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2013 vs. 2014 Federal Poverty Level?

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Question: I know the 2013 Federal Poverty Level rates were used to determine the premium tax credit subsidy. However, when it comes to reconciliation at tax time will the 2013 or 2014 Federal Poverty Level rates apply? This could make a big difference if a single persons MAGI is $46,500 for the 2014 tax year. Which one? 400% of the FPL for 2013 is $45,960 (No subsidy) or 400% of the FPL for 2014 is $46,680 (Subsidy).

Answer: The IRS will use the 2013 FPL standard to reconcile 2014 MAGI and advance premium tax credits (subsidies). See Fred's comment below for more detail.


X, thanks for the clarification.

It would have been possible for Covered CA to have set up the system to use both 2013 and 2014 Federal Poverty Level (FPL). They basically only needed to change the screening guideline for Medi-Cal to 2014 FPL effective 4/1/14. After the Medi-Cal eligibles were screened out for separate processing, anyone else continuing with the Covered CA application process would be subject to the same 2013 FPL guidelines that were already being used from October 2013 to March 2014. So the back-end of the process did not need to be changed.

The entire issue of how to use two different FPL’s in the same system was addressed in this article (note that California opted to use an April 1 implementation date):


I’m sure there can be complications not during but after the initial application process, and perhaps Covered CA determined that the easiest thing to do was to just use 2014 FPL across the board. They probably figured that using the wrong FPL would only result in minor differences in the advance premium tax credit (APTC), could only benefit the applicant with respect to cost-sharing reduction (CSR) and in only a small percentage of cases, and would limit the programming changes needed to implement the new Medi-Cal eligibility threshold. I don’t think that was the right decision but I’m not the one who was faced with a 4/1/14 programming deadline.

As you noted, the biggest error was in not considering what happens when a person is close to 400% FPL (i.e. ineligible for a subsidy under the 2013 FPL but considered eligible if erroneously using 2014 FPL). That error can set someone up for a shock come tax time if and when they lose their entire subsidy. But as I said before, the magnitude of that error was created by the original law. Congress was well aware of what would happen if someone unknowingly crawled just one dollar over 400% FPL, and still proceeded to eliminate the clawback limitations that were previously in place for people between 400% and 500% of FPL. Covered CA shouldn’t have added to this mess by prematurely switching to the 2014 FPL, but that will only represent a tiny percentage of the total horror stories that we’ll hear come 2014 tax season.

Hi Fred.

Two FPL assessments, but only one Covered California application system for both Medi-Cal and APTC with a health plan?

How is this done in the same system? 138% of FPL is the Medi-Cal to APTC plan threshold. There are now two thresholds used? So which one becomes the deciding factor as to if one gets APTC and/or a health plan, and if one gets Medi-Cal? This is silly.

Probably why Covered California now uses only the 2014 FPL. There is only one system, which means only one threshold to assess. There cannot be two thresholds used to determine a single income threshold.

Covered California system cannot do both. Medi-Cal eligibility and health plan tax credit eligibility are NOT independent of each other. Except if fools set-up a single system which combines two independent differing independent systems.

Covered California reps informed me that it is using 2014 FPL for all applications across the board.

Yes, correct on CSR plans.

Will CA agents certified for 2014 have to do anything to re-certify for 2015??

X, are you sure Covered CA is already using the 2014 Federal Poverty Level (FPL) on ALL determinations, or just Medi-Cal? If it’s just Medi-Cal, then they are processing applications correctly. But if they are also already using the 2014 FPL for advance premium tax credits (APTC) and cost-sharing reduction (CSR), then that would be a mistake.

Note that the FPL is applied differently for APTC/CSR and Medi-Cal. For APTC and CSR, the 2013 FPL applies for the entire year of 2014. And that 2013 FPL will also be used when you calculate the final premium tax credit amount on your 2014 tax return due on April 15, 2015.

Medi-Cal uses a different standard. Eligibility was based on the 2013 FPL for the first 3 months of 2014. Then on 4/1/14, Medi-Cal began using the 2014 FPL.

What Covered CA should have done was to change their application process so that screening for eligibility for Medi-Cal for months beginning April 2014 was based on the 2014 FPL. APTC and CSR calculations should have continued to be based on the 2013 FPL. Various Covered CA documents indicate that they were aware of this distinction at least at the policy level.

Hopefully, the correct policy was translated into the correct decisions at the computer programming level. But if they accidentally started using 2014 FPL for APTC/CSR eligibility, it’s true that incomes would have been determined to be at a slightly lower percentage of FPL. And it’s true that could result in APTC that was slightly higher than they should have been. But you’re mistaken with respect to CSR, because such an error could only be beneficial to an applicant. For example, a man whose income would be 201% of 2013 FPL would qualify for only a Silver 73 plan, but if his eligibility was erroneously calculated using the 2014 FPL, his income would come in at 198% FPL and he would be given the better Silver 87 plan. Even if this mistake is discovered later, there is no payback required when someone accidentally receives too much CSR.

You are correct that the consequences of such a mistake could be tragic for an individual who is for example at 401% of 2013 FPL and is accidentally determined to be 395% of 2014 FPL and therefore eligible for APTC. Such a person would end up paying back thousands of dollars at tax time IF their income came in exactly as estimated on their application. But the magnitude of that error is due more to the cliff that exists at the 400% FPL level, regardless of who is responsible.

We can envision scenarios where a Covered CA mistake can lead to costly consequences at tax time. But it is far more likely that honest but too-low income estimates will be responsible for the vast majority of horror stories that we will hear next year when people find out at tax time that they have to pay back their entire APTC. Anyone who is above 300% FPL should be tracking their income as never before to minimize the chance of such a costly surprise. For example, anyone with taxable mutual fund investments should be aware of the possibility that this year’s bull market may result in unexpectedly high year-end capital gains distributions. If someone close to 400% FPL is socked with such a surprise, they may find out to their horror when they receive their 1099 that they have lost their entire premium tax credit. I know someone who is in this situation and have already begun scouring their holdings for both potential capital gains surprises AND for holdings which they can sell at a loss before the end of the year to offset those distributions. People in the 300-400% FPL income level may not be used to such detailed tax planning, but these preventive actions can end up saving their premium tax credit.

Makes you wonder how is it that the highly paid execs at Covered California have decided to change the enrollment system’s application eligibility assessment to the use of the 2014 FPL for enrollment into 2014 plans. Is not the most fundamental action (and query), upon making enrollment/application system changes, to verify if such changes are actually correct? And this 2014 FPL usage change was implemented some months back prior to the new 2015 plans being released too.

If one applies for 2014 tax credit and a 2014 health plan, Covered CA will now incorrectly assess financial eligibility based upon the 2014 FPL, rather than with correct eligibility assessment based upon the 2013 FPL.

So, some at the top of the tax subsidy threshold (assessed just under 400% FPL) who get and take an advance subsidy, will find themselves having to pay back all advanced premium tax subsidy when they recalculate at tax time to find their household income actually just above and outside the 2013 FPL subsidy eligibility.

Others at the lowest end of subsidy eligibility will, with a strong subsidy and fantastic enhanced Silver 94 plan, find they in fact should have been provided Medi-Cal (and should have paid $0 each month for coverage). And others with other enhanced Silver plans on the income eligibility threshold of other enhanced Silver plans levels will find they should have actually had the much richer benefit (cost sharing reduction) lower income eligible enhanced Silver plan.

Yea, Covered California.

Thanks Fred. I appreciate your help.

The IRS will use the 2013 FPL to determine eligibility for the premium tax credit for the 2014 tax year. In other words, when you are preparing your 2014 tax forms in early 2015, you will be using IRS instructions that will refer to the 2013 FPL (in your example, 400% FPL will be $45,960 for an individual).

The IRS website “Questions and Answers on the Premium Tax Credit” provides more info but the relevant sentences are under item 6 (“What are the income limits?”):


“For purposes of the premium tax credit, eligibility for a certain year is based on the most recently published set of poverty guidelines at the time of the first day of the annual open enrollment period. As a result, the tax credit for 2014 will be based on the 2013 guidelines. The tax credit for 2015 will be based on the 2014 guidelines. Use of the 2014 federal poverty guidelines (FPL) for the 2015 premium tax credit eligibility determinations will begin on the first day of the open enrollment period for 2015 coverage, which is November 15, 2014.”

(This reflects the language in the law, so there should be no change or controversy over this interpretation.)

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