With passage of the Affordable Care Act (ACA), a new term was created to determine eligibility for Medicaid or premium subsidies offered for plans within the exchange. The new term Modified Adjusted Gross Income or MAGI has been adopted in order to standardize the income calculation for Medicaid or premium support. Standardization was needed because types of income used to determine eligibility for Medicaid and CHIP varied by state. For example, 27 states still have asset verification for parents enrolling in Medicaid. Enrollment in Medicaid and CHIP requires the applicant to submit extensive documentation during the application process, which can serve as a deterrent to applying for benefits.
States will still be required to use existing income criteria for individuals who are eligible for Medicare, classified as Medicaid medically needy, classified as permanently disabled or eligible for Medicaid based on participation in another program. The transition to MAGI will result in two significant changes to Medicaid and CHIP enrollment. Populations that apply for Medicaid and CHIP enrollment under the MAGI calculation will no longer be required to submit to asset testing. In addition, states must apply a 5% income exclusion for Medicaid and CHIP applicants to raise the eligibility threshold as required by a federal mandate to 138% of the federal poverty level (FPL).
The new MAGI levels the calculation and also determines income based on an income tax definition, meaning that family size and household income will be determined by the tax filing entity.
The calculation for MAGI includes the adjusted gross income increased by the amount excluded from gross income under section 911 of the U.S. tax code, tax-exempt interest and Social Security benefits. Internal Revenue Section 911 is Foreign Earned Income excluded from an individual’s gross income, which will now be used in the MAGI calculation.
ACA adopted the MAGI eligibility determination to simplify enrollment. MAGI eliminates the possibility of coverage gaps that would occur with different eligibility outcomes based on different income standards. By adopting MAGI as the standardized income calculation, enrollment in subsidized health insurance plans will be made more efficient through use of online applications. Eligibility determination will be faster since asset verification will not be used, eliminating the need to submit documentation. The standardized approach will also reduce the frequency that individuals receiving premium subsidies will be move in and out of Medicaid due to changes in their income.
In order to be eligible for the subsidies and assistance with out-of-pocket expenses, an individual or family’s MAGI will be compared to the FPL. The level of assistance will be determined by the percentage of MAGI to the FPL as determined by number of family members. For example, in 2020 the FPL is $12,490 for a one-person household and increases by $4,420 for each additional family member. The FPL for a four-person family is starts at $25,570. In 2021 the FPL for a one-person household will be $12,760 and increase $4,480 for each additional family member. The FPL in 2021 for a four-person family will start at $26,200.
Federal Poverty Line for 2021
Subsidies will be available according to ACA rules for individuals and families with MAGI ranging from 100% to 400% of the FPL. The subsidies will be used to reduce the premium cost for health insurance coverage offered within the health insurance exchanges. Assistance will be available for out-of-pocket expenses for those with incomes ranging from 100% to 250% of the FPL. Examples of out-of-pocket costs for which assistance will be provided are copays and deductibles that would typically be the responsibility of the policyholder.
STATESIDE CAN HELP!
Stateside Insurance Services, since 2003, has focused on providing comprehensive health insurance information, responsive customer service and expert industry knowledge for Texas consumers. Stateside has annually been recognized by health insurance carriers and the Health Insurance Marketplace as a Top Producer in Texas.
Whether the health insurance policy is for an individual, family, small business or supplemental Medicare coverage, Stateside dedicates the time, and our deep industry expertise, to ensure our clients have identified the best health insurance plan for their specific needs.
Stateside is available to answer any general questions regarding your coverage options, can provide a subsidy determination, and even assist in creating and submitting online applications for ACA compliant plans during an Open Enrollment or throughout Special Enrollment periods.
By using the Telephone Appointment System, clients can take advantage of scheduling a health insurance discussion when convenient for their schedule. During Open Enrollment phone appointment availability is expanded to include extended hours and weekends.