Subsidies Archives - PolicyAdvantage.com

We’ve recently created a blog segment called “#Advantage” where we’ll answer the questions that we get at Twitter. Our official Twitter hash-tag is #Advantage, and we’ll explain this in further detail in a future blog post. For now, you can find additional information at www.twitter.com/advantage (or @advantage).

Our 4/24/14 question was from “CA Medicare Assist” (@MedicareInCA) in Santa Rosa, California. The question was this:

Does healthcare reform make health plans cheaper? (see the official Tweet here)

“CA Medicare Assist” (@MedicareInCa) mentions that this is the #1 question they’re asked. And… it’s a good one. Check out the answer below the tag.

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The answer is: In certain cases, yes it does. Healthcare reform can make health plans “cheaper” for certain policyholders. However, there are some additional important details that should be considered. Here are the questions that are raised:

How are these health plans made cheaper? Plans are made cheaper via “Advanced Premium Tax Credits” at public health insurance exchanges like Covered California. APTCs are commonly known as the “subsidies” that you hear so much about. These subsidies are applied to individual health insurance premiums to make them more affordable.
Who are these health plans made cheaper for? Health plans are made cheaper for individuals and families that fall between approximately 100% and 400% of FPL (or Federal Poverty Level). For individuals, this is about $11,000 to $45,000 per year in gross income.
Are health plans made cheaper for everyone? Nope. In fact, for many of those who fall outside of 100% to 400% of FPL (or individuals making more than about $45,000 per year), health plans can actually get more expensive in a lot of cases.
How are the subsidies that make these plans “cheaper” funded? These new subsidies are funded from a variety of different sources, mostly in the form of taxes. Here are a few of them: A) increasing the Medicare tax on high-income households, B) taxing high-cost medical plans, C) penalties for those who don’t get coverage, D) employers paying if they don’t provide coverage, E) new fees on the health industry, and certain others.

Thanks for stopping by at our “#Advantage” blog segment dedicated to questions from our followers and others. We hope you found our information to be valuable.

We’ll continue to roll-out answers as questions come in. Don’t forget to hash “#Advantage” at Twitter, and visit our official tag here: www.twitter.com/advantage.

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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.

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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.

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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)

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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.

Thanks for stopping by, we hope you found our information to be valuable. Check back at our blog to get further information about funding healthcare. Also, please share with your friends, clients, colleagues, and family. Here are a few of our other information outlets:

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