Top 3 Policies to Reduce Uninsurance in the ACA Coverage Gap

For the millions of Americans who fall in the ACA coverage gap, three policy proposals could improve their chances of finding affordable healthcare coverage, a brief from Kaiser Family Foundation indicated.

The coverage gap, much like the “family glitch” is a group of people who would qualify for lower-cost public insurance based on income but are precluded due to another factor.

The coverage gap exists because 12 states have not adopted Medicaid expansion, KFF researchers explained. This leaves individuals who would qualify for Medicaid or Affordable Care Act marketplace subsidies under Medicaid expansion without coverage.

Approximately 2.2 million Americans exist in the coverage gap. Another 1.8 million are eligible for Affordable Care Act marketplace subsidies but could be eligible for Medicaid as well under Medicaid expansion.

For those who seek to promote universal coverage, there are three general policy solutions to providing insurance for those who fall in the coverage gap.

First, policymakers could motivate states that have not yet adopted Medicaid expansion to embrace it by increasing the financial incentives.

This could come in the form of a higher matching rate. Currently, the federal matching rate is 90 percent for Medicaid expansion enrollees. The American Rescue Plan Act included a five percentage point increase in the federal matching rate for two years.

Policymakers could introduce an increase to the federal matching rate on top of the American Rescue Plan Act’s boost or they could consider passing financial disincentives to refusing to adopt Medicaid expansion.

“There are already substantial financial incentives for states to expand Medicaid under the ACA; some states have not acted on them largely due to politics or ideology, so it is unclear if additional incentives will impel them to act,” the researchers noted.

“For some policies, the legal limits of the federal government’s ability to leverage Medicaid funds to states as an incentive to adopt the ACA expansion is unclear.”

Second, lawmakers could construct a public option, such as President Joe Biden touted on his campaign trail.

As opposed to the first option in which states are the ultimate decision-makers, the public option would be a federally-provided coverage opportunity for those in the coverage gap. It would be available regardless of states’ political and ideological dispositions.

Those who fall into the coverage gap would be automatically enrolled in the public option. They would have no premium and would have access to full Medicaid benefits.

The public option could decrease healthcare spending, but it largely depends on the design of the coverage option, Urban Institute researchers found in a separate study.

This solution presents some challenges, namely that it would require significant administrative and infrastructural preparation and maintenance. Furthermore, states that have not yet expanded Medicaid would likely never feel the pressure to do so with a federal option so readily available to patch the coverage gap.

Lastly, instead of creating an entirely new coverage infrastructure for a public option health plan, policymakers could build on what is already available in the Affordable Care Act.

By extending Affordable Care Act marketplace premium subsidies to those in the coverage gap, policymakers could mirror Medicaid cost-sharing for this population that is not Medicaid eligible.

Like the public option, this may be easier to enact than financially incentivizing Medicaid expansion because it would not require state approval. The solution could also incorporate wrap-around benefits that are offered in the Medicaid program but not in the Affordable Care Act marketplace. Arkansas has already enacted a solution like this.

However, as with any solution, this one also has its challenges.

“Unless further cost-sharing reductions and benefit enhancements were included, marketplace plans would have significantly higher cost-sharing and less comprehensive benefits than Medicaid,” the researchers explained. “Extending marketplace subsidies to people in the coverage gap raises all of the same potential inequities across states as a public option.”

These options would require heavy investment from the federal government. But these investments could be offset by other policy decisions.

Policies built upon Medicaid would decrease costs for the federal government. Also, Medicaid providers have a lower reimbursement rate than employer-sponsored health plans, so the government would be saving money on reimbursement.

However, if states take a new public healthcare option as an incentive to drop their Medicaid expansion policies, then the federal would incur greater costs.

Enrollment would be a major factor in the amount of healthcare spending tied to these solutions.

Currently, the Affordable Care Act federal health insurance market is taking on more enrollees during the special enrollment period. In the first two months, roughly, of the special enrollment period, the federal health insurance marketplace gained half a million new enrollees.