More than 2 million low-income people — half of them in Florida and Texas — are uninsured because they face a coverage gap: They earn too much to qualify for Medicaid, but because of a quirk of the Affordable Care Act, they do not enough to qualify for a subsidized ACA marketplace plan.
The problem affects people in 11 states that have not expanded Medicaid.
However, some of these consumers could probably get financial help in purchasing a marketplace health plan. All they have to do is estimate in good faith that in 2023 they will be earning at least the federal poverty line, or $13,590 for one person. This is the minimum income required to qualify for grants that help pay Marketplace plan premiums.
If their 2023 earnings are found to fall short of this estimate, they will not face a fine or have to pay money back to the government, as long as the prediction was not made “with willful or reckless disregard of the facts”. said Eric Smith, a spokesman for the IRS.
No one interviewed by KHN advises people stuck in this “coverage gap” to lie about their marketplace applications (which is a crime). But determining whether an income estimate is optimistic or fraudulent is a gray area. Accurate income forecasting is often impossible, especially for part-time workers or small business owners.
“People have to be honest when predicting their income for the next year, but what does it mean to be honest when you have no idea what your income will be?” said Jason Levitis, senior fellow at the Urban Institute. who worked in the Ministry of Finance until 2017 and helped implement the Health Law.
Open registration on the federal market began this month and will run until January 15.
Many people don’t realize that whether they get marketplace subsidies depends on their income forecast for next year, rather than this year or last year, said insurance agents and ACA navigators, who help consumers sign up for marketplace plans. In contrast, eligibility for Medicaid and most other state assistance programs is based on current income, and some states refuse to enroll adults without children, even if they have extremely low incomes.
Several ACA navigators and insurance agents interviewed by KHN mistakenly thought that customers would have to pay back money to the government if they assumed their income would exceed the poverty line, but then didn’t. They also believed the government would ask applicants for documentation verifying their income if their estimate did not match other government data.
But this assumption is also wrong.
“The marketplace no longer requires additional income documentation when available prior year data shows income below 100% FPL but current year certification is above 100% FPL,” said Ellen Montz, associate administrator and director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare & Medicaid Services.
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Previously, documentation was required when applicants projected that their income would be above the poverty line, and federal data showed current income is below. But in March 2021, a federal court overturned that provision. And falling below the poverty line does not affect a person’s eligibility to apply for subsidies for years to come, Montz said.
The Affordable Care Act required states to use billions of federal dollars to extend eligibility for Medicaid, the state health care program for low-income people, to anyone with an income up to 138% of the poverty line, currently $18,755 for one person . But in 2012, the Supreme Court ruled that expansion was optional for states.
Today, 11 states have a coverage gap because they have not expanded Medicaid. In addition to Florida and Texas, these 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 July 2023. Wisconsin also hasn’t expanded Medicaid, but it does cover adults earning up to 100% of the poverty line.
Sarah Christian, Navigator coordinator at the South Carolina Primary Health Care Association, said she doesn’t know there’s no penalty for people earning below the poverty line and overestimating their income to qualify for subsidies. She said her organization has been advising consumers based on the belief that “the government” will flag predictions that exceed current income and ask for evidence.
Alison Holmes, 58, of Longwood, Fla., thought she would be stuck in the Medicaid coverage gap for the tenth straight year in 2023 because her family’s income that year was $16,000 — far less than the $27,750 , which a family of four must earn in order to get marketplace subsidies. But having recently been offered a part-time job as a fellow, she believes her earnings will push the family’s income above the poverty line in 2023. Because of this, she plans to sign up for coverage.
For the first time in a decade, Holmes said, she has hope that health insurance could be within her reach. “Even if it were a year,” she said, “to be able to do all the tests, what a burden it would take off my shoulders.”
Holmes’ children are covered by Medicaid and her husband is covered by the Department of Veterans Affairs.
Although she met with ACA navigators, Holmes said, little did she know that the IRS could not require her to repay if her family’s income eventually fell below the poverty line. She fears that without health insurance, she will not be able to stay healthy to care for her disabled son.
Kelly Fristoe, president of the National Association of Health Underwriters and an insurance agent in Wichita Falls, Texas, said he’s asking clients who aren’t eligible for Medicaid but whose income is below the poverty line to think about ways they can make more money. “When I hear people say they only make $10,000 or $12,000 a year, I say, ‘Come on man, is there anything else you can do to make money like mow the grass or clean a garage? just to get you to the $13,500 mark?’” he said. “‘And when you do that, you can get your health insurance for free.'”
That’s because people on the lowest incomes are eligible for the highest subsidies, which generally allows them to choose a health plan with no monthly premium and little or no out-of-pocket expenses. Fristoe said he helps enroll people who are confident they will earn enough to lift them above the state poverty line. But “some say, no, there’s no way they can, and I have to say, ‘There’s no way I can help you,'” he said.
Cynthia Cox, vice president of KFF, said marketplace applicants often expect to make more money the following year and can be quite optimistic.
She found that the income of low-income people often fluctuates, 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 next year that is higher than what they have earned in the current year.
“How do you distinguish deceit from optimism?” she said.
Although people with incomes below the poverty line do not have to pay back anything if they overestimate their income the following year and receive ACA marketplace subsidies, people with higher incomes are expected to pay money back to the government if they underestimate their income and receive higher subsidies to which they are entitled — up to certain amounts. For example, an unmarried person whose income is 100% to 200% of the poverty line would repay a maximum of $350 if the person’s income was higher than projected in 2023, according to the IRS.
José Ibarra, who leads the ACA navigators at CentroMed, a community health center in San Antonio, said about a third of people seeking help have incomes below the poverty line and are in the service gap.
“It’s the most heartbreaking situation when we meet people right on the bladder,” he said. “We coach people to ask applicants if they think they can expect a few more hours of work because they are so close to the threshold. We want people to give the best honest forecast for the 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 line discouraged people from signing up, so many consumers stopped seeking help and navigators stopped asking them persuade to apply.
“We have to get used to it. We’re a non-expansion state of Medicaid,” she said. “You fall below the income limit and get no subsidies.”
But after hearing about the relaxation of requirements from a KHN reporter, Souto said she would work with navigators to reach consumers who had been turned down in the past. “We’re going to go back a few years and find consumers that we know have had this situation and revisit them and maybe reach out and say, ‘Let’s try this,'” she said.
KHN (Kaiser Health News) is a national newsroom producing in-depth journalism on health issues. Along with Policy Analysis and Polling, KHN is one of the three major operational programs at KFF (Kaiser Family Foundation). KFF is a donated non-profit organization that provides information on health issues to the nation.