The looming Obamacare disaster in Colorado

Mandatory Medicaid application 

Thousands of Coloradans who buy their own health insurance recently received notices that their existing plans did not meet ACA standards and were being terminated Jan. 1, 2014. That meant it was time to shop for new coverage, and the first stop for many was connectforhealthco.com, the official Obamacare exchange for the state.  The site provides a quick eligibility test based on your income, promising generous assistance with premium payments for those applicants who earn between 133% and 400% of Federal Poverty Level (FPL).  For example, a single individual earning as much as $45,000 a year would be eligible for subsidized premiums according to the site’s quick-eligibility-determination.  What Coloradans found when they actually tried applying for insurance was a different story.

Applicants making less than 133% of FPL are quickly advised (correctly) by the web site to apply for Medicaid, because they are not eligible for subsidies on the exchange.  However individual applicants earning between 133% and 400% of FPL are still redirected to the Medicaid application.  In fact, the site will not let an applicant proceed further into the process until they have a “Medicaid Rejection” number from the state.  The only way that an applicant can proceed to apply for exchange health insurance without applying for Medicaid first is to decline the other benefits of the ACA that they are legally entitled to.  This means they will not receive the advance premium credit, eligibility for CSR plans, nor the lower out of pocket caps on their policy.

Why this is a disaster in the making: “please hurry up and reject me from Medicaid!”

By forcing thousands of people who stand zero chance of qualifying to apply for Medicaid anyway, Obamacare is adding to the already burdened backlog of Medicaid applications on file in Colorado.  Time is of the essence for many, as their existing policies only run through Dec. 31, and current wait times for a Medicaid application can stretch into months.  This will undoubtedly leave people uninsured as they patiently await a Medicaid rejection and the application sits in a state of limbo on the Exchange.  Once they apply for Medicaid, their life is literally in the hands of state bureaucrats, and many will find themselves pleading with the state to “please, reject me from Medicaid already so I can get my insurance!”  Colorado applicants cannot default back to the federal exchange and avoid this mess either, they are stuck with the Colorado exchange by law.

How it should have been done

The state is trying to comply with an overly complicated portion of the ACA which severely restricts the benefits of persons buying through the exchange if they are eligible for other government coverage like CHP and Medicaid.  So it’s understandable that they would want to shunt a lot of people to the Medicaid application by default.  But there are going to be thousands of applicants with income between 133% and 400% of FPL who can safely be routed around the Medicaid application.  Your average individual applicant making $35,000 is clearly not eligible for Medicaid, but is still eligible for the rest of the benefits of the ACA.  There is absolutely no reason to add them to the roles of Medicaid applicants.  The state has tax return data on file, and is no doubt tied into the IRS via whatever database needed to verify income levels and expedite the process.  Many persons in the (133-400) range could have easily been routed around the Medicaid application.

Furthermore, the Exchange should allow an applicant to simply check a box testifying that they are not eligible for any coverage that would disqualify them from subsidies on the exchange, and that their income is below 400% of FPL.  This would move the fight to the IRS’s territory if they believe the applicant should have been on another government program instead of the subsidized exchange.   And that’s where the fight should be.  Let the IRS audit and ferret out the “people who are on the exchange but should have been on Medicaid.”  Frankly, it’s ridiculous that the category even exists.

Why not just apply without the advance premium credit and get it all back when you file?

Applicants in the 133%-400% of FPL range have the option of trying to get reimbursed for the premium assistance when they file their tax return.  The problem is, the applicant loses other benefits by doing this.  The applicant qualifies for a lower out-of-pocket maximum for the year, and is also possibly eligible for participation in Cost Sharing Reduction plans, but must decline these benefits if he wishes to apply without going through Medicaid first.  Additionally, nobody knows what the IRS forms and worksheets are going to look like for tax year 2014, and we probably won’t see them until late next year.  If there are any surprises with claiming your subsidy at filing time, it will be far too late to make any adjustments to the plan you purchased, not only for 2014 but for 2015 as well (because you won’t file your 2014 return until after the Obamacare open enrollment period for 2015).  Truly a planning nightmare.

What’s so bad about applying for Medicaid?

The Medicaid application is nothing short of a full body cavity search, requiring you to list bank accounts, stocks, savings accounts, and even your cars.  You get to tell the state about your mortgage, your heating bill, and even the number of rooms in your house dedicated to your home business.  All just so you can get a “rejection number” needed to proceed with your application on the Exchange.  Colorado’s Obamacare exchange stands as a monument government’s inability to connect two points with a straight line.