Meet the five million Americans caught in the ACA coverage gap

Residents struggle without Medicaid benefits, insurance subsidies

The Wall Street Journal's Christopher Weaver recently profiled a handful of Americans that have found themselves in the Affordable Care Act's (ACA) coverage gap—an administrative "twilight zone" in which they do not qualify for Medicaid or insurance subsidies.

What is the ACA coverage gap?

As it was originally written, the ACA would expand coverage to millions of Americans in 2014 through its individual mandate provision and by making affordable coverage options available. Specifically, the federal government would offer insurance subsidies to residents making between 100% and 400% of the federal poverty level (FPL) and pay to expand Medicaid eligibility to all residents making less than 138% FPL.

However, the Supreme Court in 2012 made Medicaid expansion optional, and many states have since rejected the federal funds, which cover the entire cost of the expansion for three years and then at least 90% thereafter. As a result, there are no new affordable coverage options for residents making below 100% FPL in states that opt not to expand Medicaid.

Which states will have the biggest coverage gaps next year?

Case study: The coverage gap in Alabama

According to a recent report from the Kaiser Family Foundation, many of the affected individuals are clustered in the South, residing in states like Alabama that have historically placed stringent income limits on who can qualify for Medicaid.

Alabama resident Ernest Maiden, a 57-year-old uninsured diabetic, recently learned that he falls into the ACA's coverage gap because he earns about $200-per-week as a hair stylist. If Maiden earned just $1,300 more per year, he would qualify for about $470 in monthly subsidies to help pay for insurance premiums, as well as additional subsidies that would reduce his deductible for some plans to as little as $100 a year.

Despite expansion, some states will trim Medicaid rolls next year

Instead, the cheapest "bronze"-level plan available will cost him $437 a month, and the plan—offered by Blue Cross Blue Shield of Alabama—has a $6,350 annual deductible. That means Maiden would have to spend about $11,600—more than his entire income—before his insurance would begin pitching in for medical treatment.

"It's a Catch-22," Maiden says, adding that without financial assistance, he must "choose between paying bills and buying medicine." Earning more would be difficult, given low demand for styling services in Birmingham, he told Weaver.

At the same time, higher-wage families nearby in some instances pay less for insurance coverage. For example, Cal and Heather Morris—whose combined annual income is about $35,000—qualify for a family subsidy of up to $439 a month. They now pay about $83 per month for a midlevel "silver" plan listed at $522.43 a month, while their three children are covered under the state's Medicaid program.

For hospitals, the coverage gap is a major problem

Hospitals, including University of Alabama at Birmingham (UAB) Health System, see the coverage gap as a big problem for their bottom line. "All we see is our revenues going down," says UAB CEO Will Ferniany. Like other hospitals in the state, UAB faces reimbursement cuts for treating uninsured patients, but it is not seeing an influx of newly insured patients through Medicaid expansion.

Hospitals in states that nixed Medicaid expansion could get 'bailouts'

Federal census data that show about two-thirds of nearly 30,000 uninsured people living in Jefferson County, which includes Birmingham, would qualify for Medicaid if the program were expanded (Weaver, Wall Street Journal, 2/10).

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