How do states decide whether to use the current-year or prior-year FPL for Medicaid and ACA subsidy determinations?
Executive summary
States do not independently choose whether to apply the “current-year” or “prior-year” Federal Poverty Level (FPL) for Medicaid and Affordable Care Act (ACA) premium-subsidy determinations; federal program rules and the timing of published HHS poverty guidelines drive which year’s FPL is used. Marketplace premium tax credits (APTCs) are calculated using the prior year’s FPL compared with the applicant’s projected income, while Medicaid/CHIP eligibility generally relies on the poverty guidelines associated with the Medicaid/CHIP determination year as published by HHS (fiscal/timing distinctions noted below) [1] [2] [3].
1. How the ACA marketplace ended up using the prior-year FPL
Congress and federal marketplace procedures require that premium tax credit eligibility be determined during open enrollment for the upcoming coverage year using the most recently available official poverty guidelines, which effectively means comparing projected income for the coverage year to the prior year’s published FPL; healthinsurance.org and program-reference materials explain that APTC eligibility for a plan effective in year N is computed against the year N–1 poverty level numbers [1] [2]. This convention exists because Marketplace enrollment and subsidy calculations occur before HHS publishes the new poverty guidelines for the coming year, so the prior year’s standards are used operationally [1] [2].
2. Why Medicaid and CHIP typically use the “current” guidelines for eligibility
Medicaid and CHIP eligibility are administered under rules tied to the federal poverty guidelines designated for the program year—state Medicaid programs apply the poverty levels that HHS publishes for that Medicaid/CHIP eligibility period, so coverage thresholds like the 138% expansion cutoff are determined by those guidelines for that benefit year (Covered California and reference charts make the 138% rule and the linkage to the FPL year explicit) [4] [3]. In practice this means Medicaid eligibility for calendar-year 2026 will use the poverty guidelines HHS published for 2025 if those are specified as the basis for 2026 Medicaid determinations in federal/state guidance, because the timing of publication and program rules synchronizes Medicaid to those guidelines [3].
3. Timing, publication, and the practical effect on applicants
The apparent mismatch—marketplaces using the prior year’s FPL while Medicaid refers to a program-year guideline—originates in timing and administrative practicality: marketplaces need a stable benchmark when applicants estimate projected income for the coming year, so they compare that estimate to the most recently published guidelines (the prior year), whereas Medicaid enrollment windows and state program rules align eligibility to the guidelines HHS designates for that program year [1] [3]. The upshot: an applicant’s percentage of FPL can differ depending on whether they’re evaluated for Medicaid or for marketplace subsidies, which is why people near the 100–138% thresholds are routed between programs during application [5] [6].
4. Where state discretion actually exists—and where it doesn’t
States cannot unilaterally decide to use a different year’s FPL for federal marketplaces or for the federally defined APTC rules; federal law and HHS guidance determine the FPL reference for ACA subsidies and for Medicaid/CHIP eligibility, and states implement those federal standards [1] [2]. States do have discretion on program design choices—such as adopting Medicaid expansion, setting outreach priorities, and operating eligibility systems—which affect how applicants experience the handoff between Medicaid and marketplace subsidies, but not the underlying choice of which FPL numbers to apply [4] [3].
5. Important caveats, data quirks, and practical resources
The mechanics described here are reflected in multiple consumer guides and calculators that translate FPL percentages into income bands for subsidies and cost-sharing reductions; those resources repeatedly note that marketplace subsidy eligibility is based on the prior year’s guidelines while Medicaid thresholds track the program year figures and that Alaska/Hawaii have different FPL amounts [1] [5] [7]. Reporting and private calculators can emphasize slightly different framings (for outreach or product purposes), so consumers should rely on official HHS or state Medicaid guidance when in doubt; the sources used here do not include the full regulatory citations, so finer legal drafting or exceptional transitional rules would require consulting HHS or CMS publications directly [2] [3].