Enhanced unemployment benefit will skew ACA marketplace/Medicaid enrollment

The enhanced unemployment benefits provided in the CARES Act, the massive COVID-19 response bill that passed the Senate 96-0 last night, looks likely to create some strange incentives for the newly uninsured seeking health insurance.

For anyone who qualifies for unemployment insurance, the bill adds an extra $600 week to the normal benefit for four months. That's more than $10,000 for anyone who stays unemployed for that long (as millions likely will: a staggering 3.3 million new jobless claims were entered this week).  For the first time, UI benefits are available to the "self-employed, independent contractors, those with limited work history, and others who are unable to work as a direct result of the coronavirus public health emergency."

As noted last night by the Brookings Institute's Loren Adler, the extra $600 per week will not be counted for the purposes of determining eligibility for Medicaid and CHIP, but will be counted for determining subsidy eligibility for private plans in the ACA marketplace. If that holds, some fairly high earners will likely end up eligible for Medicaid but not for subsidized marketplace coverage.  That's all the more likely because while Medicaid eligibility is determined on a monthly basis, marketplace subsidies are determined on the basis of annual income -- so income earned up to the time of layoff counts along with the enhanced UI benefit.*

Others may be eligible both for Medicaid and for weak marketplace subsidies. In that case, Medicaid should be the clear choice for most. Let's look at the math.

In the 36 states that have enacted the ACA Medicaid expansion, people in households with income up to 138% of the Federal Poverty Level are eligible. That's $1,468/month for an individual and $3,013/month for a family of four.  Marketplace subsidies are available on a sliding scale for incomes ranging from 138-400% FPL (up to $49,960/year for an individual, $103,000 for a family of four).

In the marketplace, Strong Cost Sharing Reduction (CSR) is available up to 200% FPL ($24,980 individual, $51,500 for four).  The marketplace value proposition is much weaker for people with incomes over 200% FPL. Silver plan deductibles average over $4,000 for enrollees over this threshold (slightly less at 200-250% FPL, where weak CSR is available). Below 200% FPL, silver plan deductibles range from $0-1000.

Perhaps more importantly with the possibility of hospitalization for COVID-19 looming large, the annual out-of-pocket maximum can be no higher than $2,700 for a silver plan at income up to 200% FPL. At 200-250% FPL the OOP max can be $6,500, and at incomes above 250% FPL, as high as $8,150.

The enhanced unemployment benefit will prevent a lot of marketplace applicants from accessing CSR. Medicaid, for its part, generally has no out-of-pocket costs, or minimal ones.

Let's say a single person has been earning $2,500 per month and has earned $10,000 at the time of layoff. Her ordinary monthly unemployment allowance (which varies by state) is $1,250, qualifying her for Medicaid. For marketplace purposes, however, her monthly income is $3,650, more than she was making before. On a marketplace application, she will have to estimate annual income, and it would be implausible to get it below the $24,980 cutoff for strong CSR. She will probably pay about $200/month for a silver plan with a deductible in the $3-4,000 range. On the monthly basis, however, she is eligible for Medicaid, which costs nothing and has little if any out-of-pocket costs.

While CMS has promised to enable HealthCare.gov to recognize the extra $600/week unemployment benefit as income for marketplace purposes while discounting it when determining Medicaid eligibility, it's not there yet [added 4/26].*  Moreover, HealthCare.gov asks applicants to report both annual and current monthly income. While the platform is capable of finding Medicaid eligibility on the basis of monthly income even when actual or projected annual income exceeds the annual income limit, several experienced navigators have told me that they prefer to go through  state Medicaid websites or departments in this circumstance.

Perhaps it's best that those who lose employer-sponsored insurance in a pandemic end up in Medicaid, which will shield them from high in-network out-of-pocket costs and balance billing. In fact it would make best sense either to render the unemployed presumptively eligible for Medicaid or to simply cover all COVID-19 testing and treatment via Medicare.  Meanwhile, given our current Rube Goldberg infrastructure, how will people navigate? Millions who go through the marketplace may get the false impression that they're ineligible for Medicaid. Many may reject marketplace coverage offered with weak subsidies or no subsidies.  A further fix is needed.

P.S. In the 14 states that have refused to expand Medicaid, the MAGI bump-up caused by adding the $600/week extra benefit could be a boon. In nonexpansion states, eligibility for ACA marketplace subsidies begins at 100% FPL; people below that threshold get no help from the law. Four months at $600/week gets you mostly there.

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* Originally, I had written that the annual income estimate was likely to trump the monthly on HealthCare.gov. That is apparently not true. CMS has told me that monthly income will control if it's under the Medicaid eligibility threshold.  HealthSherpa, a commercial online brokerage with an "enhanced direct enrollment" (EDE) platform integrated with HealthCare.gov, tells me that their platform will in fact place an applicant in Medicaid if current monthly incomes so qualifies her.  Five highly experienced enrollment assisters have told me that they would not try this, however.