Welcome back to another edition of Phrases Made Easy. This series at our blog takes all of those long, drawn-out insurance phrases and turns them into concepts that are easy for people to understand.
Today we’re going to be talking about the “FPL” or “Federal Poverty Level.” The reason that we want to discuss this phrase, is because it’s an important component in the new state health insurance exchanges which are set to get going by 2014. As you know, these exchanges are a large part of healthcare reform.
As mentioned in the previous blog article “Benefits Chalk Talk: State Health Insurance Exchanges,” a business or individual may or may not utilize these exchanges (depending on preference and planning strategy). However it’s a good idea to have an understanding of them. So here we go… this phrase is easy: Federal Poverty Level or FPL.
Here’s the first simple question:
Q: What exactly is the Federal Poverty Level or FPL?
A: In the United States, the Federal Poverty Level (FPL) is a measure used by the federal government to define who is poor.
With that question answered about as simply as possible, here are some important notes about the Federal Poverty Level (FPL):
- It’s origin was from Lyndon B. Johnson’s “War on Poverty”
- From this “War on Poverty” came many of today’s programs such as food stamps, Medicare, and Medicaid
- The Federal Poverty Level (FPL) is calculated based on current “federal poverty guidelines”
- These guidelines are issued and updated yearly by the Department of Health and Human Services (HHS)
- The Federal Poverty Level (FPL) is used to determine who is eligible for federal subsides or aid
- In 2012, 100% percent of the Federal Poverty Level was $23,050 for a family of four (4 people), and $11,170 for an individual (1 person)
Which brings us back to a few more important questions:
Q: Who is eligible for federal subsides (or aid) in a state health insurance exchange?
A: State health insurance exchanges will provide subsidies for individuals and families who fall within 100% to 400% of the Federal Poverty Level (most Americans).
Q: What is 100% of the Federal Poverty Level (FPL), and how is it calculated?
A: In 2012, 100% of the federal poverty level was yearly income of $23,050 for a family of four. Add (+) $3,960 per person for families that are larger than four, and subtract (-) $3,960 per person for families with less than four.
Q: What is 400% of the Federal Poverty Level (FPL), and how is it calculated?
A: Sometimes the Federal Poverty Level is used to determine subsidies for those who earn more than the poverty level (up to 400% of FPL in this case). State health insurance exchanges will provide subsidies for individuals and families earning up to 400% of the FPL. 400% of the Federal Poverty Level for a family of four in 2012 is $92,200 ($23,050 x 4).
Q: What are the ranges of income that are eligible for subsidies in a state health insurance exchange?
A: Families of four (4 persons) with yearly incomes between $23,050 (100%) and $92,200 (400%) may be eligible for subsidies.
A2: An individual (1 person) with a yearly income between $11,170 (100%) and $44,680 (400%) may be eligible for subsidies.
We hope this blog post helped you understand the Federal Poverty Level (FPL) better. It’s an important concept when determining eligibility for subsides in the new state health insurance exchanges. Contact us for further information if you may be interested in enrolling in a state health insurance exchange.
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