There has always been a debate over what qualifies people for assistance programs and federal subsidies - like Medicaid or child health services. But before the government decides who qualifies, there have to be standards that help determine who is eligible and who isn't. Cue the federal poverty level.
But, what is the federal poverty level, and how is it determined? And, more importantly, how do you determine if you qualify for aid?
What is the Federal Poverty Level?
Put simply, the federal poverty level (FPL) is a standard that the federal government uses to determine who (or what households) qualify for federal subsidies or aid, like Medicaid or Children's Health Insurance Program (among others). Each year, the U.S. Census Bureau and the U.S. Department of Health and Human Services work together to assess the level of poverty in the United States -- using the census data on the estimated number of people living in poverty and determining a line or level at which to qualify households or individuals as living in poverty. The U.S. Department of Health and Human Services (HHS) releases new federal poverty level guidelines every year in January, and these levels are used to determine the eligibility of households with different numbers of members for aid or government subsidies.
The federal poverty level is supposed to represent the minimum income required to provide basic necessities like food, clothing, shelter and transportation, to name a few.
The federal poverty level is split between the 48 contiguous states and Washington D.C., with Alaska and Hawaii being separate. The report is made up of household income and the size of the household.
According to the HHS website, "the January 2018 poverty guidelines are calculated by taking the 2016 Census Bureau's poverty thresholds and adjusting them for price changes between 2016 and 2017 using the Consumer Price Index (CPI-U)."
If you fall within certain percentages of the federal poverty level, you may qualify for certain aid, subsidies, or healthcare programs. And while some programs may vary depending on your state, there are resources available to help you determine what you are eligible for and what is offered.
These programs include Medicaid, the National School Lunch Program, Food Stamps and the Children's Health Insurance Program (CHIP), among others.
Federal Poverty Level Calculator
To calculate the federal poverty level for your state and household size, simply search your state and size of household (how many members are in it).
For example, the HHS has determined that for 2018, the federal poverty level for individuals starts at $12,140, increasing by some $4,320 for each additional person - so the federal poverty level for a household of 2 members would be $16,460 (for the 48 contiguous states and D.C., with slightly different rates for Hawaii and Alaska).
For Hawaii and Alaska, the cost of living is higher and thus levels for both states are higher than the rest of the 48 and Washington D.C.
To calculate what percentage of the federal poverty level your income rests at, simply divide your income by the federal poverty level in your state and multiply by 100. For example, if your individual annual income was $40,000 and you lived in Colorado where the federal poverty level for individuals sits at $12,140 as of 2018, you would divide $40,000/$12,140 and multiply by 100 to get 329% - which could qualify you for some programs or tax credits.
How to Qualify for Medicaid and Children's Health Insurance Program
Although the qualifications for certain subsidies and aid programs may vary depending on your state or income level, there are several different ways to qualify for aid or healthcare based on how you rank on the federal poverty level.
Through Obamacare, tax credits became available to help those sitting on the federal poverty spectrum to pay for health insurance.
Still, different government agencies may calculate eligibility differently, with some using before-tax income and others after-tax income as a guideline.
For 2018, the HHS declared that households that fall between 100% and 400% of the federal poverty line qualify for premium tax credits that can go to a lower-cost Health Insurance Marketplace healthcare premium for a insurance plan in all states, according to Healthcare.gov.
Additionally, you may be able to qualify for Medicaid coverage based solely on your income if your income is below 138% of the federal poverty level in your state - if it has expanded Medicaid coverage, that is. However, even if your state hasn't expanded Medicaid coverage, if you are below 100% the federal poverty level for your state, you may not be able to qualify for either income-based Medicaid or lower Marketplace healthcare premiums, but may still be able to qualify for Medicaid if your state offers it, according to Healthcare.gov.
Other programs like the Emergency Shelter Grant (ESG), Utility Assistance and United Way Rent require a income below 150% of the federal poverty level to qualify.
Additionally, some households may be eligible for the Children's Health Insurance Program (CHIP) and can use their ranking on the federal poverty level to seek an application if they qualify.
To help you determine if you are eligible, there are calculators and resources available to show you where you stand on the federal poverty threshold.
Has the Federal Poverty Level Increased?
Over the past couple years, the federal poverty level has increased slightly per year.
In 2016, the FPL for the 48 contiguous states and D.C. started at $11,880 for individuals and increased by $4,140 per member added to the household, while in 2017, the FPL for the 48 contiguous states and D.C. started at $12,060 for individuals, increasing by $4,180 per member added to the household.
And, by 2018, those rates are slightly higher at $12,140 as the starting point.
History of the Federal Poverty Level
According to the HHS, the federal poverty threshold was originally created in 1963 by Mollie Orshanksy, who worked for the Social Security Administration. Orshansky used a variety of data and differentiating factors such as sex, size of household, farm or non-farm household, and others to create an estimate of a somewhat-official poverty standard.
However, it wasn't until 1965, after President Lyndon Johnson's War on Poverty initiative was in effect, that the Office of Economic Opportunity began to use Orshansky's poverty thresholds to set a "quasi-official definition of poverty," according to the HHS. The War on Poverty also instigated many welfare programs, and in the following years, the standards and means of measurement and assessment for the FPL changed to reflect differing standards of living, exclusively non-farm households and other slight changes -- many of which were made in the 1980s.