The Affordable Care Act will expand health care coverage to millions of Americans. Among other key provisions, it ends discrimination against those with pre-existing conditions, allows young adults to stay on their parents’ plans until age 26, provides subsidies to make coverage more affordable, and expands Medicaid to low-income people who cannot afford insurance.
In ruling on Obamacare’s constitutionality, however, the Supreme Court created a potential coverage gap affecting low-wage workers and other poor adults, who may be left out of the Affordable Care Act’s promise.
While the Supreme Court declared Obamacare constitutional, one part of the ruling struck down the health care law’s penalty for states that choose not to participate in the law’s Medicaid expansion. In short, while the federal government can offer states the “carrot” of increased Medicaid funding to expand coverage to low-income populations, it cannot use the “stick” of taking away existing Medicaid dollars from states that do not want to comply. States can choose whether or not to extend health coverage to low-income people.
Seven Republican governors have already announced their intention to reject the Medicaid expansion, which, if implemented, would give more than 4 million people in those states access to affordable health coverage. Workers below the poverty line in those states, however, are in a double bind: They can’t access coverage through the Medicaid expansion but are ineligible for Obamacare subsidies to help people above the poverty line afford health coverage. This creates a coverage gap for low-wage workers.
To see how this coverage gap would play out, let’s examine the hypothetical situation of a low-wage worker named Jan and her neighbor John, who live in one of these seven states where Republican governors say they will reject the Medicaid expansion.
Prior to Obamacare, John was uninsured, as annual premiums for someone his age total about $8,495—approximately one-third of his income. An Obamacare subsidy, however, now provides him with $6,768 per year toward the purchase of health insurance, leaving him with only $143 a month in payments, or 6.91 percent of his income. Under the new health law, John will finally be able to access insurance.
Unfortunately, Texas’s refusal to expand Medicaid creates a coverage gap for workers, similar to Jan, who are living in poverty and thus ineligible for Obamacare subsidies, which ensure that people just above the poverty line do not pay more than 2 percent of their income for health care. The average unsubsidized health insurance premium for a 55-year-old in 2014 is expected to be $8,495—96 percent of Jan’s entire annual salary, and obviously unaffordable for a low-wage worker without some assistance. The U.S. Department of Health and Human Services has announced that people below 133 percent of the poverty line in states that refuse the Medicaid expansion will not be assessed a penalty for not purchasing insurance that is unaffordable to them. But that doesn’t change the fact that Jan will remain uninsured and will have to hope and pray that nothing goes wrong with her health.
States have many good reasons to expand their Medicaid coverage. It will create a healthier workforce, bring jobs into the state by increasing the demand for health care and other goods and services, and provide greater economic security for millions of families. And it’s almost entirely covered by the federal government, which is paying 100 percent of the costs for the first two years and 90 percent of the costs in the long term.
But, as the case of Jan and John proves, it’s also about fairness. States that refuse the expansion are leaving millions of vulnerable families struggling to make ends meet without health care, as their neighbors and friends are able to take advantage of new subsidies and insurance reforms that make gaining access to health care easier. These are often the workers who are cleaning our offices, preparing our food, or caring for our aging parents.
States have a responsibility to ensure that all of their citizens are able to access the promise of affordable health coverage.
Melissa Boteach is the Director of the Poverty and Prosperity program at the Center for American Progress.
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Senior Vice President, Poverty to Prosperity Program