More than 2 million low-income people — half of them in Florida and Texas — are uninsured because they’re stuck in a coverage gap: They make too much to qualify for Medicaid, but because of a quirk of the Affordable Care Act, they make too little to qualify. for an ACA subsidized market flat
The problem affects people in 11 states that have not expanded Medicaid.
However, some of these consumers could probably get financial help to buy a health plan from the Marketplace. All they have to do is make a good faith estimate that in 2023 they will earn at least as much as the federal poverty level, or $13,590 for one person. That’s the minimum income required to qualify for subsidies that help pay premiums for Marketplace plans.
If their 2023 income turns out to be less than that estimate, they will not face a financial penalty or have to pay the government back, as long as the prediction was not made “with willful or reckless disregard for the facts.” said Eric Smith, an IRS spokesman.
None of those interviewed by KHN are advising people caught in this “coverage gap” to lie on their marketplace apps (which is a crime). But determining whether an earnings estimate is optimistic or fraudulent is a gray area. Accurately forecasting income is often impossible, especially for people who work part-time or run small businesses.
“People need to be honest when predicting next year’s income, but what does it mean to be honest when you have no idea what your income will be?” said Urban Institute senior fellow Jason Levitis, who worked at the Treasury Department until 2017 and helped implement the healthcare law.
Open enrollment in the federal marketplace began this month and will run through January 15.
Many people don’t realize that whether they get subsidies from the marketplace depends on their income forecast for the coming year, not current or prior year income, said ACA insurance agents and navigators, who help consumers enroll in market plans. By contrast, eligibility for Medicaid and most other government assistance programs is based on current income, and some states refuse to enroll childless adults, even if they have extremely low incomes.
Several ACA navigators and insurance agents interviewed by KHN mistakenly thought that clients would have to pay the government back if they estimated their income would be above the poverty level, but then they didn’t. They also believed that the government would ask applicants for documentation verifying their income if their estimate did not match other government data.
But that assumption is also false.
“The marketplace no longer requires additional income documentation if available data from prior years shows income below 100% FPL, but certification for the current year is above 100% FPL,” said Ellen Montz, administrator Associate and Director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare & Medicaid Services.
Previously, documentation was required when applicants projected their income to be above the poverty level and federal data showed current income below. But in March 2021, a federal court struck down that provision. And not meeting the poverty level does not affect an individual’s eligibility to apply for benefits in future years, Montz said.
The Affordable Care Act required states to use billions of federal dollars to expand eligibility for Medicaid, the federal-state health program for low-income people, to all people with incomes up to 138 % of poverty level, currently $18,755 per person. But in 2012, the Supreme Court ruled that the expansion was optional for the states.
Today, 11 states have a coverage gap because they did not expand Medicaid. In addition to Florida and Texas, those states are: Alabama, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, and Wyoming. South Dakota voters this month approved a constitutional amendment to expand eligibility beginning in July 2023. Wisconsin also did not expand Medicaid, but covers adults earning up to 100% of the poverty level.
Sarah Christian, navigator coordinator for the South Carolina Association for Primary Health Care, said she was unaware there were no penalties for people who earn below the poverty level and overestimate their income to qualify for subsidies. She said her organization had advised consumers based on the belief that “the government will flag” predictions that exceed current income and ask for proof.
Alison Holmes, 58, of Longwood, Florida, thought she would be stuck in the Medicaid coverage gap for the 10th straight year in 2023 because her family income this year was $16,000, well below the $27,750 a family of four you must win to get subsidies from the market. But after she was recently offered a part-time job as a grant writer, she believes her 2023 earnings will boost the family’s income above the poverty level. As a result, she plans to sign up for coverage.
For the first time in a decade, Holmes said, he was hopeful that health insurance might be within his reach. “Even if it was for a year,” he said, “to be able to get all the tests done, what a weight that would take off my shoulders.”
Holmes’s children are covered by Medicaid and her husband has coverage through the Department of Veterans Affairs.
Although he has met with ACA navigators, Holmes said, he was unaware that the IRS couldn’t require him to repay money if his family’s income ultimately fell below the poverty level. Without health coverage, he worries that he won’t be able to stay healthy to care for his child who has a disability.
Kelly Fristoe, president of the National Association of Health Underwriters and an insurance agent in Wichita Falls, Texas, said she asks clients who are not eligible for Medicaid but whose income is below the poverty level to think about ways in which they can earn more money. . “When I hear people say they only make $10,000 or $12,000 a year, I’m like, ‘Come on, man, is there anything else you can do to make money, like mow the lawn or clean out a garage, just so you can make money? to the $13,500 mark?’” she said. “’And if you do that, you can get your health insurance at no cost.’”
This is because people with the lowest incomes qualify for the highest subsidies, which generally allows them to choose a health plan with no monthly premium and little or no out-of-pocket costs. Fristoe said she helps enroll people who are confident they will earn enough to get them above the federal poverty level. But “some say, no, there’s no way they can do that, and I have to say, ‘There’s no way I can help you,’” she said.
Cynthia Cox, vice president of KFF, said market applicants often expect to make more money the following year and can be reasonably optimistic.
He noted that low-income people’s incomes often fluctuate, in part because the number of hours they work and their pay can change throughout the year. Consumers may want to give a good faith estimate for the coming year that is higher than what they earned in the current year.
“How do you tell fraud from optimism?” she said.
Although people with income below the poverty level do not have to pay anything to overestimate their income for the following year and receive subsidies from the ACA market, people with higher incomes are expected to pay money back to the government if they underestimate their income and get a higher subsidy to which they are entitled, up to certain amounts. For example, a single person whose income is 100% to 200% of the poverty level would pay a maximum of $350 if the person’s income in 2023 were higher than projected, according to the IRS.
José Ibarra, who oversees ACA navigators at CentroMed, a community health center in San Antonio, said about a third of people who seek help have incomes below the poverty level and are in the coverage gap.
“It’s the most heartbreaking situation when we find ourselves with people right in the bubble,” he said. “We train people to ask applicants if they think they can expect to work a few more hours because they are so close to the threshold. We want people to make the best honest projection for next year, and we take them at their word.”
Islara Souto, director of the navigation program for the nonprofit Epilepsy Alliance Florida, said the government’s previous income verification system for people with incomes below the poverty level discouraged people from enrolling, so many consumers stopped seeking help and browsers stopped trying to persuade them to apply.
We are so used to it. We are a state with no Medicaid expansion,” he said. “You are below the income limit and you will not receive subsidies.”
But after hearing from a KHN reporter about the easing of the requirements, Souto said he would work with browsers to reach consumers who have been denied in the past. “We’ll go back a few years and find consumers that we know have had that situation and we’ll look at them and maybe we’ll come up and say, ‘Let’s try this,’” he said.
