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Families and Children Manual Section: Financial Eligibility Policy Manual Number: 010.010 Chapter: Income Overview

May 01, 2019 Division of TennCare 1 INCOME OVERVIEW

Legal Authority: 42 CFR 435.603; Tenn. Comp. R. & Regs. 1200-13-20

1. The MAGI Methodology and Insurance Affordability Programs

The Affordable Care Act (ACA) requires that financial eligibility for all insurance affordability programs be determined using the Modified Adjusted Gross Income (MAGI) methodology. This means that for certain Medicaid categories, the Children’s Health Insurance Program (CHIP, or CoverKids in Tennessee) and the Advance Premium Tax Credits (APTCs) offered on the Exchange, household income determined using the MAGI methodology will apply across all three programs. The primary difference with income counting rules for the three programs is that Medicaid and CHIP determine eligibility based on monthly income, while the Exchange uses annual income to determine APTC eligibility.

MAGI methodology is based on federal tax rules. In general, when determining eligibility, taxable income is counted and non-taxable income is excluded. Expenses that are allowed under federal tax rules are allowed in Medicaid eligibility determinations. The MAGI methodology also eliminates the use of disregards based on household characteristics, e.g. the earned income disregard. A general 5% disregard of household income is permitted, but only if it impacts eligibility. See the Expenses and The 5 Percent FPL Disregard for MAGI policies.

2. General Income Types

Income types that are generally countable for TennCare Medicaid, TennCare Standard and CoverKids coincide with income types that are reported under the Income section on IRS Form 1040. Countable income under the MAGI methodology includes the following:

a. Jobs (Wages, tips, etc.) b. Investment Income c. Alimony Received d. Self-employment e. Capital Gains f. IRA Distributions g. Pensions/Annuities h. Rental or Royalty Income i. Farming/Fishing Income j. Unemployment Compensation k. Social Security benefits l. Retirement m. Other income: i. Canceled debts ii. Court awards iii. Jury Duty pay