New Study Suggests Improvements For Estimating Who Is Eligible For Health Insurance Exchange Subsidies

From Health Affairs:

State governments are preparing for the advent of individual health insurance exchanges in 2014, and for the projected seventeen million Americans who meet certain income eligibility criteria but are not eligible for Medicaid or an affordable employer-sponsored plan who will be awarded federal tax credits to offset the cost of purchasing coverage through an exchange.

The Congressional Budget Office has estimated that just less than half of the $1.8 trillion in gross federal outlays for coverage provisions under the Affordable Care Act will be used for this purpose. Eligibility for advance access to this credit is determined by projecting a household’s modified adjusted gross income at the time a member of the household applies. A new study, released as a Web First by Health Affairs, found that this method of determining eligibility could result in many false positives and false negatives, causing those eligible for the subsidies to be refused early access to them and causing some households that are initially determined eligible to be required to pay back the subsidies they receive. In a simulation, the study determined that by augmenting data from prior tax returns with six months of current income to determine eligibility for Medicaid and the exchanges, the number of people incorrectly deemed ineligible with allowances for change decreased by more than 40 percent.

For his analysis, the author used a longitudinal microsimulation model of the Affordable Care Act, factoring in income, employment, family composition, and taxes from the 2001 Survey of Income and Program Participation. Additionally, the simulation results showed that advance subsidies tended to overpay by $208 annually on average, but that there will be meaningful differences between advances and final subsidies for many low-income households.

Adopting an eligibility determination policy that is transparent, consistent across Medicaid and the exchanges, and generous in allowing applicants to claim a change in circumstances will…be critical,” concluded the author. “Policy makers should consider statutory and regulatory changes that further align Medicaid and the exchanges under a single income standard.”

Read the article here.

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