In May, CMS quietly moved to shrink the ACA's coverage gap in states that have refused to expand Medicaid

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One of the most intractable of the holes in the ACA's implicit promise of affordable care for all is the so-called "coverage gap" opened up when the Supreme Court made the ACA Medicaid expansion optional for states in 2012, two years prior to scheduled full implementation. 

As originally enacted, the ACA provided Medicaid eligibility to adults in households with incomes up to 138% of the Federal Poverty Level (FPL). In the wake of the Supreme Court decision, just 25 states implemented this expansion upon the 2014 launch of the ACA's core programs. To date, thirteen holdout states have not enacted it. In those states, eligibility for ACA marketplace subsidies begins at 100% FPL, and some 2 million adults with incomes below that level get no help obtaining insurance.

There's no easy way for Democrats to plug this hole, as KFF's Larry Levitt recently explained on Twitter. They could make people in nonexpansion states with incomes below 100% FPL eligible for premium subsidies. But that might tempt states that have enacted the Medicaid expansion to rescind it, since the federal government pays 100% of marketplace premium subsidies and "only" 90% of Medicaid costs for expansion enrollees. They could create a new federally administered public option operating in nonexpansion states, but that's a heavy administrative lift, and very likely beyond the political capabilities of a Democratic party with razor-thin majorities.

As I mulled Levitt's thread, a partial and kludgy administrative response occurred to me: CMS could allow any applicant in a nonexpansion state to attest to an income over 100% FPL, without requiring documentation. In 2020, supplemental unemployment insurance provided by the CARES Act pushed a lot of incomes over the 100% FPL threshold, and enrollment for 2021 at 100-150% FPL in nonexpansion states soared 17%. Marketplace subsidy eligibility is based on an estimate of next year's income, and low income is notoriously uncertain and fluctuating. Why not open the door further?

I took a look at the statute setting the terms for marketplace subsidy eligibility and verification (42 U.S. Code § 18081) and the 2022 Notice of Benefit and Payment Parameters (NBPP) published May 5, 2021, seeking a way that current rules might be modified. It turns out that new rulemaking is unnecessary. 

As of now (effective May 5), CMS is declining to require verification of an income claimed to be above 100% FPL even if data sources tapped by CMS indicate that the applicant's income is below that threshold. The change is announced in the NBPP:

7B. VERIFICATION PROCESS RELATED TO ELIGIBILITY FOR INSURANCE AFFORDABILITY PROGRAMS

As noted in section IV of the preamble, on March 4, 2021, the United States District Court for the District of Maryland decided City of Columbus, et al. v. Cochran, No. 18-2364, 2021 WL 825973 (D. Md. Mar. 4, 2021), vacating certain requirements under 45 CFR 155.320, which provides Exchange income verification requirements for resolving data matching issues related to eligibility for advance payments of premium tax credits. Under the current regulation, an individual who attests to a household income within 100 percent to 400 percent of the federal poverty level (FPL), but whose income according to trusted electronic data sources is below 100 percent FPL, must submit additional documentation supporting the attested to household income.[199] Given the court's order invalidating this policy, we are finalizing revisions to § 155.320 in this final rule to rescind text implementing the policy.

As explained below in the Implementation of the Decision in City of Columbus, et al. v. Cochran section, HHS's systems automatically generate requests for income verification information for those with income data matching issues, and it will take some time to redesign this function. Until that redesign is complete and implemented, however, HHS will be able to identify consumers who receive requests for income verification information as a result of current system logic. We have established a manual process to notify those consumers that they need not provide the requested information  ( Federal Register Vol. 86, No. 85, p. 24216 (pdf pg.77).

The suit in question was filed by several cities and two individuals challenging nine provisions of the NBPP for 2019 issued by the Trump administration in April 2018. The federal district court in Maryland upheld five provisions and negated four,* including a rule that "where electronic [government] data sources reflect income under 100 percent FPL and a consumer attests to income between 100 percent FPL and 400 percent FPL, additional income verification must be submitted."** Such documentation was not required before the NBPP for 2019 was finalized. As of May 5, it is again no longer required.

Judge Deborah K. Chasanow found that HHS's "stated rationale for imposing income verification requirements-to prevent fraud in states that did not expand Medicaid-is unfounded. Defendants failed to point to any actual or anecdotal evidence indicating fraud in the record."

Finding the verification requirement onerous, the court noted that during the comment period for the proposed rule, 

Many commenters were concerned that this new verification process would disadvantage house-holds with lower household incomes" because low-income consumers are more likely to experience variance in their income levels and would also have difficulty in providing documentation to resolve their income data matching issues. 83 Fed. Reg. at 16,986. This is because many "work in part-time or in hourly positions," "rely on multiple part-time or part-year jobs," or "work in cash industries, such as food service, where tip-income makes up the largest portion of their earnings" and "[i]n all these cases, documentation from an employer may be hard to obtain." AR1657 (p. 22).  

The court's conclusion on this front: 

HHS's decision to prioritize a hypothetical risk of fraud over the substantiated risk that its decision result in immense  administrative burdens at best, and a loss of coverage for eligible individuals at worst, defies logic (p. 23).

Under Biden,*** CMS seems eager to accede to this order without delay:

In City of Columbus. the district court vacated four provisions of the 2019 Payment Notice. Implementing the court’s order as to two of those provisions, regarding income verification and QIA expenditure reporting, can be accomplished immediately. We find that it is necessary and in the public interest to implement these two provisions quickly to provide immediate notice to the regulated community on what standards will apply and to prevent injury to the public. A delay in implementing the court’s decision regarding these two provisions would cause unnecessary harm. HHS needs to move quickly on these two provisions to fill the regulatory void caused by the court’s vacatur. Without immediate action, there will be confusion among issuers and consumers regarding what is expected, which we find to be contrary to the public interest. We find it impractical to wait months to clarify what standards apply after the vacatur of the two policies. In this rule we have explained the impact of the court’s decision (p. 24269).

It would appear that as of now, during the emergency Special Enrollment Period open in HealthCare.gov states (and thus in all nonexpansion states) until August 15, as well as in Open Enrollment for 2022, beginning November 1, any marketplace applicant in nonexpansion states can estimate an income over 100% FPL (in 2021, $12,760 for an individual, $26,200 for a family of four). At incomes up to 150% FPL, under the subsidy boosts implemented in March in the American Rescue Plan, a benchmark silver plan with strong Cost Sharing Reduction (CSR) is free. Silver plans in this income bracket have a median deductible of $0 and an average deductible of $177.

If income for the year in question ultimately proves to fall below the 100% FPL threshold, there is no clawback of subsidies granted, unless the applicant's income estimate is made with "intentional or reckless disregard for the facts." That's stipulated in 26 CFR § 1.36B-2 (6), "Special rule for taxpayers with household income below 100 percent of the Federal poverty line for the taxable year" [added 8/1/21]

It might be thought ironic that a court decision finding no evidence of fraud in low-income enrollees' income estimates could generate, shall we say, aspirational income estimates with no penalty. But such are the absurdities created by polarization, gridlock, and Republicans' ideological will to deny affordable healthcare to poor people. 

Before the 2019 rule was finalized, attestation of income above 100% FPL in marketplace applications was essentially on an honor system. Enrollees do provide information under penalty of perjury. But estimates of future income leave room for maneuver -- particularly, as the Columbus decision highlights, for low income people who may take on various jobs, often with uncertain and fluctuating hours. Urgency imposed by the pandemic, opportunity afforded by supplemental unemployment insurance income in 2020 and 2021, the availability of free coverage at incomes anywhere near 100% FPL, and increased funding for enrollment assistance and advertising allocated by the Biden administration may collectively create a new culture of flexible income estimation.

Also ironically, both sides of the political divide may be have reasons to embrace the implications of this rule. Nonexpansion states can get more poor people covered at zero cost to the state (while ceding no ideological ground), as the federal government pays 100% of marketplace subsidies. The Biden administration can get a bite taken out of the coverage gap -- how big may depend on how sub-rosa this amended rule remains.

This is only the latest kludgy workaround imposed on the ACA by political gridlock. The law now functions with  a zero-penalty individual mandate, premium subsidies inflated by a failure to appropriate funds for statutorily-required CSR reimbursement (CSR, available only with silver plans, is consequently now priced into silver plan premiums, creating discounts in bronze and gold plans), and an open invitation to attest to income above the poverty line. Those who otherwise lack access to affordable insurance should take the invitation. 

Update, 6/27/2021: It's important to note, in the rule text above, that CMS warns in the second paragraph that since systems can't be changed on a dime, it will continue to demand verification of income estimates over 100% FPL when data sources indicate otherwise, but then follow up with the enrollee to say, in effect, "never mind."  Kludge!  

Update 2, 6/27/21: As stated above, enrollment in the 100-150% FPL income bracket in nonexpansion states increased by 17% in Open Enrollment for 2021. That surge has continued in the emergency Special Enrollment Period launched on Feb. 15 this year. As I noted in this post, 75% of the 1.24 million SEP enrollees announced by CMS as of May 31 were in the thirteen remaining nonexpansion states, including 578,775 in Florida and Texas alone. Almost 50% of these enrollees are paying less than $10 per month for coverage. Based on past enrollment patterns, it's safe to posit that at least a third of the enrollees in nonexpansion states would qualify for Medicaid if their state had enacted the expansion -- that is, have incomes under 138% FPL. 

Update 3, 6/28/21: the next post considers how CMS might signpost the coverage gap so fewer people fall into it.

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* A summary of the complaint in Columbus and the four provisions of the 2019 NBPP negated by the court is here.

**For the rule requiring documentation of income over 100% FPL (if other data sources indicate otherwise), see p. 16985 (Federal Register / Vol. 83, No. 74 / Tuesday, April 17, 2018)

*** The NBPP's top matter casts this reversal of a Trump-era rule (and changes to the NBPP generally) as compliance with a directive from the new president:

On January 28, 2021, President Biden issued Executive Order 14009, “Strengthening Medicaid and the Affordable Care Act,” [1] directing HHS, and the heads of all other executive departments and agencies with authorities and responsibilities related to the ACA, to review all existing regulations, orders, guidance documents, policies, and any other similar agency actions to determine whether such agency actions are inconsistent with this Administration's policy to protect and strengthen the ACA and to make high-quality health care accessible and affordable for every American. As part of this review, HHS examined policies and requirements under the proposed 2022 Payment Notice and the January 19, 2021 final 2022 Payment Notice to analyze whether the policies under these rulemakings might undermine the Health Benefits Exchanges or the health insurance markets, and whether they may present unnecessary barriers to individuals and families attempting to access health coverage. HHS also considered whether to suspend, revise, or rescind any such actions through appropriate administrative action.

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