One of the major problems with the Affordable Care Act will come with the determination of what set of plans recipients can become eligible for. Under the law, Americans who make up to 133% of the federal poverty line can sign up for Medicaid. From 133%-400%, they are eligible to collect subsidies on a sliding scale by participating in the insurance exchanges. So where people fall along those lines will prove challenging. Sarah Kliff gives an example:
Think of a woman earning $10,000 at a part time job. Under the health reform law, she’d qualify for Medicaid: she’s below the earning threshold (133 percent of the federal poverty line, which works out to over $14,500 for an individual).
Let’s say she adds on another part time job, one that pays $5,000. The woman no longer qualifies for Medicaid; she’s above the $14,500 threshold. She moves to the exchange, where she’ll receive heavily subsidized, private insurance.
Income fluctuation like this is really widespread. Back in February, a Health Affairs study estimated that we’re likely to see “millions of adults and their families between Medicaid and state exchanges, often within months of their initial enrollment.”
There are additional challenges here. Because of the change to the law rolling back a 1099 requirement for small businesses, the government is required to claw back exchange subsidies that are over the guidelines from when an individual signed up. If his or her income changes mid-year, they will have those subsidies returned to the government. So that’s another bookkeeping issue. And, states can create a Basic Health Plan for their residents who make between 133-200% of the federal poverty line. This would look like Medicaid, but then slotting people between those three programs (Medicaid, the Basic Health Plan and the exchanges) while also keeping track of the subsidy levels is going to be a bear. And that doesn’t even include CHIP, the Children’s Health Insurance Program, which has its own eligibility rules for kids.
The somewhat good news here is that the seamless coverage regulations proposed by the Department of Health and Human Services have been widely praised. They are designed to do all those calculations backstage, so that the consumer need only to visit one portal to figure out which program they slot into. And it sets up a process for annual eligibility review, so individuals are not responsible for flagging their increase in income. Individuals who end up making too much for Medicaid will get to keep their coverage until they get a new plan on the exchange.
The somewhat bad news is that because of the new rules, the tax credits just got less affordable.
Under the Affordable Care Act, people between 133 and 400 percent of the federal poverty line and insured individuals who have to spend more than 9.5 percent of their household incomes on their employer sponsored plans qualify for subsidized coverage within the exchanges.
Following passage of the law, the Joint Committee on Taxation issued a memo explaining that an employee could only qualify to receive federal subsidies through the exchange if the cost of their single policies exceeded 9.5 percent of income. Friday’s regulations reiterated this interpretation, despite health groups’ efforts to expand the regulation to include the cost of family coverage in the calculation and allow far more people to qualify for subsidized insurance.
Tim Jost has more. This really impacts those who have to spend too much on their employer plans, not those who cannot get coverage from an employer. But it shows how the success of the exchanges is uniquely tied to affordability, which is just not a slam dunk. Already we’ve seen them clawed back as one pay-for. The trigger from the Catfood Commission II could cut into exchanges more. And this new rule will allow less people to be eligible for subsidized insurance.
There’s a less defined, and certainly less powerful, constituency around exchange subsidies than there is around Medicare or even Medicaid. This is a community of previously uninsured people who are just trying to get themselves covered and get some money for it. I don’t know who speaks up on their behalf as their subsidies get ground down.