When we first learned that the Federal Poverty Level or FPL would tie in directly to how much California health insurance would cost, we had only an inkling of what the numbers were. Many people have no idea what the Federal Poverty Levels are but that\’s about to change with the advent of the Health Exchange in 2014. These rates will have a significant effect on the availability of health insurance subsidies and therefore cost. The difference in cost will be night and day. Let\’s take a look at the numbers and how they figure into your expected costs.

What are the Federal Poverty Numbers

First of all, as is evident by the name, they are Federally designated which is interesting since there can be such divergence in cost and resulting incomes from say Los Angeles to Boise Idaho. The FPL is used to established eligibility for many federal and State programs including Medicaid (Medi-Cal in California), food stamps, and other social safety nets. The FPL figures heavily into the new Health Reform bill on two main fronts, both of which directly affect how much an individual of family will pay out of pocket for both health insurance premiums and actual out of pocket expenses. Before we get into the actual Poverty numbers, let\’s look at how the two pieces will work.

Subsidies for premium based up to 400% of FPL

If you make under 400% of the FPL for a given year (there will actually be a look back period), you can expect to receive a immediate subsidy towards the monthly Individual or Family health insurance premium. This subsidy will come right off the top although you may need to reimburse the amount at tax time if you made over the 400%. Below 100%, a person will receive free or fully paid Medi-Cal so the real subsidy window is from 100% and 400% of the Federal Poverty Level. Keep in mind that these are California requirements and levels. This is how the subsidy will work…if you make under 400% of poverty, You will not be required to pay more than 9.5% of your income towards health premiums. If you make 401% above poverty, no subsidy. It\’s a clean distinction. So that\’s subsidy, what about medical bill out of pocket?

Federal Poverty Level effect on California health plan benefits

The State just released the final California essential benefit summaries and there\’s an interesting twist. The Silver health plan has different levels of benefits based on FPL. For example, if you make between 100%-150% of the FPL, you\’ll have much richer benefits than if you make between 150%-200% of the FPL. 200-250% of the FPL provides yet another plan benefit (less rich than the prior). If you make over 250% of the FPL, you will have the standard Silver health plan but with subsidies towards the premium. Below 250%, you receive both premium subsidies and richer benefits. Between 250% and 400%, you receive only premium subsidies. Above 400% of the Federal Poverty Level, you\’ll receive a very high monthly premium. It will be interesting to see what the last group does as they make up a bulk of the current private individual and family health market. Keep in mind that the subsidies are for Individual and Family. Subsidies are not available for the group health insurance market in California (company sponsored health plans).

2013 Federal Poverty Guidelines available at http://www.calhealth.net/Federal_Poverty_Level_and_California_health_insurance.html