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Six strategies for avoiding the Affordable Care Act’s coverage gap

Income too high for Medicaid but too low for marketplace subsidies? These strategies could mean the difference between coverage and no coverage.

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Reviewed by our health policy panel.

In eleven of the twelve states that have so far refused to enact the Affordable Care Act’s expansion of Medicaid eligibility (which the Supreme Court made optional for states in 2012), there’s good news and bad news for people who are seeking health insurance for 2022 and don’t earn a lot of income.

The good news is that COVID-19 relief legislation signed by President Biden in March of this year, the American Rescue Plan Act, vastly improved subsidies in the ACA private plan marketplace. Comprehensive coverage – a Silver plan with strong cost-sharing reductions –  is now free to many low-income Americans, and heavily subsidized for people who earn a bit more.

The bad news is that in states that have refused to enact the Medicaid expansion, the government still offers no help to people who report household incomes below the poverty line.

ACA’s coverage gap

The ACA’s creators intended for people in this income category to get Medicaid, but governors and legislators in the twelve “nonexpansion” states said no – even though the federal government foots 90% of the cost. More than 2 million low-income adults in these states are in the ACA’s coverage gap – eligible neither for Medicaid nor for help paying for coverage in the ACA private plan marketplace.

The remaining non-expansion states (excluding Wisconsin, which has no coverage gap,* and Missouri, where expansion is imminent) are as follows:

The minimum income to qualify for subsidized marketplace coverage in “nonexpansion” states is 100% of the federal poverty level (FPL). For enrollment in 2022, the cutoffs are as follows. (They are slightly lower for those still seeking coverage for the remainder of 2021.)

Persons in
100% FPL
(minimum to qualify for coverage)
1 $12,880
2 $17,420
3  $21,960
4  $26,500

A Silver plan with strong cost-sharing reduction is free to enrollees with incomes between 100% FPL and 150% FPL. (In 2022, that’s $19,230 for an individual, $39,750 for a family of four.) At 150-200% FPL, Silver coverage costs no more than 2% of income.

At incomes above 200% FPL, the percentage of income required for a benchmark Silver plan rises with income to a maximum of 8.5% of income.  But again, in non-expansion states, subsidies are not available to people in households with incomes below 100% FPL.

Stumbling blind into the coverage gap

The application for coverage on – the federal marketplace for health coverage used by all of the non-expansion states (and 24 other states) – does not highlight the minimum income required for coverage. As a result, many low-income applicants who might expect to get federal aid find themselves confronted with a choice of plans quoted at full, unsubsidized cost – an average of $452 per month per adult for benchmark Silver coverage, unaffordable for almost all low-income enrollees.

A 2015 change delivered a special enrollment period to people in 18 states whose income increased, making them eligible for subsidies.

Leaving the coverage gap? This SEP’s for you.

Very few low-income enrollees know about the minimum income requirement, or know that their state legislatures and governors have denied them the Medicaid coverage that the ACA’s creators intended for them.

Many who work uncertain hours, or are self-employed, or do seasonal work, may not recognize how many variables go into their estimate of annual household income, which determines the size of subsidy – or whether a subsidy is available at all.

For applicants with incomes near the federal poverty line, knowing the stakes – that good coverage is free just above the 100% FPL threshold, and unaffordable just below that threshold – can make the difference between coverage and no coverage. For anyone not on a fixed salary, a good-faith estimate of next year’s income allows for some wiggle room. Many applicants may miss including allowable income sources, or fail to take fluctuations in their income into account, or otherwise miss the opportunity to claim a qualifying income.

A budget resolution introduced last week by Sen. Bernie Sanders proposes to create a new federal program that would offer insurance to people in this “coverage gap.” But with Democrats holding narrow majorities in both houses of Congress, their ability to create such a program is at best uncertain. Even if they do, it likely won’t go into effect in 2022.

Open enrollment for 2022 in non-expansion states begins on November 1 and HHS has proposed an end date of January 15. For those still seeking coverage in 2021, an emergency special enrollment period open to all who lack coverage ends soon – on August 15. After that date, you need a qualifying “life change” to get coverage for the remainder of 2021.

Six tactics for avoiding the coverage gap

Here is a checklist of strategies that may help you achieve eligibility for subsidized ACA coverage.

1. Know the eligibility cutoff.  As noted above, to qualify for subsidized coverage, an applicant must estimate an annual income for the coming year that’s above 100% of the Federal Poverty Level ($12,880 for an individual, $17,420 for a couple, etc. in 2022. See the list above.) This point can’t be emphasized enough, according to Shelli Quenga, Director of Programs at the Palmetto Project, a nonprofit health insurance brokerage in South Carolina.  “You need to know what amount you’re shooting for,” Quenga says. “You need to know where that line is. does not tell you.”

Jennifer Chumbley Hogue, CEO of KG Health Insurance in Murphy Texas, is equally emphatic on this point. “If somebody calls me and they’re on the bubble, I tell them: ‘the state of Texas did not expand Medicaid. That means, if you cannot project $13,000 of income, you do not get any help. So let me ask you: Do you think you’re going to make $13,000 in 2021?’”

2. Use gross income, not net.  Many applicants don’t recognize these terms, which denote income before and after taxes. Gross income, which the application requires, is basically the largest number on the pay stub or tax form.

3. Consider earning more income if necessary.  When clients’ estimates fall short, Quenga will ask them what they can do to hit the target. “I’ll say, ‘Can you think of something you can do that’s going to earn you another $150 a month? Bake cakes? Clean houses? Mow grass? Do some babysitting? Provide some care to a nearby elderly person?’” Extra income of this sort can be entered on the application as self-employment, with wage income entered elsewhere.

4. Recognize uncertainty. The marketplace application for coverage provides a box to check “if you think your income will be difficult to predict.” That’s the case for many people – especially at low wages. If it’s hard to forecast how many hours you’ll work per week, how much you’ll make per hour (tips or overtime may make this variable), or how much work you’ll get if you’re self-employed, keep the eligibility threshold in mind as you estimate these factors.

5. Count everyone’s income. Household income includes income earned by everyone included in your tax return, including those who are not seeking coverage. Hogue cites the case of a woman in her early 60s whose husband is on Medicare and Social Security. “If your spouse is getting Social Security income, don’t forget to include it,” she says. That also holds for pensions, retirement accounts, and alimony (if awarded before 2019).

6. Consider how to count. The application allows you to estimate income on an hourly, weekly, twice-monthly, monthly or annual basis – and, if your income changes during the year, it invites you to estimate a different income for next year than for the current year. This flexibility allows you to take account of factors described below.

You can view the application on the site here. The income questions are on page 3. Note that the form recognizes the uncertainty involved in forecasting future income.

Considerations for individuals earning an hourly wage

If your income estimate is based on an hourly wage, consider the following questions:

  • Is the amount you and other workers in your household earned in the current month (or on the pay stubs you’re looking at) representative of what you are likely to earn throughout the year?
  • If you or a household member are a seasonal worker, have you fully accounted for that person’s likely full-year income?
  • Do you work more hours or earn more tips during the holiday season (or at other times of the year?) Have you fully accounted for that? Does anyone in the household take on a second job or temp job during the holiday season (or other season)? Have you included that income?
  • Do you sometimes get paid overtime?  Do the pay stubs you’re using to estimate income reflect that?
  • Do you have reason to anticipate a raise in the coming year? (For example, Florida will raise the state minimum wage to $10 per hour in September 2021, and to $11 per hour in September 2022).  If so, estimate your income on the basis of future pay rates.

Many who report income on an hourly wage basis work uneven and uncertain schedules. If a single person is unsure how many hours per week they’re likely to work, “I often tell them to put down 30 hours,” says Hogue – an amount that generally will qualify a solo applicant for coverage at an hourly wage of $8.50 or higher.

Strategies for the self-employed

Many of the low-income clients served by the Palmetto Project are self-employed, Quenga says. “Charleston is a huge destination wedding site. We have a lot of wedding planners, DJs, photographers, videographers.” Estimating next-year income is especially difficult if you’re self-employed, Quenga notes.

And for the self-employed, “Your projected income is your best guess of what you hope to earn.”  She notes that the self-employed are generally oriented toward minimizing their income for tax purposes. For the health insurance application, they have to reverse that mindset.

Considerations when estimating your income for 2022

When you apply for coverage for 2022 (or the remainder of 2021), you may have your 2020 tax return to refer to, as well as pay stubs for at least 10 months’ income in 2021.  If the totals for 2020 or 2021 are below the eligibility cutoff, that’s not necessarily going to be true in the year following. When estimating income in this case, consider these questions:

Were your hours cut because of the pandemic? Regardless, can you realistically expect to work more hours in 2022 (or the remainder of 2021)? These questions apply to everyone in your household – that is, all who file taxes together and earn any income. If so, you can estimate a higher income for the coming year in good faith.

Should you check off allowable tax deductions?  The health insurance application asks about tax deductions that, if taken, reduce your gross income. The application points out that reporting these deductions “could make the cost of health coverage a little lower.” That’s true – if your income is above 150% FPL (Coverage is free up to that threshold.)

But if your income hovers near 100% FPL, these deductions could put your income below that threshold and disqualify you from subsidized coverage.  The deductions listed on the application are those taken for interest paid on student loans,  tuition and fees, retirement plan contributions, and alimony paid. If your income is near the cutoff, “do not check off a deduction that will put you under 100% FPL,” says Hogue.

If you were unemployed in any part of 2021 The American Rescue Plan provides free marketplace coverage in 2021 for any applicant who received any unemployment insurance income at any point in the year. After the emergency special enrollment period (SEP) ends on August 15, you will need to apply for a personal SEP to access this benefit – and do so within 60 days of having lost employer-sponsored coverage or experienced another qualifying life event. This particular benefit is not available in 2022.

What if your income estimate turns out to be higher than what you actually earn?

Low-income applicants may worry that they will owe large sums of money if their income estimate proves inaccurate. While those who underestimate their income do have to pay back a portion of their subsidy at tax time, that is not the case for those who overestimate income (in fact, if over-estimators pay any premium at all, they will get a partial refund).

If income for the year in question ultimately proves to fall below the 100% FPL threshold, there is no clawback of subsidies granted, unless the applicant’s income estimate is made with “intentional or reckless disregard for the facts.”

Your income estimate has to be good faith. You can’t make stuff up. But within the range of the realistically probable, you have leeway. “Suppose you mow grass for a living, and there was a drought,” Quenga posits. “You can’t control that. There is no penalty if you don’t end up hitting your target.”

Who’s checking your income anyway?

The ACA exchanges do check applicants’ income estimates against data sources such as employer records. In 2019, the Trump administration implemented a rule requiring the ACA exchanges to demand income documentation from applicants who claimed an income above 100% FPL if “trusted data sources” indicated an income below the threshold. If the enrollee failed to provide the documentation, the federal subsidy would be cut off, and the enrollee would likely lose coverage due to the unaffordability of the unsubsidized premiums.

But that rule was challenged in court, and in March 2021 a federal court ordered the Department of Health and Human Services (HHS) to rescind it. HHS responded promptly, rescinding the documentation requirement this past May. HHS did warn that its computer systems could not be retooled instantly, so that for some time, a request for income documentation would be sent in this situation. But HHS added that it would send a follow-up communication to the enrollee, saying that documentation was not required.

The ACA’s creators did not intend to shut poor Americans out of its benefits. But governors and state legislatures that refuse to enact the ACA Medicaid expansion do willfully perpetuate the coverage gap. Low-income people in non-expansion states should use every tool available to produce a good faith income estimate that will give them access to quality government-subsidized health insurance.

* * *

* States that enact the ACA Medicaid expansion offer Medicaid to all legally present adults with household incomes up to 138% FPL. Wisconsin, uniquely, offers Medicaid to adults with incomes up to 100% FPL – which is also the bottom threshold for subsidy eligibility in the private plan marketplace. No one, therefore, is excluded from aid on the basis of income.

Andrew Sprung is a freelance writer who blogs about politics and healthcare policy at xpostfactoid. His articles about the Affordable Care Act have appeared in publications including The American Prospect, Health Affairs, The Atlantic, and The New Republic. He is the winner of the National Institute of Health Care Management’s 2016 Digital Media Award. He holds a Ph.D. in English literature from the University of Rochester.

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