Why the Poorest of the Poor Get No Help Paying for Health Insurance

Why the Promise of Obamacare Misses Those Living in Poverty

Man in business suit handing money to a homeless man.
In many states, people living below the poverty line don't qualify for Medicaid or for help paying for health insurance. Image © Design Pics/Con Tanasiuk/Getty Images

In many states, the poorest of the poor get no help paying for health insurance and no help from Medicaid despite the reforms of the Affordable Care Act. People living in poverty in one of the states that has chosen not to expand Medicaid are too poor to qualify for a health insurance subsidy and don’t qualify for Medicaid under their state’s Medicaid eligibility rules. Absurdly, for the nation’s most needy, the Affordable Care Act has done the least.

Here’s how this happened.

Before the ACA, getting Medicaid was difficult. In most states, you had to be very low income and also fall within a category of particularly needy people such as pregnant women, children, those caring for a child under the age of six, the disabled, or the aged. If you were poor but didn’t also fit within one of those categories, you weren’t eligible for Medicaid.

How Obamacare Was Supposed to Work

The original intent of the ACA was to do away with the old, complicated Medicaid eligibility rules and give Medicaid to everyone making up to 138% of federal poverty level. That would provide free health insurance coverage with no (or very low) deductibles and copayments. Medicaid was to be the nation’s health insurance safety net.

Those who were not poor enough to qualify for Medicaid under the expanded Medicaid eligibility rules, but couldn’t afford to buy health insurance outright, would be given financial assistance to buy private health insurance on a health insurance exchange according to this plan:

  1. Those making up to 138% of FPL would get full Medicaid coverage for free.
  2. Those making from 100%-250% of FPL would get multiple subsidies.
  1. Those making 250% of FPL-400% of FPL would get the premium tax credit subsidy to help pay their monthly health insurance premiums.

But, That’s Not What Happened

Many Republican-led states objected to expanding Medicaid to thousands or even hundreds of thousands of new recipients in their states. Their leaders saw it as expanding an expensive social benefit program that would cost taxpayers too much.

The Supreme Court ruled that the federal government couldn’t punish states for not expanding Medicaid by taking away their federal Medicaid funding. This ruling effectively made Medicaid expansion optional for states, since there was no longer any financial penalty for non-compliance. Not surprisingly, most Republican-led states chose not to expand their Medicaid programs.

In these states, the safety net of Medicaid for everyone making less than 138% of FPL doesn’t exist. Unfortunately, due to the way the subsidy provisions of the ACA are worded, those folks aren’t eligible for subsidies to help make buying health insurance more affordable, either.

Subsidies are only available to those making between 100% and 400% of FPL, not to those making less than 100% of FPL. The ACA's authors intended that everyone making less 100% of FPL would be covered by Medicaid, so wouldn’t need a subsidy. The overlap area between 100% of FPL and 138% of FPL was to allow a buffer to decrease the rate of people churning back and forth between Medicaid and subsidized health insurance as their incomes varied from month to month.

Now, in states that have chosen not to expand Medicaid, those making less than 100% of FPL don’t get Medicaid and they don’t get a subsidy. The poorest of the poor get nothing unless they can eke out enough income to reach poverty level. Too Poor to Qualify for a Health Insurance Subsidy? What Now?

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