If you're hoping to have health insurance coverage start on Jan.1 2014, you have until Dec. 23 to sign up. One common confusion: determining what counts as income in the state Health Insurance Marketplaces. That's crucial, because it determines what financial help you can get to reduce the cost of premiums and lower out-of-pocket expenses. Here's what you need to do.
1. Determine your MAGI
All subsidies are based on your projected Modified Adjusted Gross Income (MAGI) for 2014. What’s that? This annotated Form 1040 that we made shows it better than I can tell it, so check it out. But in short, you start with your Adjusted Gross Income, and then add back untaxed Social Security benefits and tax-free interest income, if any. Freelancers, in particular, often find that their MAGI is lower than their total income because they have so many deductions for things like business expenses and self-employment taxes.
(Note that when you start your application, your state marketplace will pull information about your income from the Internal Revenue Service, the Social Security Administration, and Equifax, the credit-reporting agency. If you filed a 2012 tax return it’s best if you can say, honestly, that your 2014 income will be roughly the same as or higher than what you reported in 2012. If its going to be more than 10 percent lower than what those sources suggest, you will be asked for additional verification.)
2. Determine the Federal Poverty Level for your family size
Where your MAGI falls as a percentage of the Federal Poverty Level (FPL) determines the amount and kind of financial help you will be offered. The FPL varies by family size. So the next step is to consult the chart below to see what the income cutoffs are for a family of your size.
Federal Poverty Level chart
| Family size |
100% FPL |
133% FPL |
250% FPL |
400% FPL |
| 1 |
$11,490 |
$15,282 |
$28,725 |
$45,960 |
| 2 |
$15,510 |
$20,628 |
$38,775 |
$62,040 |
| 3 |
$19,530 |
$25,975 |
$48,825 |
$78,120 |
| 4 |
$23,550 |
$31,322 |
$58,875 |
$94,200 |
| 5 |
$27,570 |
$36,668 |
$68,925 |
$110,280 |
3. Check your subsidy
Your subsidy depends on where you fail in the Federal Poverty Level chart (and where you live), as described below:
If your MAGI is Under 133 percent of the FPL: You will be automatically enrolled in Medicaid if you live in a state that is expanding this free or nearly free government health plan to cover all low-income households.
If your MAGI is between 133 percent of the FPL (in a Medicaid expansion state) OR 100 percent of the FPL (in a non-expansion state) and 250 percent of the FPL: You will receive generous subsidies to lower the price of your premium as well as the ability to purchase special Silver plans with very low deductibles and out-of-pocket costs. If you are below 100 percent of the FPL in a state that’s not expanding Medicaid, you’ll get no financial help whatsoever, thanks to the infamous coverage gap that I wrote about a few weeks back.
If your MAGI is between 250 percent of the FPL and 400 percent of the FPL: You will get subsidies on your insurance premium but no help with cost-sharing. The size of the subsidies decreases as you go up the income scale.
If your MAGI is above 400 percent of the FPL: Sorry, no financial help. But the good news is that when you start your marketplace application you can bypass the entire section that asks about your finances.
It’s important to note that some people, upon applying for marketplace coverage, may discover they qualify for other types of financial help I haven’t had room to mention. Some may qualify for existing Medicaid programs, even in states that aren’t expanding coverage. Some may learn their children qualify for the Children’s Health Insurance Program. These programs have too many income cutpoints to describe here, but our free interactive tool, HealthLawHelper.org, knows them all and I strongly recommend you check it out.
Got a question for our health insurance expert? Ask it here; be sure to include the state you live in. And if you can't get enough health insurance news here, follow me on Twitter @NancyMetcalf.
Health reform countdown: We are doing an article a day on the new health care law until Jan. 1, 2014, when it takes full effect. (Read the previous posts in the series.) To get health insurance advice tailored to your situation, use our Health Law Helper, below.
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