$80,640
4$24,300$60,750.0$97,200
5$28,440$71,100.0$113,760
6$32,580$81,450.0$130,320
7$36,730$91,825.0$146,920
8$40,890$102,225.0$163,560
For families/households with more than 8 persons, add $4,160 for each additional person.

These figures above are valid for the 48 contiguous states and the District of Columbia. Federal poverty level guidelines for Alaska and Hawaii differ slightly.[i]

2016 POVERTY GUIDELINES FOR ALASKA
PERSONS IN FAMILY/HOUSEHOLDPOVERTY GUIDELINE 100%POVERTY GUIDELINE 250%POVERTY GUIDELINE 400%
1$14,840$37,100.0$59,360
2$20,020$50,050.0$80,080
3$25,200$63,000.0$100,800
4$30,380$75,950.0$121,520
5$35,560$88,900.0$142,240
6$40,740$101,850.0$162,960
7$45,920$114,800.0$183,680
8$51,120$127,800.0$204,480
For families/households with more than 8 persons, add $5,200 for each additional person.

 

2016 POVERTY GUIDELINES FOR HAWAII
PERSONS IN FAMILY/HOUSEHOLDPOVERTY GUIDELINE 100%POVERTY GUIDELINE 250%POVERTY GUIDELINE 400%
1$13,670$34,175.0$54,680
2$18,430$46,075.0$73,720
3$23,190$57,975.0$92,760
4$27,950$69,875.0$111,800
5$32,710$81,775.0$130,840
6$37,470$93,675.0$149,880
7$42,230$105,575.0$168,920
8$47,010$117,525.0$188,040
For families/households with more than 8 persons, add $4,780 for each additional person.

What does the federal poverty level have to do with Obamacare?

The Affordable Care Act (the law known as Obamacare) makes government subsidies available to qualifying consumers. Subsidies can reduce what you’re required to pay toward your monthly health insurance premiums under Obamacare, and in some cases what you may need to pay from your own pocket toward things like copayments and deductibles.

In order to qualify for Obamacare subsidies (premium tax credits), your household income (technically your modified adjusted household income, as reported on your federal tax return) can be no more than 400% of the federal poverty level. That’s about $47,000 for a single person or $97,000 for a family of four in 2016. Depending on where your income falls below that 400% threshold, subsidies limit your personal responsibility for monthly Obamacare insurance premiums to between 2% and 9% of your income.

If you earn no more than 250% of the federal poverty level, you may also qualify for additional subsidies that can lower your out of pocket costs (in the form of deductibles and copayments, etc.) 250% of the federal poverty level is about $29,000 for a single person or about $60,000 for a family of four.

Federal poverty level and Medicaid under Obamacare

Obamacare sought to expand eligibility to Medicaid for qualifying Americans, but some states have refused additional Medicaid dollars. Depending on where you live, you may qualify for Medicaid rather than Obamacare health insurance subsidies if your income is below 133% of the federal poverty level.

Note that in some states you may only qualify for Medicaid if you earn 100% of the federal poverty level or less and meet other criteria.

Whether you qualify for Medicaid coverage depends partly on whether your state has expanded its program.

  • In all states: You can qualify for Medicaid based on income, household size, disability, family status, and other factors. Eligibility rules differ between states.
  • In states that have expanded Medicaid coverage: You can qualify based on your income alone. If your household income is below 133% of the federal poverty level, you qualify.

What if the federal poverty level changes?

Federal poverty level guidelines are revised every year by the federal government. This means that your eligibility for subsidies – and the potential dollar value of your subsidies – may differ from one year to another. If your income changes each year you may find that your eligibility for Medicaid or Obamacare subsidies may change. So it’s important to review your health insurance options each year to ensure you are getting the best savings towards your health insurance.

[i] https://aspe.hhs.gov/poverty-guidelines

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