2014 Federal Poverty Guidelines Released

Under ACA, eligibility for Medicaid and premium-reduction subsidies for exchange policies is governed by the poverty guidelines for the policy year.   The 2014 guidelines are now available and can be viewed at: http://familiesusa.org/product/federal-poverty-guidelines

In the Medicaid expansion states, individuals and families who fall under 133% of the  poverty line will receive coverage through Medicaid.   Those whose incomes are between 133% and 400% are eligible for subsidies and/or a tax credit when purchasing insurance through an exchange.

In states that have not expanded Medicaid,  individuals and families are eligible to purchase subsidized insurance from an exchange so long as their anticipated income is at or above the 100% poverty level.

If a taxpayer is approved to receive a subsidy by an exchange, but their total income for the year as reported on their 2014 return falls below the 100% level, their tax credit will be computed as the value that would apply if their income was exactly 100% of the FPL. 

State Medicaid Eligibility Levels

Complete list of income eligibility levels for Medicaid and CHIP, as of January 1, 2014:

http://www.medicaid.gov/AffordableCareAct/Medicaid-Moving-Forward-2014/Downloads/Medicaid-and-CHIP-Eligibility-Levels-Table.pdf

Figuring your household income (Part Two)

The starting point of determining your household income for purpose of the ACA tax credit is your adjusted gross income AGI).  As explained in my previous post (Part One), your household income is the combination of the AGI of the primary taxpayer and any other family  members with incomes large enough to trigger tax liability, together with any tax-exempt income from interest, social security, or foreign earnings.

AGI is defined in Internal Revenue Code section 62.  It is the amount remaining after subtracting various specified deductions from  your gross income (or the total of all taxable forms of income). Because these various deductions can potentially reduce your income by thousand of dollars, it means that you or your family may be eligible for the premium assistance tax credit even if you have total income well above the 400% federal poverty level.

Here are some of the most common deductions enumerated in Section 62 which may effectively reduce income. Many individuals or families whose household incomes fall above the 400% FPL subsidy limits may find that they can effectively reduce their AGI and qualify for significant credits toward their insurance by simply taking advantage of deductions they may not have fully utilized in the past.

Falling off the cliff…..

The really cool part about Obamacare, especially for we older folks, are the subsidies. 

The really terrible part about Obamacare, especially for we older folks, is what happens if our incomes too high to qualify for subsidies, but just barely.

Here’s why:

The part that makes the care “affordable” is that everyone who earns income between 100% to 400% of the federal poverty  line gets a tax credit for any amount that we pay that is above a certain percentage of our income. That percentage varies, but is no more than 9.5%.  Because we need to pay our insurance premiums right away, the law has another perk: we can choose to claim that tax credit in advance, and the government will pay it out in monthly installments directly to the insurance company.