New Health Insurance Marketplaces Support Work
By Elizabeth Lower-Basch
This post originally appeared in "Spotlight on Poverty: The Source for News, Ideas, and Action."
Much attention has been paid in the last few weeks to the Affordable Care Act (ACA), so-called Obamacare. So far, most of that discussion has ranged from the launch of the federal website to the overall effectiveness of the ACA in providing healthcare insurance to those who need it. One element that has not been discussed much, however, is the enormous benefit the full implementation of the ACA will be in promoting work and ensuring that low-wage workers will not lose access to health insurance by accepting a job.
The truth is the Affordable Care Act fills a critical gap in coverage for low-income workers. Most people in the U.S. are covered by health insurance that is provided through a job, either their own or a parent or spouse’s. Retirees receive health insurance from Medicare. And most low-income children who are not covered by employer-sponsored insurance are eligible for public health insurance through Medicaid or the Children’s Health Insurance Program (CHIP). But, until the implementation of the ACA, many working poor adults were out of luck. As of January 2013, workers without children were completely ineligible for public health coverage in half the states, while other states provided only limited insurance packages, or capped enrollment. In January 2013, 33 states set the Medicaid eligibility limit for parents at less than the federal poverty level–around $19,500 for a family of three–with 16 states limiting eligibility to parents with incomes less than half that threshold.
These eligibility limits have been particularly harmful because low-wage and part-time workers are far less likely than higher-earning workers to be offered employer-sponsored health insurance or to be able to afford it even when offered. Based on a March 2013 survey, the Bureau of Labor Statistics reports that just 28 percent of the workers with wages in the lowest 10 percent of the wage distribution – those earning $8.75 an hour or less – were offered insurance coverage, and just 11 percent of such workers participated in employer-based health insurance. By contrast, 94 percent of those with wages in the top 25 percent – those earning $27.60 an hour or more – were offered coverage. Part-time workers were also far less likely to be offered health insurance than full-time workers. As a result, among adults ages 18-64, those who worked but were employed less than year-round full-time were actually more likely to be uninsured than those who did not work even a single week.
This means that workers at the bottom of the labor market, especially parents, have too often been caught in a bind. If they take the low-wage jobs they can find, they are highly unlikely to be offered employer-based health insurance that they can afford. But even these low earnings are often enough to cause them to lose eligibility for Medicaid. They have had to choose between jobs and health insurance. Parents exiting from TANF cash assistance are typically eligible for 12 months of transitional Medicaid, after which they find themselves caught facing the same dilemma as other low-wage working families.
As of January 1 of the new year, states will be able to remove this predicament. By expanding Medicaid to all individuals up to 133 percent of the poverty level, states can ensure that no one will lose their health insurance by taking a job, even if it is part-time or low-paid. In addition, workers at higher income levels who are not offered affordable employer-provided coverage will be eligible for subsidies that will help them make co-payments and deductibles as well as cover insurance premiums.
Some politicians and pundits have expressed deep concern about the possible disincentives to work caused by the loss of means-tested benefits as earnings increase. In most cases, these concerns are overblown or based on false or misleading information. However, the loss of Medicaid benefits is one place where there is a harmful “cliff effect”—and states now have the power to fix it. As of this writing, only 26 states have committed to expanding Medicaid in 2014. The remainder should do so as soon as possible—for the sake of good health, for the sake of reducing poverty, and for the sake of promoting work.