Medi-Cal and the Governor’s Proposed 2015-16 Budget: Health Care Reform Boosts Enrollment and Federal Funding

January 23, 2015

The Governor’s proposed 2015-16 budget reflects the continued implementation of the federal Patient Protection and Affordable Care Act (ACA) — also known as health care reform — in California. In particular, state budget documents highlight the impact of ACA-related changes affecting Medi-Cal, the state’s Medicaid program and a key source of health care coverage for millions of low-income Californians. The most notable changes include:

  • The expansion of Medi-Cal health care services — which took effect on January 1, 2014 — to newly eligible parents and childless adults who were previously excluded from the program and whose incomes are at or below 138 percent of the federal poverty line (equal to $16,243 for an individual in 2015).
  • Increased enrollment of low-income Californians who were already eligible for Medi-Cal prior to implementation of the ACA and who have since signed up due to new outreach efforts, simpler eligibility and enrollment rules, and other factors associated with the implementation of health care reform.

This post draws on the most recent state estimates in order to highlight five key facts about Medi-Cal enrollment and funding as policymakers prepare to debate state budget priorities for the 2015-16 fiscal year, which begins on July 1.

1) Medi-Cal enrollment has increased by 4 million over the past two years, primarily due to implementation of federal health care reform and the phase-out of the Healthy Families Program.

As shown in the chart below, Medi-Cal enrollment is up by slightly more than half — from just under 8 million in 2012-13 to nearly 12 million in 2014-15, the fiscal year that began this past July. Two major policy changes contributed to this substantial increase. The first is California’s decision to fully implement the ACA, including expanding Medi-Cal coverage to nonelderly adults who previously were ineligible. About 2 million newly eligible Californians are expected to be enrolled in Medi-Cal as of June 2015 due to the program expansion. An additional 1.1 million Californians who were already eligible for Medi-Cal prior to health care reform — but who had not previously signed up — are expected to be enrolled in the program as of this coming June.

A second — and often overlooked — factor that contributed to the recent jump in Medi-Cal enrollment is state policymakers’ decision, back in 2012, to eliminate the Healthy Families Program (HFP). By November 2013, California had shifted, to Medi-Cal, hundreds of thousands of low- and moderate-income children who previously received health, vision, and dental care through the HFP. As a result of this change, more than 900,000 children who otherwise would have been enrolled in the HFP are instead receiving services through Medi-Cal.

2) The number of Californians enrolling in Medi-Cal as a result of federal health care reform is much larger than the state initially anticipated.

One year ago, the Brown Administration projected that about 800,000 Californians who became newly eligible under the Medi-Cal expansion would be enrolled in the program as of June 2015. While this seemed a large number at the time, it turns out that this projection was actually well below the mark. As noted above, the Administration now expects 2 million newly eligible Californians to be enrolled in Medi-Cal as of June 2015 – more than twice the enrollment gain that was projected a year ago.

The Administration also has doubled its estimate — from 552,000 to 1.1 million — of the number of already eligible Californians who will be enrolled in Medi-Cal as of June 2015 due to federal health care reform. In short, at least in terms of enrollment, ACA implementation in California has been more successful than advocates and state policymakers ever could have imagined a year ago.

3) Medi-Cal enrollment growth is stabilizing following two consecutive years of double-digit increases.

Medi-Cal enrollment is projected to rise by just 2 percent — to 12.2 million — between 2014-15 and 2015-16. In contrast, enrollment increased by nearly 20 percent from 2012-13 to 2013-14 and by 26 percent from 2013-14 to 2014-15, mainly due to the effects of health care reform and the elimination of the HFP.
Health---Medi-Cal---Caseload;-SFY-Caseload-Since-12-13-CHART

4) The federal government will provide an estimated $17 billion in 2015-16 to support health care services for Californians who enroll in Medi-Cal due to federal health care reform.

California is projected to receive $17.1 billion in federal Medicaid funds in 2015-16 — up from an estimated $15.1 billion in 2014-15 — to provide services to Californians enrolled in Medi-Cal as a result of the changes associated with health care reform. These federal dollars will flow to doctors, clinics, and other health care providers in communities throughout the state, boosting local economies and supporting vital health care services for millions of low-income Californians. Specifically, in 2015-16 the federal government is projected to provide:

  • $14.3 billion to support services for Californians who are newly eligible for Medi-Cal under the program expansion. The federal government is paying the full cost for this group through 2016, phasing down to a still-high 90 percent of the cost by 2020.
  • $1.2 billion to support services for Californians who sign up for Medi-Cal through a new “Express Lane” enrollment pathway. California adopted a new process to reach out to certain Californians and expedite their enrollment in Medi-Cal based on information that’s already available to the state. This process primarily targets adults and children who receive CalFresh food assistance, but who are not yet enrolled in Medi-Cal. The federal government is paying nearly all of the cost for these “Express Lane” enrollees, who largely consist of low-income adults who are newly eligible for Medi-Cal.
  • $1.1 billion to support services for Californians who were already eligible for Medi-Cal prior to implementation of health care reform and who have since enrolled due to simpler program rules and other factors. The federal government is expected to pay slightly more than half of the cost for this group.
  • $0.6 billion to support services for Californians who sign up for Medi-Cal through a new hospital-based enrollment option. Hospitals may now enroll Californians in Medi-Cal for up to two months based on preliminary information provided by patients (a status known as “presumptive eligibility”). Individuals must later submit an application and be found eligible in order to extend this temporary coverage. The federal government is paying most of the cost for these enrollees, who largely consist of low-income adults who are newly eligible for Medi-Cal.

5) The state’s “net cost” for Californians who enroll in Medi-Cal due to federal health care reform is substantially smaller than the “sticker price” highlighted by the Governor.

In 2015-16, the state is projected to spend $1.1 billion on services for Californians who enroll in Medi-Cal due to implementation of federal health care reform. The Governor highlights the fact that more than $900 million of this $1.1 billion will support services for Medi-Cal beneficiaries who were already eligible for Medi-Cal prior to health care reform and who are expected to be enrolled in 2015-16 due to simpler program rules and other factors. (This is the group for which the state and federal government split the cost of services roughly 50/50.)

Clearly, this $1.1 billion state investment pales in comparison with the more than $17 billion the federal government is expected to provide for ACA-related enrollment in 2015-16. But the state’s actual — or “net” — cost associated with new Medi-Cal enrollees will be even lower than this $1.1 billion “sticker price” suggests — possibly as low as $0. This is because state policymakers adopted two major policy changes in 2013 designed to reduce — or “offset” — state General Fund spending with alternative funding sources. In essence, these General Fund “offsets” eliminate most, if not all, of the state’s cost for ACA-related enrollment in Medi-Cal. Specifically:

  • State policymakers redirected — from the counties to the state — a substantial share of the state dollars that counties have historically used to provide health care to uninsured, low-income residents. This fund shift is projected to total nearly $700 million in 2015-16, with these dollars used to reduce state General Fund spending. After taking this fund shift into account, the state’s projected cost for ACA-related Medi-Cal enrollment in 2015-16 “nets out” to about $400 million ($1.1 billion minus $700 million).
  • State policymakers also established a tax on Medi-Cal managed care organizations (MCOs), with a portion of the revenues used to offset state General Fund spending. As Medi-Cal enrollment has increased under health care reform, so have MCO tax revenues, which in turn boosts the benefit to the state’s General Fund. How much of this benefit is attributable to higher Medi-Cal enrollment under health care reform? Unfortunately, state budget documents don’t provide an answer. However, a review of other state data suggests that this General Fund benefit will likely exceed $400 million in 2015-16. An offset of this size would further reduce the state’s net cost for ACA-related Medi-Cal enrollment to $0 in 2015-16, after taking into account the $700 million state fund shift from counties described above.

Beyond ACA Implementation: What Issues Could Be on State Policymakers’ Agenda in 2015?

California’s success in implementing federal health care reform – including the enrollment of an additional 3 million Californians in Medi-Cal — speaks to the pent-up demand for affordable health care coverage as well as the difficult economic circumstances that many residents face in the aftermath of the Great Recession. In order to qualify for Medi-Cal, a nonelderly adult with no dependent children must have an income below roughly $1,350 per month — a paltry sum in a state where the fair market rent for a one-bedroom apartment exceeds $1,000 per month.

Clearly, Medi-Cal provides a health care lifeline for millions of low-income Californians and is a critical piece of the state’s health care infrastructure. But the state’s long-term goal should be to reduce the number of residents who live below or near the poverty line — and who thus qualify for Medi-Cal — by helping families boost their incomes, such as by further increasing state’s minimum wage and creating a state earned income tax credit (EITC). While rising incomes would cause some residents to lose eligibility for Medi-Cal, they could purchase coverage — with federal financial assistance — through Covered California, the state’s health insurance marketplace that was established as part of the ACA.

In addition, more work is needed to ensure that Californians who continue to live on poverty-level wages have access to necessary health care services. Expanding health care coverage to undocumented immigrants in California — including through Medi-Cal — is already on the agenda, as we noted earlier this month. Lawmakers might also consider repealing the 10 percent reduction to Medi-Cal provider payments that the state began implementing in 2013 — a cut that may be discouraging some providers from participating in Medi-Cal even as enrollment continues to rise. These are important policy questions to watch as California seeks to build on the progress already made in expanding coverage as envisioned in federal health care reform.

— Scott Graves


Issues to Watch in 2015: Expanding Health Care Coverage to Undocumented Immigrants in California

January 6, 2015

More than 2 million undocumented immigrants live in California. They make significant contributions to our state, comprising nearly one-tenth of the workforce and paying well over $2 billion in state and local taxes each year. But when it comes to health care, these Californians face a substantial hurdle: federal law prevents them from accessing coverage under the Affordable Care Act (ACA), either through Medicaid (Medi-Cal in California) or through the new health insurance marketplace set up under the ACA (Covered California). While undocumented residents may get health care coverage through an employer, most do not. Those who lack coverage may have no regular source of health care and may face huge out-of-pocket costs for any care they do receive.

Expanding health care coverage to undocumented immigrants in California will be a key policy issue in 2015. This post highlights four key facets of the state and federal policy landscape that will help determine whether California makes significant progress toward achieving this goal in the near future. These are: (1) state Senator Ricardo Lara’s Senate Bill 4, (2) President Obama’s recent executive actions on immigration, (3) California’s current policy regarding Medi-Cal coverage for undocumented immigrants, and (4) the anticipated renewal of California’s “Section 1115” Medicaid waiver, the current version of which expires in late 2015.

Senate Bill 4: A Framework for Expanding Health Care Coverage to California’s Undocumented Residents

Last year, Democratic state Senator Ricardo Lara introduced SB 1005, starting a conversation about expanding health care coverage to all of the state’s undocumented residents. While that initial effort stalled, Senator Lara’s new bill — SB 4 — will rekindle the debate in 2015. SB 4 is intended to provide health care coverage to undocumented residents by allowing those with low incomes to enroll in Medi-Cal and those with somewhat higher incomes to buy coverage — with state financial assistance — through a new, state-run health insurance marketplace that would mirror Covered California.

SB 4 would advance a worthy policy goal. But by expanding the state’s role in providing health care coverage to undocumented immigrants, this legislation would also result in new state costs. These costs will be estimated and scrutinized as part of the legislative hearing process that will get under way in early 2015. Senator Lara has been working to identify revenues that could offset some or all of the new state costs, thereby minimizing the impact of this policy change on the state budget.

President Obama’s Recent Executive Actions on Immigration

Senator Lara introduced SB 4 in the wake of a significant change in federal policy regarding undocumented immigrants. In November, President Obama announced a new federal policy allowing several million undocumented immigrants to apply to temporarily remain in the US — and work legally — without fear of deportation. The President’s order will primarily benefit an estimated 4 million parents who have lived in the US for more than five years and whose children are US citizens or lawful permanent residents. In addition, a few hundred thousand undocumented immigrants who came to the US as children will benefit from the expansion of the Deferred Action for Childhood Arrivals (DACA) program, which the President created in 2012.

In short, due to the President’s recent actions, well over 4 million people throughout the US will soon be able to apply to the federal government for “deferred action.” Those who qualify would be considered lawfully present in the US for a three-year period. It’s not known how many undocumented immigrants living in California will be eligible to apply for deferred action. The number could be substantial, possibly in the range of 1 million. However, it’s unlikely that all of the immigrants who are eligible to apply would do so, or that all of those who do apply would in fact be granted deferred action status.

The President’s Actions Provide a Pathway to State-Funded Medi-Cal Coverage for Some Undocumented Immigrants

The President’s recent actions on immigration — combined with the state’s current policy on Medi-Cal coverage for undocumented immigrants — will help to move California closer to the goal of providing affordable health care coverage to undocumented residents.

Here’s how:

California allows certain undocumented immigrants — including those who qualify for deferred action under federal immigration rules — to sign up for Medi-Cal so long as they otherwise meet the program’s income eligibility guidelines. For adults, this means their income can’t be higher than 138 percent of the federal poverty line (just over $16,000 per year for an individual). Because of this state policy, low-income residents who qualify for deferred action under the President’s original DACA program – the one created back in 2012 — are already eligible for Medi-Cal. By extension, low-income Californians who qualify for work permits and temporary relief from deportation under the President’s new initiatives should also be eligible for Medi-Cal. In other words, even if SB 4 never becomes law, a large number of undocumented immigrants — those who qualify for deferred action under the new federal rules — could soon begin enrolling in Medi-Cal based solely on current state policy.

Yet, while California’s policy is unambiguous, it’s not clear how state policymakers will respond in the wake of the President’s actions. A top aide to Governor Brown recently said that the Governor is evaluating the impact of the new federal immigration rules. This same aide noted that expanding Medi-Cal coverage to undocumented residents who qualify for deferred action under these new federal policies would “cost money.” This is true. In fact, California pays the full cost of Medi-Cal coverage for such immigrants because federal dollars can’t be used for this purpose. Federal Medicaid funds may be used only to provide emergency and pregnancy-related services (i.e., limited and episodic care) to this population.

Clearly, California has a compelling fiscal incentive for encouraging the federal government to rethink its restrictive approach to funding health care for undocumented immigrants. A favorable outcome — from the state’s perspective — would reduce California’s costs for expanding health care coverage to undocumented residents as well as help to move the state closer to achieving the coverage goals envisioned in SB 4.

State Officials Should Explore Whether Federal Funds Could Be Used to Cover a Larger Number of Undocumented Immigrants Under a “Section 1115” Waiver

The impending expiration — in October 2015 — of California’s Section 1115 Medicaid waiver provides an opportunity for state officials to engage their federal counterparts on the issue of health care coverage for undocumented immigrants. (Section 1115 waivers allow states, with federal permission and for a limited time, to “test new approaches in Medicaid that differ from federal program rules.”) The Governor wants a new waiver and plans to submit a formal proposal to the Obama Administration in early 2015, kicking off what’s likely to be several months of negotiations. State officials have floated a number of ideas for the waiver that focus largely on changing how health care services are delivered and paid for through Medi-Cal, with the goals of improving health outcomes and controlling costs.

So far, undocumented immigrants don’t figure into the state’s Section 1115 waiver ideas. But they should. After all, what could be more critical to transforming how health care is delivered and funded than rethinking the fragmented and incomplete “system” through which undocumented immigrants currently access health care services in California? As noted above, the federal government already shares — with the state — the cost of providing limited and episodic health care to some undocumented residents through Medi-Cal, including services delivered in costly emergency rooms. Without a doubt, these federal dollars could be used more efficiently and effectively if they instead supported coordinated care that emphasized prevention and the appropriate management of chronic health conditions.

This is where the Section 1115 waiver comes in. In theory, current federal policies that prevent federal dollars from being used to support health care coverage for undocumented immigrants could potentially be modified as part of a waiver agreement, at least for the duration of a new waiver (typically five years). If this occurred, California’s cost of providing Medi-Cal coverage to undocumented residents would drop substantially. This is because the federal government would begin sharing costs that the state would otherwise pay for on its own. (Under this scenario, federal costs for undocumented immigrants would not increase compared to current law. Instead, federal Medicaid dollars that support limited and episodic care for undocumented immigrants would be redirected to fund health care coverage.) Moreover, expanding health care coverage for undocumented immigrants with federal financial assistance would help move California closer to meeting Governor Brown’s goals for a new Section 1115 waiver: improving health outcomes and controlling costs.

Conclusion

Lawmakers and advocates will pursue multiple options in 2015 to advance — and pay for — a worthy goal: extending health care coverage to undocumented residents who work, pay taxes, and put down roots in the Golden State. In light of the President’s recent actions on immigration, the anticipated renewal of the state’s Section 1115 Medicaid waiver provides a key opportunity to help move California closer to creating a health care system that works for everyone.

— Scott Graves


The ACA Will Temporarily Shield Some Medi-Cal Providers From the State’s 10 Percent Cut

October 7, 2013

Doctors, dentists, and other health care providers who participate in Medi-Cal (California’s Medicaid program) are bracing for — or have already felt the impact of — a 10 percent payment cut that the state has begun implementing, as we reported last month. However, thanks to the federal Affordable Care Act (ACA), this reduction will not apply — at least through the end of 2014 — to many primary care services provided by family physicians, internists, and pediatricians. In fact, these physicians will see a substantial increase in their Medi-Cal payments starting this fall. This is because the ACA requires states to boost their Medicaid payments to the federal Medicare level for nearly 150 primary care services during 2013 and 2014, with the federal government paying the entire cost of the increase. (This increase applies to services provided on or after January 1, 2013, but the state’s implementation has been delayed. Therefore, doctors will receive retroactive payments for qualifying services provided since the beginning of this year.)

This payment boost is welcome news for primary care physicians who participate in Medi-Cal, since they currently receive exceptionally low reimbursement rates relative to their peers in other states. California’s Medicaid payments for ACA primary care services were the third-lowest in the US in 2012, when measured as a percentage of Medicare payments for the same services (see chart). Once the ACA rate increase takes effect, California’s Medicaid payments for primary care services will more than double, rising by an average of 136 percent, according to the Kaiser Family Foundation.

Based on state estimates, the ACA increase will bring an additional $1.2 billion in federal Medicaid funds to California during the 2013-14 fiscal year — dollars that will support the work of primary care physicians who serve very-low-income Californians through the Medi-Cal Program. Moreover, because primary care doctors are largely shielded from the payment cut that the state is currently rolling out, they will receive roughly $250 million that they otherwise would have lost during 2013-14, with half of these dollars coming from the federal government and the other half from the state. Taken as a whole, these additional dollars, although temporary, could help to boost primary care doctors’ participation in Medi-Cal as the state prepares to implement a major expansion of the program in January 2014.

Still, it’s worth bearing in mind that the Medicaid payment increase is set to expire at the end of 2014. At that point, primary care doctors not only would lose the temporary rate bump provided by the ACA, but also would be fully subject to the rate cut that the state is currently phasing in. Such a steep drop in payments could cause at least some primary care physicians to rethink their participation in Medi-Cal in 2015. In order to head off that possibility — and provide greater fiscal certainty for other Medi-Cal providers — state policymakers should consider repealing the 10 percent cut for all providers as part of next year’s budget debate.

— Scott Graves


California Set to Open New Marketplace for Affordable Health Coverage

September 27, 2013

Next week, California’s new online marketplace for affordable health coverage will open for business — a major milestone in the implementation of health care reform. Starting on October 1, Californians who lack affordable health coverage can access soon-to-be-expanded Medi-Cal coverage or purchase private health insurance — possibly with federal financial assistance — through Covered California, the health exchange that state policymakers created to help implement federal health care reform. Californians can apply for coverage in several ways, including online, by phone, and by mail, and can submit applications — which are available in multiple languages — directly to Covered California or to county human services offices. Both the Medi-Cal expansion — which will extend eligibility to more than 1 million low-income adults — and the private health coverage available through Covered California take effect on January 1, 2014. (For helpful summaries of how health care reform will work in California, see this recent Sacramento Bee article and Covered California’s list of frequently asked questions.)

Through Covered California, consumers for the first time will be able to make apples-to-apples comparisons of their health coverage options, a change that should help people make more informed choices. Moreover, while Californians will be able to purchase coverage outside of the exchange, Covered California is the only place where residents with incomes up to 400 percent of the federal poverty line — currently $45,960 for an individual — can use federal subsidies to lower the cost of the coverage that they buy.

These new coverage options can’t come soon enough for many Californians. In 2012, more than one-fifth of residents lacked health care coverage in 10 of the 40 California counties for which data are available, according to the US Census Bureau. These 10 counties, which include Los Angeles, Riverside, and Fresno, are home to more than two in five Californians.

130927_healthcoverage

It’s important to bear in mind that health care reform won’t reach all Californians. In particular, undocumented immigrants are prohibited from purchasing coverage through Covered California and will remain ineligible for Medi-Cal. A recent report from the UCLA Center for Health Policy Research notes that “despite being in working families, most undocumented immigrants are not covered by health insurance and face significant access-to-care barriers.” This is a key reason why we’ve consistently highlighted the need to maintain a strong county health care safety net to assist Californians who fall through the cracks.

Still, full implementation of health care reform this coming January will significantly improve the lives of millions of Californians — US citizens and legal immigrants alike — who currently lack access to affordable coverage and live daily with the prospect of being one medical diagnosis away from financial ruin.

— Scott Graves


Expanding Medi-Cal: Small State Cost, Big Impacts

December 19, 2012

In January, the Legislature likely will begin considering how to implement a key component of the federal health care reform law in California: the expansion of Medicaid coverage to most people with incomes at or below 138 percent of the federal poverty line (an eligibility limit that currently is $15,415 per year for an individual). As we noted in a blog post last week, the vast majority of the cost of the expansion will be covered by the federal government, including 100 percent of the cost from 2014 to 2016. As a result, the expansion is likely to have a relatively minor impact on the state budget. This assessment is reinforced by a new report from the Kaiser Family Foundation. The report, authored by researchers from The Urban Institute, uses a rigorous study design to estimate the impact of boosting access to Medicaid — known as Medi-Cal in California — in all 50 states.

The cost to California of expanding Medi-Cal coverage is projected to account for less than 2 percent of total state Medi-Cal spending over the next 10 years. Specifically, the report projects that California is on track to spend about $375 billion on Medi-Cal between 2013 and 2022 — without taking the Medi-Cal expansion into account. Expanding Medi-Cal as envisioned in the federal Affordable Care Act would add only about $6 billion to the state’s costs over this 10-year period, equal to just 1.7 percent of total projected state Medi-Cal spending.

The study estimates that the state’s relatively modest $6 billion investment would allow an additional 1.9 million Californians to access affordable health care coverage through Medi-Cal in 2022 alone. In addition, the study projects that expanding Medi-Cal would bring nearly $69 billion in additional federal dollars — 11 times the state’s investment — into California’s health care sector and the broader state economy over the next decade. That’s quite a bang for the state’s health care buck.

— Scott Graves


Expanding Medi-Cal: The Next Step on the Road to Health Care Reform

December 14, 2012

Since President Obama signed the Affordable Care Act (ACA) in 2010, California has taken a number of steps to fulfill the promise of federal health care reform for the millions of Californians who lack access to affordable health coverage. With health care reform set to take full effect in 2014, the next big step is just around the corner: the expansion of Medi-Cal coverage to low-income adults under age 65 who currently are excluded from the program. This group includes nondisabled adults who don’t have children at home. It also includes parents who do have kids at home, but who lose access to Medi-Cal when their incomes rise more than a few percentage points above the federal poverty line – currently $19,090 for a family of three. Low-income adults under age 65 are much more likely than other Californians to lack health care coverage, as the following chart shows.

The ACA requires states to expand their Medicaid programs to cover most people with incomes at or below 138 percent of the poverty line – currently $15,415 per year for an individual or $26,344 for a family of three – beginning on January 1, 2014. The federal government will pay 100 percent of the cost of the expansion for the first three years, gradually reducing the federal share to 90 percent of the cost in 2020 and beyond. However, the Supreme Court’s landmark decision on the ACA this past June limited the federal government’s ability to compel states to implement the Medicaid expansion as envisioned in the health care reform law. As a result, some states wondered whether they could limit their expansion of Medicaid by setting a threshold below 138 percent of the poverty line and still expect the federal government to pay all of the cost from 2014 to 2016. This week, the Obama Administration provided an answer: No. As a result, a partial Medicaid expansion is not in the cards in the near term as health care reform continues to move forward in California and other states.

Governor Brown is expected to call a special session of the Legislature for early 2013 to address a number of remaining health care reform issues, potentially including the expansion of the Medi-Cal Program. We’ll have more to say about all of this in the weeks to come. But for now, it’s clear that expanding Medi-Cal can’t come soon enough for low-income adults who lack affordable health care options.

— Scott Graves


Ensuring Affordable Access to Health Coverage

October 31, 2011

Today is the deadline to comment on a number of proposed rules implementing the Affordable Care Act. One that the CBP finds particularly noteworthy is a set of proposed regulations written by the Treasury Department that serve to determine whether job-based coverage is affordable.

How affordability is defined is crucial for determining whether families will have access to subsidized health coverage through state health insurance exchanges. As written, the Treasury Department’s proposed rule penalizes families who have access to job-based coverage through a working family member.

In an effort to preserve job-based health coverage, the ACA generally does not allow individuals to purchase coverage through state health insurance exchanges if they can get it through an employer. This applies whether an individual is the worker or a dependent of the worker. This means that workers and their dependents must accept job-based health coverage, even if that coverage is less comprehensive or more expensive than what is available through the exchange.

The ACA provides an exception if the job-based coverage is “unaffordable,” defined as costing 9.5 percent or more of household income. For a single employee, applying the rule is simple. The complication is for workers with dependents. Premium costs are higher for a family than for a single individual. Yet, the proposed rule assesses the affordability of the premium based on the cost for the worker, not the family. Therefore, if premium costs for a worker alone are less than 9.5 percent of income – even if the cost of family coverage is much higher – then the dependents of this worker would be barred from purchasing subsidized health coverage in the exchange because they would be considered to have access to affordable job-based coverage.

If the proposed rule is adopted as written, then millions of families would either have to pay large portions of their incomes toward premium costs for job-based coverage, or go without coverage altogether, contrary to the intent of the ACA. Treasury should modify the proposed rule to allow affordability of family coverage to take into account premium costs for a family – rather than a single individual. A number of organizations, including the Kaiser Family Foundation, have weighed in on the issue. Find the CBP’s comments on the issue here.

— Hanh Kim Quach