Is it possible to escape the coverage gap?

Why being stranded in the coverage gap can be a death sentence – and a look at 'escape routes' for the millions who are trapped

  • By
  • healthinsurance.org contributor
  • August 15, 2016

Since the moment in 2012 that the Supreme Court ruled that states had the choice of opting out of the Obamacare’s Medicaid expansion, there has been a constant outcry from expansion advocates who predicted disastrous consequences for those caught in the so-called coverage gap.

The coverage gap refers to the segment of the adult population living in poverty but with incomes that make them ineligible for Medicaid because their state didn’t expand Medicaid. The double whammy is that these folks have incomes too low for them to receive subsidized comprehensive coverage in Obamacare’s health insurance marketplaces.

What does it mean to be in the coverage gap?

For individuals, being caught in the coverage gap can be a veritable death sentence. If Idaho had expanded Medicaid, Jenny Steinke would have had access to an asthma specialist and treatment to maintain her health. Instead, she was one of nearly three million people in 18 states who are in the coverage gap because their states haven’t expanded Medicaid.

Without Medicaid coverage, Steinke had to make do with short-acting inhalers she got from friends and from a community clinic. But they weren’t enough, and Steinke was just 36 when she died of an asthma attack in September 2015.

She’s an example of how the patchwork implementation of Medicaid expansion across the country means that poor residents in communities just minutes from each other can have strikingly different access to healthcare.

It’s a short drive from Clairfield, Tennessee to Middlesboro, Kentucky. Yet for impoverished residents in the two towns, access to care is worlds apart. Middlesboro residents with incomes up to 138 percent of the poverty level are eligible for Medicaid. They’re able to obtain the medical care they need – check-ups, preventive exams, prescription drugs, disease management, hospitalization – because Kentucky accepted federal funding to expand Medicaid (the future of Kentucky’s Medicaid expansion is uncertain, as Governor Bevin has requested a waiver that would place additional restrictions on enrollment, and has toyed with the idea of repealing Medicaid expansion if CMS does not approve the waiver).

But Tennessee has not expanded Medicaid. As a result, just 20 miles down the road from Middlesboro, impoverished residents in Clairfield mostly do without the medications and treatment they need. (If Kentucky decides to roll back its Medicaid expansion, Middlesboro residents would be in the same dire straits as Clairfield residents).

In states that haven’t expanded Medicaid, the coverage gap prevents Obamacare from working as intended – and the burden is not felt just by impoverished, uninsured residents. It’s shared by hospitals, businesses, state budgets, and residents who have private insurance.

Realistic options for those in the ‘gap’ are limited

If your income and your state’s refusal to expand Medicaid have landed you in the coverage gap, you should be legitimately concerned about your ability to pay for medical care. Your options for receiving coverage and care in your state are limited.

For healthy individuals in the coverage gap, one of the most obvious options is short-term health insurance. If you’re eligible, a short-term plan can be much less expensive than an ACA-compliant plan, and for the duration of the plan, it provides coverage that’s similar to what was available in the individual market prior to 2014.

Consider a 40-year-old man living in Cheyenne, Wyoming and earning $10,000 a year. Wyoming hasn’t expanded Medicaid yet, and the cheapest plan he can get on HealthCare.gov for 2016 has a $6,850 deductible and costs $334 a month. Like all ACA-compliant plans, the policy has no dollar limit on essential health benefits.

But he could get a short-term plan with a $7,500 deductible ($10,000 maximum out-of-pocket) and a $2 million benefit maximum for less than $76 a month. Or a plan with a $1,000 deductible for less than $124 a month. Virtually all of the short-term plans available to him would be less expensive than paying full price for the cheapest plan on Healthcare.gov.

Short-term caveats

Granted, there are pros and cons to short-term insurance. The policies are medically underwritten, and they don’t cover pre-existing conditions – so they wouldn’t be helpful for people like Steinke. Temporary health coverage is also limited in duration and scope, and out-of-pocket limits can be higher than what’s allowed under the ACA – and policies have benefit maximums.

The ACA does include a penalty for being without minimum essential coverage, and a short-term plan is not considered minimum essential coverage under the ACA. However, people in the coverage gap are exempt from the penalty.

Other ‘escapes’

If you’re in the coverage gap, Medicaid isn’t available, and ACA-compliant coverage can only be purchased at full price – an unrealistic option given that everyone in the coverage gap has an income below the poverty level. There are a few possible solutions, not all of which are adequate or realistic:

For coverage

  • You could move to a state that has expanded Medicaid, but that may be easier said than done for people with low-wage jobs, few assets, and few prospects elsewhere.
  • You could increase your income to at least the federal poverty level, in order to obtain subsidized health coverage (if that happens mid-year, you’ll qualify for a special enrollment period during which you can enroll in a subsidized plan). Again, this is easier said than done depending on one’s circumstances. Navigators have been invaluable in helping poor people tally up income from varied sources in order to get their total income up to the poverty level, where subsidies become available.
  • You can purchase a non-ACA compliant plan, which includes things like accident supplements, critical illness coverage, discount plans, and the aforementioned short-term insurance. Although in most cases – with the exception of short-term insurance – these were never intended to be stand-alone coverage.

For care

  • Free clinics and federally funded community health centers provide a wide range of preventive and primary care services for people in the coverage gap. More than a million low-income, uninsured Americans rely on community health centers that offer care on a sliding fee scale. And the ACA provided funding to increase the number of community health centers across the country. For many in the coverage gap, a community health center is their only realistic access to care, although treatment is limited to primary care.
  • You can rely on EMTALA for emergency situations. Emergency departments cannot turn patients away due to inability to pay. However, emergency departments are only required to stabilize patients; there’s no provision for ongoing treatment under EMTALA.

The real solution? Medicaid expansion in every state

The best possible solution – with the broadest possible reach – is Medicaid expansion in every state, and realistic, affordable access to care for everyone, regardless of how much money they have.

The country is slowly heading in that direction. Indiana, Pennsylvania, New Hampshire, Alaska, Montana, and Louisiana have all expanded Medicaid since mid-2014, and lawmakers in several other states will once again consider Medicaid expansion when legislative sessions begin again in 2017. The number of people in the coverage gap will likely shrink over time, preventing needless deaths like Steinke’s.

But that’s assuming politicians aren’t successful in their efforts to undo Medicaid expansion that’s already taken effect.

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