Q. I keep hearing about the “coverage gap” in states that are not expanding Medicaid. Can you explain what that means and who it affects?
Technically the law expands Medicaid to 133 percent of FPL (states can also opt to set a higher threshold), but the legislation includes an income calculation methodology that disregards the top five percentage points, so a household can have an income of up to 138 percent of FPL and still qualify for expanded Medicaid, since the 5 percent disregard brings their income down to 133 percent of FPL.
Originally, the law required states to expand Medicaid in order to continue to receive federal Medicaid funding. But very little of the total burden was placed on the states: The federal government paid the full cost of Medicaid expansion for the first three years (2014 through 2016), and then the states began to pay a small portion, ramping up to 10 percent by 2020 and remaining at that level going forward. The federal government will always pay at least 90 percent of the cost of covering the newly eligible population, assuming the ACA remains in place.
Expansion is optional, and some states continue to say no
But in 2012, the Supreme Court, while upholding the rest of the ACA, struck down the Medicaid expansion requirement, leaving it up to each state to decide whether or not to participate. As of 2018, 31 states plus the District of Columbia had expanded Medicaid.
The other 19 states have not yet expanded their coverage, although Virginia will expand Medicaid as of January 2019 and voters in Maine approved Medicaid expansion with a November 2017 ballot initiative. Medicaid expansion was supposed to take effect in Maine as of July 2018, but that process has been delayed by the governor’s opposition. The official count of expansion states has remained unchanged since mid-2016, when Louisiana expanded coverage. But it will grow once coverage is expanded in Maine and Virginia, and there are additional states where voters will decide on Medicaid expansion in the 2018 election.
Medicaid eligibility varies depending on where you live
In Washington, D.C. and the 31 states where Medicaid has been expanded, all legal residents with a household income up to 138 percent of FPL are eligible for Medicaid.
But in the states that have not expanded Medicaid, eligibility is still based on pre-ACA guidelines. In most cases, that means Medicaid is only available to people with disabilities, low-income children and pregnant women, and extremely low-income parents. (In Alabama, for example, Medicaid is available for parents with a household income of up to 13 percent of FPL. For a family of three, that’s $2,701 in annual income in 2018. If the family’s income exceeds that amount, the parents would not qualify for Medicaid).
And Medicaid is generally not available at all to childless adults in states not expanding Medicaid, regardless of how low their income is. (This chart has income limits for Medicaid in each state, and contact information for each state’s Medicaid Department is available here.)
The coverage gap: No realistic access to health insurance
The “coverage gap” exists because ACA premium subsidies are only available for people with a household income of at least 100 percent of FPL, up to 400 percent of FPL. The subsidies are not available below 100 percent of FPL, because when the ACA was written, Medicaid expansion was an integral part of the law: It was assumed that subsidies would not be needed below 100 percent of FPL, since Medicaid would be available instead.
So in states that are not expanding Medicaid, virtually all able-bodied childless adults with incomes below 100 percent of FPL, as well as a large number of parents with incomes below 100 percent of FPL, are not eligible for any financial assistance to help them afford health insurance. There are no exchange subsidies for them, and they don’t qualify for Medicaid unless they meet the stringent existing guidelines.
According to Kaiser Family Foundation data, there are about 2.2 million people in the coverage gap across 16 states (the KFF analysis does not include Maine and Virginia as states with a coverage gap, since both will expand Medicaid soon. And Wisconsin has not accepted federal funding to expand Medicaid under the ACA, but has structured coverage so there’s no Medicaid coverage gap).
Households with incomes below 100 percent of FPL generally cannot afford to pay full price for health insurance. In most cases, they will remain uninsured, simply because they have no other alternatives. Unfortunately, this disproportionately impacts minorities, particularly in the southern United States where almost all of the states have maintained their pre-ACA Medicaid eligibility guidelines.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.