Why Do 7 Million Children Lack Health Coverage? Will PPACA help?

In a recent report on children’s access to affordable health insurance, the Government Accountability Office (GAO) found that states missed many opportunities to cover children. In 2009, 7 million children were uninsured. If the affordability programs in the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) were effective, about 75 percent would be eligible for some form of assistance, whether Medicaid, the Children’s Health Insurance Program (CHIP), or premium assistance to purchase qualified coverage.

GAO is concerned that the programs won’t help much unless other obstacles are addressed. There are several.

First, nearly half of those uninsured children (47.9 percent) would be eligible for Medicaid, and another 19.9 percent would qualify for CHIP. These children could be covered now.  Why aren’t they? Two likely reasons are:

  • The parent(s) or guardian(s) are unaware of the benefits available to their children and
  • Their eligibility often changes as the parents’ income rises or falls, so that they move in and out of the system.

Before PPACA, Congress tried to address these problems in the Children’s Health Insurance Program Reauthorization Act (CHIPRA) (P.L. 111-3). States were offered incentive bonuses for increasing enrollment, and to qualify for the incentives they needed to adopt at least five of eight listed options to make enrollment easier. These options included:

  • “express lane” enrollment through agencies that administered other assistance programs;
  •  eliminating the requirement for personal interviews;
  • using one application for Medicaid and CHIP;
  • offering premium assistance for employer-sponsored or benchmark insurance;
  • applying presumptive eligibility to children’s applications;
  • easing the asset tests, for children;
  • using verification methods that rely on easily available data instead of requiring parents to provide hard copy documentation; and
  • maintaining continuous enrollment for 12 months regardless of changes in income.

This last measure makes a huge difference. States commonly redetermined eligibility every six months, or even more often. GAO estimated that in states with 12-month continuous eligibility, 3 percent of children experienced a change in circumstances that would have affected their eligibility. On the other hand, in the states without that policy, 19 percent had a change affecting eligibility within six months, and 30 percent, within in one year.

Another possible complication is that the standards for Medicaid and CHIP eligibility aren’t the same for all children, let alone everyone in the family. Infants up to one year old are eligible at the highest income levels, but the limits drop at one year and six years. States often have much lower income limits for coverage of parents, too.

As we’ve discussed before, PPACA will require states to coordinate their eligibility determination systems with those of the exchanges, premium subsidy and other affordability programs, and are even encouraged to allow one program to determine eligibility for another. But the Internal Revenue Service proposed a rule to measure the affordability of coverage that could render many children ineligible for its program.

Under PPACA, individuals who have access to affordable group insurance that provides “minimum essential coverage” are expected to buy that insurance. If no such insurance is available to them, they can get insurance through the health insurance exchanges. If their incomes are between 100 percent and 400 percent of the federal poverty level, they can get a tax credit for the payment of the premiums, and the credit may even be used in advance to pay those premiums. The group insurance is “affordable” if the cost would exceed the “applicable percentage” of the employee’s income, 9.5 percent at the highest income level.

The IRS proposed a rule to implement the program defines “affordablility” solely in terms of the cost of  “self-only” coverage for the employee. If the cost of self-only coverage is under the limit but coverage for the employee and a spouse or dependents exceeds the percentage, both the employee and the spouse would be deemed to have access to minimum essential coverage. Thus, they would not be eligible for the exchange or any related subsidy. GAO was quite concerned that the proposed rule undermined the purpose of PPACA. Many people who commented on the proposed rule think that’s not what Congress intended.The IRS explained that section 36B(c)(2)(C) of the Internal Revenue Code specifies that the affordability computation must be based on the employee’s self-only coverage.

Subsection (b) explains how the amount of premium assistance is determined, and it is based on the cost to cover the taxpayer, the taxpayer’s spouse, and any dependent who is covered through the Exchange. The cost of the plan that a taxpayer has selected is compared to the cost of the second least expensive “silver” plan in the individual market in the taxpayer’s rating area which is offered through the same Exchange. The cost of self-coverage is used to determine the amount if the taxpayer files as unmarried, not a surviving spouse and not a head of household or buys self-only coverage. But for all other taxpayers, the comparable plan is family coverage.

In the final rule published May 23, 2012, the IRS deleted the proposed language that made the cost of self-coverage the standard for employees with families.Those provisions are reserved for later clarification.The agency also opened a new comment period, which closes August 21, 2012.