More than 鈥 half of them in Florida and Texas 鈥 are uninsured because they are stuck in a coverage gap: They earn too much to qualify for Medicaid, but because of a quirk of the Affordable Care Act, they earn too little to qualify for a subsidized ACA marketplace plan.
The problem affects people in 11 states that haven鈥檛 expanded Medicaid.
Some of these consumers, however, likely could get financial help to purchase a marketplace health plan. All they have to do is estimate in good faith that in 2023 they will earn at least as much as the federal poverty level, or . That is the minimum income required to qualify for subsidies that help pay the premiums for marketplace plans.
If their 2023 income turns out to fall short of that estimate, they won鈥檛 face a financial penalty or have to pay back money to the government as long as the prediction was not made 鈥渨ith an intentional or reckless disregard for the facts,鈥 said Eric Smith, a spokesperson for the IRS.
No one KHN interviewed is advising people stuck in this 鈥渃overage gap鈥 to lie on their marketplace applications (which is a crime). But determining whether an income estimate is optimistic or fraudulent is a gray area. Forecasting income exactly is often impossible, particularly for people working part time or running small businesses.
鈥淧eople need to be honest in predicting their next year鈥檚 income, but what does it mean to be honest when you have no idea what your income is going to be?鈥 said Urban Institute senior fellow , who worked at the Treasury Department until 2017 and helped implement the health law.
Open enrollment in the federal marketplace began this month and .
Many people don鈥檛 realize that whether they get marketplace subsidies depends on their forecast of next year鈥檚 income, not the current or previous year鈥檚 income, said insurance agents and ACA navigators, who help consumers enroll in marketplace plans. In contrast, eligibility for Medicaid and most other government assistance programs is based on current income, and some states refuse to enroll any adults without children even if they have extremely low incomes.
Several ACA navigators and insurance agents interviewed by KHN mistakenly thought clients would have to pay money back to the government if they estimated their incomes would exceed the poverty level but then didn鈥檛. They also believed the government would ask applicants for documentation that verifies their income if their estimate didn鈥檛 match up with other government data.
But that assumption is also untrue.
鈥淭he marketplace no longer requires additional income documentation if available data from previous years shows income below 100% FPL but the attestation for the current year is above 100% FPL,鈥 said , deputy administrator 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 that their income would be above the poverty level and federal data showed current earnings below. But in March 2021, that provision. And falling short of the poverty level doesn鈥檛 affect an individual鈥檚 eligibility to apply for subsidies in future years, Montz said.
The Affordable Care Act required states to use billions in federal dollars to expand eligibility for Medicaid, the federal-state health program for low-income people, to everyone with incomes up to 138% of the poverty level, currently $18,755 for an individual. But in 2012, the Supreme Court ruled that the expansion was optional for 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 widen eligibility starting in July 2023. Wisconsin also did not expand Medicaid, but it covers adults earning up to 100% of the poverty level.
Sarah Christian, navigator coordinator with the South Carolina Primary Health Care Association, said she was unaware that there was no penalty for people who earn less than the poverty level and overestimate their income to qualify for subsidies. She said her organization had advised consumers based on the belief that 鈥渢he government will flag鈥 predictions that exceed current income and ask for proof.
, 58, of Longwood, Florida, thought she would be stuck in the Medicaid coverage gap for a 10th consecutive year in 2023 because her family鈥檚 income this year was $16,000 鈥 well short of the $27,750 that a family of four must earn to get marketplace subsidies. But after recently being offered a part-time job as a grant writer, she believes that her 2023 earnings will push the family鈥檚 income over the poverty level. As a result, she plans to sign up for coverage.
For the first time in a decade, Holmes said, she felt hopeful that health insurance might be within her reach. 鈥淓ven if it was for one year,鈥 she said, 鈥渢o be able to get all the tests, what a weight it would be off my shoulders.鈥
Holmes鈥 children are covered by Medicaid, and her husband has coverage through the Department of Veterans Affairs.
Even though she has met with ACA navigators, Holmes said, she did not know the IRS couldn鈥檛 require her to pay back money if her family鈥檚 income ultimately fell short of the poverty level. Without health coverage, she worries she won鈥檛 be able to stay healthy to care for her son who has a disability.
Kelly Fristoe, president of the National Association of Health Underwriters and an insurance agent in Wichita Falls, Texas, said he asks clients who aren鈥檛 eligible for Medicaid but whose incomes are less than the poverty level to think about ways they can make more money. 鈥淲hen I hear people say they only make $10,000 or $12,000 a year, I say, 鈥楥鈥檓on, man, is there anything else you can do to make money, such as mowing grass or cleaning out a garage, just to get you to the $13,500 mark?鈥欌 he said. 鈥溾楢nd if you do that, you can get your health insurance at no cost.鈥欌
That鈥檚 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 he helps enroll people who are confident they will earn enough to put them over the top of the federal poverty level. But 鈥渟ome say, no, there鈥檚 no way they can do that, and I have to say, 鈥楾here鈥檚 no way I can help you,鈥欌 he said.
, vice president of 麻豆女优, said marketplace applicants often expect to make more money the following year and can be reasonably optimistic.
She noted that the earnings of low-income people often fluctuate, partly because the number of hours they work and their pay can change during the year. Consumers may want to give a good-faith estimate for next year that is higher than what they earned in the current year.
鈥淗ow do you distinguish fraud from optimism?鈥 she said.
Although people with incomes below the poverty level don鈥檛 have to pay anything back for overestimating the following year鈥檚 income and receiving ACA marketplace subsidies, people with higher incomes are expected to pay money back to the government if they underestimate their earnings and get a larger subsidy than they are entitled to 鈥 . For example, an unmarried person whose income is 100% to 200% of the poverty level would pay back a maximum of $350 if the person鈥檚 2023 income was higher than predicted, according to the IRS.
Jos茅 Ibarra, who oversees ACA navigators at CentroMed, a community health center in San Antonio, said that about a third of the people coming in for help have incomes below the poverty level and are in the coverage gap.
鈥淚t鈥檚 the most heartbreaking situation when we run into people right on the bubble,鈥 he said. 鈥淲e coach people to ask applicants if they think they can expect to pick up a few more hours of work because they are so close to the threshold. We want people to make the best honest projection for the next year, and we take them at their word.鈥
Islara Souto, navigation program director for the nonprofit Epilepsy Alliance Florida, said the government鈥檚 past income verification system for people with incomes under the poverty level deterred people from signing up, so many consumers stopped seeking help and navigators stopped trying to persuade them to apply.
鈥淲e鈥檙e so under the habit. We鈥檙e a Medicaid non-expansion state,鈥 she said. 鈥淵ou fall under the income limit, and you鈥檙e not going to get subsidies.鈥
But after learning from a KHN reporter about the easing of requirements, Souto said she would work with navigators to reach out to consumers who had been denied in the past. 鈥淲e鈥檒l go back a few years and find consumers we know had that situation and revisit them and maybe reach out and say, 鈥楲et鈥檚 try this,鈥欌 she said.
