The Short Answer
You’ve been hearing about tax credits to help pay for health insurance, but when you apply you don’t qualify — even though your income is low. What gives?
If you’re in a state that didn’t expand Medicaid, it’s possible that you make too much to qualify for Medicaid and too little to qualify for ACA tax credits. That puts you in the Medicaid “coverage gap.”
You can still buy health insurance even if you fall into the coverage gap, but you won’t get federal government help to pay for it. You’re exempt from the mandate, though, so you won’t have to pay the penalty if you don’t get coverage.
The Longer Answer
The ACA was designed to help people afford health insurance. As part of the early plan, states were expected to expand Medicaid — offering free and low-cost insurance to people who don’t make a lot of money. The idea was that Medicaid would cover the lowest-income people in the state, and then ACA tax credits would pick up where Medicaid left off, helping cover people who make up to 4 times the Federal Poverty Level (FPL).
This plan got complicated, however, when in June 2012 the Supreme Court ruled that states didn’t have to expand Medicaid. No change was made to the ACA tax credit qualifications.
This means that some states have expanded Medicaid to cover more people, and some haven’t.
If you’re in a state that didn’t expand Medicaid, it’s possible for you to fall into the Medicaid coverage gap — meaning your household income is too high to qualify for Medicaid or too low to qualify for ACA tax credits.
To date, 29 states (including D.C.) have not participated in the expansion. This leaves several million people in the coverage gap.
Climbing out of the gap
If you think you fall into the gap, here’s what you need to know and what you need to do.
- Apply anyway. If you live in a state that hasn’t expanded Medicaid coverage, you should still apply anyway. You may qualify under your state’s existing rules. Each state has existing coverage options that could work for you — particularly if you have kids or you’re pregnant or disabled. Also, states can still choose to expand Medicaid, and this decision could come at any time.
- Don’t worry about the tax penalty. If you would have qualified for Medicaid under the ACA expansion but your state isn’t participating, you’re exempt from the law’s requirement to buy coverage. You won’t pay a penalty for not buying it. So at least you don’t have to worry about that.
- Free and low-cost clinics. With or without insurance you may still need healthcare at some point. Check to see what the policies are at local clinics and hospitals. They may provide care whether you have insurance or not. There are free and low-cost healthcare options listed on the healthcare.gov website.
- Stay tuned. Since there is no deadline for expansion, your state could still expand coverage down the road. (Several states have recently decided to participate.) Keep checking back. It’s possible that at least some non-expansion states will have a change of heart. And right now, some of those states are exploring other options to provide low-cost care to those in need. And remember, if you’re pregnant or disabled you should apply no matter what. Many states have special programs to assist you.
Even if you’re not covered, your kids may be
Medicaid is available in every single state for children under age 19 with family incomes up to $23,550 (100% of the 2014 FPL for a family of four in most states). Also, children may still be eligible for Medicaid if their family income is higher, and children in families with even higher incomes may be eligible for the Children’s Health Insurance Program (CHIP). So if you have kids, you should definitely apply for Medicaid even if you yourself don’t meet either ACA tax credit or Medicaid eligibility requirements.