Federal approval last month of Pennsylvania’s new plan to expand Medicaid coverage under the Affordable Care Act (ACA) on January 1, 2015 has brought urgency to this obscure but important issue. States that decide to expand Medicaid where the date of expansion occurs after the original January 1, 2014 ACA Medicaid and health marketplace start date face a special problem regarding newly eligible adults with incomes between 100% and 138% of the poverty level.

This is because people in this narrow income category in states that did not expand Medicaid on January 1, 2014 could enroll in private health plans with significant tax credit subsidies starting on January 1, 2014 through the Affordable Care Act’s state and federal health marketplaces. Why? The ACA provides tax credits to purchase health insurance plans through the marketplaces for people with incomes between 100% and 400% of the poverty level. But these tax credits are not available to people who have access to other coverage that meets minimum standards in the ACA, including Medicaid or employer based coverage that’s considered affordable.

In contrast, in states that did expand Medicaid under the ACA on or before January 1, 2014 this problem does not exist since under the ACA newly eligible adults with incomes under 138% of the poverty level are eligible to enroll in Medicaid and thus not eligible for tax credits to subsidize purchase of health plans through the state or federal health marketplaces.

Therefore, in states like Pennsylvania that did not initially expand Medicaid under the ACA, a significant number of people with incomes between 100% and 138% of the poverty level are currently enrolled through the state or federal health marketplaces in private health plans with substantial tax credits to reduce the cost of their coverage. Once a state decides to expand Medicaid this group of people must shift their coverage to their state’s Medicaid program since Medicaid coverage is now available to this group. This problem was never contemplated under the ACA since the law did not anticipate the United States Supreme Court allowing states the option of refusing to expand Medicaid coverage.

As states such as Pennsylvania, Utah and others move toward actual or potential Medicaid expansions here are the key issues for this group of marketplace-insured newly Medicaid eligible adults:

1. No immediate loss of coverage. In general, the ACA does not allow individuals between 100% and 138% of the poverty level to continue to receive tax credits to purchase private health plans through the federal or state health marketplaces if they are eligible to enroll in their state’s Medicaid program. Therefore, newly eligible adults in this income category must transfer into Medicaid if they want to meet the mandate for health coverage. However, the law is not as cut and dried as it appears. Recognizing the ACA’s goal of continuity of health care coverage, newly enacted federal rules [45 CFR §155.335(a)(2)(ii), effective Oct. 6, 2014] allow some flexibility for individuals receiving tax subsidized health plans through the state or federal health marketplaces to continue that coverage as state Medicaid expansions take place. Specifically, under this guidance from the Centers for Medicare and Medicaid Services (CMS), adults receiving tax credits in the marketplaces (including adults with incomes between 100% and 138% poverty level) who do not contact the state or federal marketplace will simply continue their current health plan coverage and tax credits based on updated income information available to the marketplace from the IRS (updated IRS income information is available to the marketplace for almost all enrollees). Only people with much higher projected incomes (> 500% of poverty level) are required to contact the marketplace to remain enrolled in subsidized plans. In addition, CMS does state that any individual who does contact the marketplace during the open enrollment period will be evaluated for Medicaid eligibility.
2. We know the people to contact. The federal Department of Health and Human Services has indicated it will provide a list to states of the names of newly eligible adults with incomes between 100% and 138% of the poverty level who are enrolled in health plans through the federal health marketplace (the route of enrollment in most states that have delayed Medicaid expansion) in states that make the decision to expand Medicaid.
3. No state outreach requirement. There is no requirement in federal law that a state directly contact these nonelderly adults in this income category who have enrolled through the federal marketplace to notify them of their new eligibility for Medicaid.
4.  Michigan experience. After the state expanded Medicaid this year on April 1, the state sent letters informing potentially eligible adults to people who made an application through the marketplace. Expansion took place early enough in 2014 that Michigan was able to train navigators to tell marketplace applicants that they would have to cancel their marketplace plans on April 1 when they became eligible for Medicaid.
5.  New Hampshire experience. After state policymakers expanded Medicaid this year on August 15, the federal government and New Hampshire’s Department of Health and Human Services worked together to draft a letter and accompanying guidance that notified people in the 100% – 138% federal poverty level marketplace group of the need to switch to Medicaid. It was made clear to people that they could either apply immediately to Medicaid or – if they didn’t apply to Medicaid – they would keep their marketplace tax-subsidized coverage through the end of 2014 without any penalty. However, the state indicated there would be potential tax complications for people now eligible for Medicaid who stayed in marketplace plans in 2015.

Federal/State marketplace solution?

Overall this should be a fairly simple problem to fix. A list of newly eligible adults with incomes between 100% and 138% of the poverty level who enrolled in marketplace health plans exists and contacting them to get them to switch into Medicaid would seem straightforward. After all, if a newly eligible adult with income between 100% and 138% poverty level who did not enroll in a marketplace plan in 2014 contacts the marketplace they will be evaluated for Medicaid eligibility in a state that has expanded Medicaid coverage. How hard can it be for the federal or state marketplace to revaluate coverage options for people with existing income, family size and contact information as they were already enrolled in a marketplace plan? More than just the state or federal government sending a letter, this contact could inform people that they were identified as being likely eligible for their state’s Medicaid program and letting them know that their eligibility was being actively considered. Going forward CMS should consider this option at the marketplace level in states that expand Medicaid on or after January 1, 2015.

State outreach?

States expanding Medicaid may not see it as their responsibility to contact this group and may ask the federal government to do this outreach directly – a task that so far the federal government has not indicated it has the ability to do. Even though states do not have to pay any of the cost for these new Medicaid enrollees through 2016 and a minimal cost thereafter, states may feel that they do not want to do additional outreach to bring people into their Medicaid programs who have been getting coverage through the health care marketplaces.

Let’s fix this. Despite these jurisdictional and political barriers it is necessary that outreach and enrollment of this category of newly eligible adults take place to ensure no one is left out of health coverage because of confusion around delayed state Medicaid expansions. New Hampshire and Michigan have some early experience at working together with the federal government to ensure no low-income people lose health coverage simply because of state decisions to expand Medicaid. These cooperative, good faith efforts should serve as a model as other states move forward to expand coverage.