In effect as of January 13, 2021, the Department of Health and Human Services (HHS) will soon publish the updated Federal Poverty Level (FPL) guidelines for 2021. The new FPL level will be set at $12,880 for a person residing in the contiguous United States or Washington D.C., $14,820 for Hawaiian residents, and $16,090 for individual persons residing in Alaska. The FPL level will then adjust accordingly based on family size.
What is the Federal Poverty Level?
A measure of household income issued every year by HHS, federal poverty levels are used to determine eligibility for certain programs, subsidies, and benefits, including savings on Marketplace health insurance, Medicaid, and CHIP coverage. The FPL is a measurement of a family’s annual income, with each local, state, and federal assistance agency applying the guidelines for eligibility purposes in their programs in their own way, i.e., some agencies may define a household’s income as pre-tax while others may consider only a household’s post-tax income in their calculation for eligibility.
How often are the FPL Guidelines updated and to whom do they apply?
HHS updates the FPL guidelines annually every January, modifying them accordingly to account for inflation, and issues specific guidelines for each household size each year. For 2021, the amounts are as follows:
Premium Tax Credits and Affordability Testing
The FPL can affect employer-shared responsibility (ESR) assessments under the Affordable Care Act (ACA) as it pertains to both premium tax credits and affordability testing.
In order to be considered eligible for the premium tax credit, your household income must be between 100-400% of the federal poverty line amount in accordance with your family size. However, there are two exceptions that are applicable to those with household income below 100% of the corresponding federal poverty line. Those two exceptions are outlined here in the Instructions for Form 8962 (Premium Tax Credit Form), in addition to more specific information on how to go about obtaining the premium tax credit. It must of course be noted that household income alone does not solely qualify an individual to receive the premium tax credit, as other eligibility criteria must also be met. Aside from income, the other four factors that must be considered in this analysis include the following:
· Cost of available insurance coverage,
· State of residence,
· Physical address, and
· Family size.
For affordability testing, employers utilize a safe harbor test to determine whether or not their lowest-cost, self-only minimum essential coverage (MEC) plan is considered affordable to its employees. This is where the FPL guidelines come into play. If the employer is providing a plan that does not meet the affordability rules an employee would then have access to premium subsidies, so long as the employee meets the other requisite eligibility requirements. Premium subsidies are not available to individuals with a household income that exceeds the 400% FPL threshold, as discussed above, and are also not available to employees residing in the U.S. illegally.
Please contact your Account Manager or Sales Executive for additional information on this topic.
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