Last month, the House of Representatives passed its so-called “One Big, Beautiful Bill” to extend tax cuts to wealthy individuals and corporations while reducing federal support for Medicaid and Marketplace health insurance coverage. This budget reconciliation bill cuts $200 billion in Federal spending for the premium tax credits (PTCs) that support enrollees’ premium payments on the Affordable Care Act (ACA) Marketplaces—although, per the Congressional Budget Office’s practice for policies that mirror pending regulations, the official cost estimate reflects only half of this amount. This cut to PTCs is driven in part by the bill’s new paperwork requirements and financial burdens that would make it harder for eligible individuals and families to enroll in and keep Marketplace coverage; new eligibility rules that prohibit certain immigrants and individuals who do not meet new Medicaid enrollment requirements comprise a second set of spending and coverage cuts. These changes to Marketplace rules would result in approximately 4 million people losing health insurance coverage. This blog profiles some of the Marketplace enrollees who would face new and sometimes unsurmountable obstacles to maintaining their Marketplace coverage if the reconciliation bill becomes law.
Background
The House-passed reconciliation bill creates new limitations within Marketplace enrollment processes, such as shortening the annual open enrollment window, eliminating automatic re-enrollment and provisional eligibility for PTCs, creating more extensive and harder-to-navigate income verification requirements for PTCs and the cost-sharing reductions (CSRs) that enable enrollees to access care, and shortening the timeframe for resolving verification problems before consumers lose access to PTCs. The net result would be that unless Marketplace enrollees actively shop for and enroll in a new health plan every year, have few (if any) changes in their income or family status year-to-year, can easily verify their prior year income, and can provide sufficient documentation to explain any discrepancies between their expected income and federal tax data, they may risk losing their health insurance.
Marketplace enrollees and new applicants would face a paperwork thicket
The reconciliation bill would leave millions of people eligible for but unenrolled in Marketplace coverage—many of whom would be caught in a morass of new paperwork and verification requirements. In general, people who report changes in income or family status that the Marketplace cannot verify through tax data would risk losing their PTCs until they provide acceptable proof of these changes; people who cannot pay the full premium while they wait for their PTC eligibility to be verified would lose their coverage. Some examples include:
- Families with newborns. Marketplace enrollees must provide Social Security numbers for all family members; failure to provide a Social Security number for a single family member automatically triggers a data matching issue (DMI) with the Marketplace and delays PTC eligibility for the entire family until the family can provide a verified number.
A family in Richmond, Virginia can expect to wait 6 weeks for the Social Security Administration to mail out their new baby’s Social Security number—even if they apply for the Social Security number at the hospital. If this Virginia family reports the birth to the Marketplace within the 60-day special enrollment period for the baby’s coverage, but before they have the baby’s Social Security number, this would prompt a DMI. In this case, the entire family would lose their PTCs and must pay their full premiums to maintain health insurance coverage. If they can’t pay the full premium, they would lose their coverage and need to wait for the next open enrollment period to have the Marketplace verify their eligibility for PTCs.
Or, if the baby is born shortly before or during open enrollment, the family is unlikely to have the baby’s paperwork in-hand in time for the Marketplace to verify their eligibility for PTCs before the beginning of the plan year. In this case, the family would need to pay the full first month’s premium—known as a “binder payment”—to start their coverage. If they can’t afford this payment, they would be without Marketplace coverage for the next plan year.
- People who get married. In addition to creating a new family, marriage creates a new tax unit that does not match existing tax data. After a June wedding, for example, a couple would report their new marital status to the Marketplace within the 60-day special enrollment period related to this life event. Their new household information would not be verifiable with previous years’ tax data and would most likely trigger a DMI. At this point, the couple would lose their PTCs and need to provide proof of their marriage and newly combined income for Marketplace verification. Should this chain of events play out, they would need to pay their full premiums, without the help of PTCs, or lose their Marketplace insurance until the next open enrollment.
- People who get divorced. A family breakup through divorce will result in new, smaller household units that are not reflected in prior years’ tax data, as well as income changes that will require a new eligibility determination for PTCs. These changes, once a newly-divorced couple reports them to the Marketplace, would likely result in a DMI. Both households would provide proof of the divorce and their newly-independent income for Marketplace verification, and would need to pay their full Marketplace premiums without PTCs until the DMIs are resolved or else lose their coverage.
- People who are laid off. When a technology worker in Silicon Valley is part of a company-wide downsizing, or a retail worker is caught in bankruptcy-related layoffs, the expected income they report on a coverage application will likely be lower than the income on their last tax return. This discrepancy will result in a DMI, which would delay their eligibility for PTCs until the DMI is resolved. They may need to make their full binder payment in order to activate their coverage—even if, after losing their job, they cannot afford this expense. In addition, workers who lose their jobs outside of open enrollment and apply for coverage through a Special Enrollment Period could face even more paperwork to demonstrate their eligibility for PTCs.
- Low-Income Workers. If tax data indicates that a home health worker or certified nursing assistant earns less than the federal poverty level (approximately $32,000 for a family of four) when they apply for Marketplace coverage, these workers would need to provide additional documentation to qualify for PTCs. Even at low income levels, workers would not be considered provisionally eligible for PTCs and would have to make a full premium payment if their income verification issue is not resolved promptly.
- People with inconsistent income. A wide range of workers can experience considerable year-to-year fluctuations in their income. Some examples include:
- A self-employed plumber
- A freelance designer whose client load ebbs and flows
- A music teacher whose roster of students changes each year
- An hourly worker who can’t control how many hours they have on each shift
- An entrepreneur who leaves a larger enterprise to start their own business
If these workers—or people like them—apply for new or renewed Marketplace coverage, their inconsistent income would mean that tax data might not verify their eligibility for PTCs. They would then have to provide additional documentation to the Marketplace, and potentially pay their full premium to maintain coverage while the Marketplace solves this discrepancy. This enrollment barrier could affect more than 3 million small business owners and self-employed workers who hold Marketplace coverage.
Other proposals deepen the paperwork thicket
People such as newlyweds, self-employed workers, and families that welcome new babies are even more likely to end up uninsured thanks to other proposed changes to Marketplace enrollment. For example, a 44-day open enrollment period—rather than the current 76-day timeframe—provides consumers significantly less time to solve DMI problems and provide Marketplaces with the documentation they need to enroll in coverage. When shorter enrollment timeframes are combined with the elimination of provisional eligibility, consumers who experience problems with their enrollment paperwork are less likely to retain their coverage.
Similarly, the Trump Administration’s near-elimination of enrollment assistance and consumer outreach would mean that enrollees may not even know that enrollment processes have changed and would have a hard time finding help with their enrollment paperwork once they know they need to take action.
Finally, the enhanced premium tax credits (ePTCs), which provide greater help with Marketplace premiums to lower- and higher-income families than the original ACA premium subsidies, are slated to expire at the end of 2025. Unless Congress amends this bill to extend ePTCs, or passes other legislation to maintain this higher-level of premium support, Marketplace enrollees will face higher premiums to enroll in coverage comparable to what they hold today. And because ePTCs induce lower-risk and lower-spending individuals to purchase Marketplace plans, they reduce average total premiums by 5 percent before subsidies are applied. Individuals and families who must pay the full first-month premium to maintain their coverage, thanks to paperwork problems, would therefore face an even higher bill.
Takeaway
Now it’s the Senate’s turn to craft reconciliation legislation. Should Senate policymakers decide to mirror the House’s determination to complicate the Marketplace eligibility and enrollment process, millions of eligible individuals and families, including new families, laid-off workers, and small business owners, could be caught in the resulting paperwork thicket and be left without health coverage.
