The 400% Rule for Health Subsidies

Soon, we'll all know what our 400% of the Federal Poverty Level is.  It's going to dictate whether you are eligible for potentially 1000's of dollars in health subsidies per year starting Jan 1st, 2014.  That's a big deal especially with the ever escalating cost of health insurance (sure to continue increasing as we go forward).  Let's look more closely at the 400% rule and how it impact whether you can expect to receive a subsidy.

How does your income compare to the Federal Poverty Level?

Many Americans are not aware of the Federal Poverty Level because they don't come close to qualify for the various Federal and State programs that use the FPL as a qualifier.  Making 100% of poverty is approximately $11K per year for an adult and that's  essentially minimum wage.   The Health Reform ACA bill will change that significantly by using multiples of the FPL to determine eligible for health subsidies and other benefits.  In fact, the ACA bill sets the cap at 4 times the FPL or 400%.  This means that you can qualify for significant health subsidies if you make up to 4 times the Federal Poverty Level amounts.  In the case above, this means that a person can make up to approximate $44K annually and expect to qualify.  That's a lot of Americans!   Now we're up to almost $4K monthly or $25/hourly.  That's a wide net indeed. 

Family members increase the basis for the 400% rule

The FPL is based on size of family.  An individual person may be approximate $11K while a family of four might be $23K  (you can find exact Federal Poverty Levels).  We have to  then multiply that $23K by 4 (400%) and we get $94K.  That means a family of four that makes under $94K will likely qualify for a health subsidy!  That's a big number and it should apply to many families across the United States.  Here's the 2013 FPL limits:

 Household Size 100% 133% 150%
200% 
 300%
400% 
 1$11,490$15,282$17,235$22,980$34,470$45,960
 215,510 20,62823,265  31,02046,53062,040
 319,530 25,97529,295  39,06058,59078,120
 423,550 31,32235,325  47,10070,65094,200
 527,570 36,66841,355  55,14082,710110,280
 631,590 42,01547,385  63,18094,770126,360
 735,610 47,36153,415  71,220106,830142,440
 839,630 52,70859,445  79,260118,890158,520
 For each additional person, add$4,020 $5,347$6,030  $8,040$12,060$16,080

Important aspects of 400% rule for health subsidy eligibility

The 400% rule is interesting in that it's a fix line in the sand.  If you make 401% of the FPL, there's no subsidy.  The period of time is supposed to be the prior year's income.  For example, 2012 tax filing will drive 2014 subsidy eligibility.  Passive income will be included and the 400% is based on a person's MAGI (Modified Adjusted Gross Income).  The modified adjusted gross income is found by taking the individual's adjusted gross income and adding back certain items such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

 



Los Angeles, Family of 4
making $60K.
  Subsidy=$8,388*


Iowa, Single Adult making $30K
Subsidy=$4,222*

*Based on age, expected costs, and other assumptions according to Kaiser Calculator.  Actual subsidies will vary and official subsidy amounts will be available Oct 1st, 2013. 


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