more than 2 million low income people Half of them — in Florida and Texas — are uninsured because they’re caught in a coverage gap: They earn too much to qualify for Medicaid, but because of a quirk of the Affordable Care Act, they’re eligible for the subsidized ACA. earn too little to qualify for market plan.
This problem affects people in the 11 states that have not expanded Medicaid.
However, some of these consumers may be able to get financial help to buy a Marketplace health plan. All they have to do is estimate in good faith that in 2023 they will earn at least the federal poverty level, or $13,590 for an individual. This is the minimum income required to qualify for subsidies that help pay premiums for marketplace plans.
If their 2023 income falls short of that forecast, they will not face financial penalties or pay money back to the government, unless the forecast was made “with willful or reckless disregard for the facts.” . IRS spokesman Eric Smith said.
None of the KHN interviews are advising people caught in this “coverage gap” to lie on their Marketplace applications (which is a crime). But determining whether an earnings estimate is optimistic or fraudulent is a gray area. It is often impossible to accurately estimate income, especially for people working part-time or running small businesses.
“People need to be honest in predicting their next year’s income, but what’s the point of being honest when you have no idea what your income is going to be?” said Jason Levitis, senior fellow at the Urban Institute, who worked at the Treasury Department until 2017 and helped implement the health law.
Open enrollment in the Federal Marketplace began this month and will run through January 15.
Insurance agents and ACA navigators who help consumers enroll in Marketplace plans said many people don’t realize that whether or not they receive a Marketplace subsidy depends on their forecast of income for the next year. and not on current or previous year’s income. In contrast, eligibility for Medicaid and most other government assistance programs is based on current income, and some states refuse to enroll any adult without children, even if their income is very low.
Several ACA navigators and insurance agents interviewed by KHN mistakenly thought that customers would have to give money back to the government if they estimated their income to be above the poverty level, but then did not. He also believed that the government would ask applicants for documents verifying their income if their estimates did not match other government figures.
But this assumption is also untrue.
“The Marketplace no longer requires additional income documentation if available data from previous years shows income less than 100% FPL, but verification for the current year is 100%,” said Ellen Montz, deputy administrator and director of the Center for Consumer Information and Above FPL.” Insurance inspections at the Centers for Medicare and Medicaid Services.
Previously, the documents were required if applicants estimated their income to be above the poverty level and federal data showed current income to be below that. But in March 2021, a federal court overturned that provision. Montz said that being below the poverty level does not affect a person’s eligibility to apply for subsidies in future years.
The Affordable Care Act requires states to use billions in federal dollars to expand eligibility for Medicaid, a federal-state health program for low-income people, to all people with incomes up to 138% of the poverty level. for, currently $18,755 for a 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. Besides 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 broaden eligibility beginning in July 2023. Wisconsin also did not expand Medicaid, but it covers adults earning up to 100% of the poverty level.
Sarah Christian, the navigator coordinator for the South Carolina Primary Health Care Association, said she is not aware that there are no penalties for people earning below the poverty level and overestimating their income in order to qualify for the subsidy. She said her organization had advised consumers based on the belief that “the government will flag” predictions that exceed current income and asked for proof.
Alison Holmes, 58, of Longwood, Florida, thought she would be stuck in the Medicaid coverage gap for the 10th year in a row in 2023 because her family’s income this year was $16,000 — much less than the $27,750 a family of four would need to earn to make ends meet. needed. market subsidy. But after recently being offered a part-time job as a grant writer, he believes his 2023 earnings will push 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, she has hope that health insurance may be within reach. “Even if it was for one year,” she said, “to be able to get all the tests, that would be a lot of weight off my shoulders.”
Holmes’ children are covered by Medicaid, and her husband has coverage through the Department of Veterans Affairs.
Even though she met with ACA sailors, Holmes said, she didn’t know that if her family’s income eventually fell below the poverty level, the IRS might not require her to return the money. Without health insurance, she worries she won’t be able to stay healthy enough to care for her disabled son, who is disabled.
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 incomes are below the poverty level for ways they can They think about thinking of ways from which they can earn 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 mowing lawns? Or cleaning the garage, just to get you over the $13,500 mark?'” he said. “‘And if you do that, you can get your health insurance for free.'”
That’s because people with the lowest incomes qualify for the highest subsidies, which typically allow them to choose a health plan with no monthly premiums and little or no out-of-pocket costs. Fristoe said he helps enroll people who are confident they will earn enough to keep them at the top of 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,'” he said.
KFF vice president Cynthia Cox said market applicants often expect to make more money next year and can be reasonably optimistic.
She noted that low-income people’s earnings often fluctuate, partly because the number of hours they work and their wages can change during the year. Consumers may want to give a goodwill estimate for the next year that is higher than their earnings in the current year.
“How do you separate the fraud from the optimism?” he said.
Although people with incomes below the poverty level don’t have to pay anything back in order to overestimate next year’s income and receive ACA Marketplace subsidies, people with higher incomes are expected to pay money back to the government. will pay if they underestimate their earnings and get a bigger one. than the subsidy they are entitled to – up to a certain amount. For example, an unmarried person whose income is 100% to 200% of the poverty level would pay a maximum of $350, according to the IRS, if the person’s 2023 income was higher than predicted.
Jose Ibarra, who oversees ACA boaters at CentroMed, a community health center in San Antonio, said about a third of people who come to Help have an income below the poverty level and are in the coverage gap.
“It’s most heartbreaking when we hit the people in the bubble directly,” he said. “We train people to ask applicants if they think they can expect to take a few more hours of work because they are so close to the threshold. We want people to make the best honest projection for next year. do, and we take them at their word.”
Islara Sauto, navigation program director for the nonprofit Epilepsy Alliance Florida, said the government’s previous income verification system for people with income under the poverty level kept people from signing up, so many consumers put off seeking help. And the sailors stopped trying to persuade them to apply.
“We are subject to habit. We’re a Medicaid non-expansion state,” she said. “You fall under the income limit, and you’re not going to get a subsidy.”
But after learning about the easing of requirements from a KHN reporter, Souto said she would work with the navigators to reach consumers who have been denied in the past. “We’ll go back a few years and find consumers that we know were in the position and revisit them and maybe reach out and say, ‘Let’s try this,'” he said.