As unemployment rates rapidly rise and more individuals seek new health coverage options, states are preparing for an influx of new Medicaid and insurance marketplace enrollees. While the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides significant support for a broad array of services, its $600 a week in additional unemployment compensation could pose costly complications for states and individuals.
The CARES Act includes an additional payment of $600 a week for individuals who qualify for Pandemic Unemployment Compensation, which is supplemental to traditional unemployment insurance (UI) benefits, and is available from Jan. 27 through July 31, 2020. The additional payments will be counted as income for determining marketplace subsidy eligibility calculations. However, while unemployment benefits are usually counted when determining modified adjusted gross income (MAGI)-based income for Medicaid eligibility, the CARES Act explicitly indicates that the additional unemployment insurance payments should not be considered as income when determining eligibility for Medicaid.
This discrepancy in income counting between marketplace and Medicaid coverage could impede states’ ability to make accurate, timely MAGI-based eligibility determinations during the time period the additional UI payments are available. States could be held financially responsible for these enrollment errors in future federal program evaluations. More importantly, if individuals are not enrolled in the appropriate program, they could end up paying more than they should for coverage and could even potentially face financial penalties if they later need to pay back any excess subsidies they received for marketplace coverage.
The National Academy for State Health Policy (NASHP) and state officials have identified the following issues that will be important for the Centers for Medicare & Medicaid Services (CMS) or the Internal Revenue Service (IRS) to address in their future guidance to assist states in operationalizing this temporary change.
- Provide guidance for eligibility determination systems and processes: Will CMS provide guidance to states about how to update their eligibility determination systems if needed, and what modifications if any will be made to the federally facilitated marketplace to account for these changes?
- Model an approach based on existing processes for other income-counting differences: Currently, in MAGI-based eligibility determinations, some income such as educational awards or scholarships and certain payments that American Indian/Alaska Native individuals receive are not counted in Medicaid and CHIP eligibility determinations. However, for calculating marketplace subsidy eligibility, this income is counted if it is taxable. Should the $600 UI bonus be treated in the same way that states handle these current income counting differences?
- Provide states with sample application language: Will CMS provide additional guidance to states about how to update their applications, such as sample language, to ensure that consumers are properly reporting this supplemental income?
- Clarify how the UI payment increase will apply in certain states and circumstances: In states that have not implemented the Affordable Care Act’s Medicaid expansion, existing differences in eligibility rules between Medicaid and marketplace coverage can result in instances where an individual may initially appear to be ineligible for either Medicaid or marketplace subsidies. In these cases, states use what is referred to as the “gap-filling rule,” which involves following marketplace subsidy eligibility rules to determine an individual’s financial eligibility for Medicaid. How will the $600 UI increase be applied in eligibility determinations that trigger usage of the gap-filling rule?
- Allow for tax liability exemptions if consumers miscalculate income: Some state officials identified a particularly important issue to ensure that consumers do not face financial penalties if they mistakenly miscalculate their income when applying for coverage. For example, if individuals are not aware that they will have access to retroactive unemployment payments and, as a result, misreport their income, will the federal government allow for exemptions from any tax liability that may result from incorrect income reporting?
- Provide federal-level consumer education materials: Will CMS take any actions to help educate consumers about how unemployment benefits available through the CARES Act could impact eligibility for Medicaid or marketplace coverage?
While a future legislative package could correct the inconsistency in the income-counting methodology, Congressional action is not expected soon. State health officials need additional guidance now from federal officials on these issues to avoid costly and complicated changes to eligibility systems and to ensure that individuals receive appropriate, timely health coverage during the current COVID-19 crisis.
