Quick Income Changes Can Threaten Coverage For Those On Medicaid

When the earnings of low-income consumers change over the course of the year, a family can risk losing its health coverage if it shifts between eligibility for Medicaid and eligibility for coverage on the health insurance exchanges that were set up under the Affordable Care Act.

Researchers call this "churning." And it's not new to Medicaid. But Obamacare added millions of new customers whose incomes hover near the Medicaid line. Health officials are concerned about how well the insurance marketplaces can handle the larger volume of customers moving between the two types of coverage.

The Affordable Care Act aims to minimize churning by making the state marketplaces a one-stop shop for both types of coverage. That's still a work in progress. But some states are ahead of the curve in implementing strategies to help ensure that people don't fall through the cracks — or have their coverage lapse while they're switching plans.

Last year, when Jillian Naccache took in a roommate at her house in Bellingham, Wash., the extra money pushed her income above 138 percent of the federal poverty level ($16,105 for an individual), making her no longer eligible for Medicaid. (So far, 28 states and the District of Columbia have extended Medicaid coverage to adults with incomes below that threshold, as allowed under the health law.)

Naccache, 39, logged on to the state's health insurance exchange to report her income change. And she picked a health plan. Based on her estimated income for the year, she received a $192 tax credit on her monthly health insurance premium, reducing the amount she owed each month to $128.

A few months later, the roommate moved out, and Naccache's income dropped back below the Medicaid threshold. She logged onto the state marketplace again to report the change, and was re-enrolled in the Medicaid program.

The process wasn't entirely seamless: When she went back on Medicaid, Naccache wound up paying an extra month's premium on the private market when the two types of coverage overlapped. But switching back and forth was mostly simple, she says.

"It cost me a bit more money, but that was better than having a gap in coverage," Naccache says.

Washington has made good progress in realizing the health law's vision of a single online portal that lets each consumer either sign up for Medicaid or enroll in a health plan and get a financial subsidy, says Matthew Buettgens, a senior researcher associate at the Urban Institute, who has written about how to minimize churning.

"In Washington state, the enrollment and eligibility interface between Medicaid and qualified health plans [sold on the exchange] was integrated from the start," he says. "That's very unusual."

Among the other 14 states that run their own exchanges, New York, Rhode Island and Kentucky also stand out for their efforts to integrate data and information about Medicaid and about health insurance plans on the exchange, says Heather Howard, director of the State Health Reform Assistance Network, which helps states implement the health law.

Such integration is more complicated when the federal government is running the state's marketplace, researchers say. After a rocky beginning, integration in those states appears to be improving, says Tricia Leddy, a senior fellow at the Center for Health Care Strategies.

Buettgens estimates that 7 million people could churn between Medicaid and Obamacare coverage annually.

Consumer advocates say that efforts to integrate IT and align plans for both types of subsidized health care may fall short if simple enrollment timing issues aren't addressed. For example, Medicaid customers need to learn that they're eligible for Obamacare by the monthly deadline for coverage on the exchange.

Naccache ended up taking a tough financial hit when she switched back to Medicaid. But advocates are more concerned about the possibility that people's coverage will lapse while they're changing plans. Unlike Medicaid, where coverage can be retroactive to when someone became eligible, coverage bought on the exchanges doesn't work that way.