Leaving the coverage gap? This SEP’s for you.

When the Affordable Care Act was written, it called for Medicaid expansion in every state. The idea was that all adults with household income up to 138% of the poverty level would be covered by Medicaid starting in 2014, as long as they met the immigration criteria for Medicaid. (In most states, that means five years of being lawfully present in the United States.)

Six strategies for avoiding the ACA’s coverage gap

But in 2012, the Supreme Court ruled that states could not be forced to expand Medicaid, and as of early 2023, there are still 12 states that have left their Medicaid eligibility guidelines largely unchanged. (South Dakota will expand Medicaid in July 2023, under the terms of a ballot measure that voters passed in 2022. And Georgia will partially expand Medicaid, with a work requirement, as of July 2023.)

Unfortunately, the ACA also prohibits premium subsidies for applicants with income under 100% of the poverty level (unless they’re lawfully-present residents who have not been in the U.S. long enough to qualify for Medicaid, or for 2021 only, eligible for premium subsidies because they’ve received at least one week of unemployment compensation in 2021).

People with income below the poverty level were supposed to be eligible for Medicaid, so the ACA did not include a provision for them to get premium subsidies.

The coverage gap

After the Supreme Court ruled in 2012, it became apparent that numerous states would not expand their Medicaid programs, and that millions of people would be stuck in a health insurance desert – unable to qualify for Medicaid, and also unable to qualify for premium subsidies. But the political environment was too contentious for any sort of legislative fix, and that has continued to be the case in the ensuing years.

As a result, there are about 2 million people in the coverage gap in 11 of the states that have not expanded Medicaid. (Wisconsin has not expanded Medicaid under the ACA, but there is no coverage gap in Wisconsin as the state does provide Medicaid for residents with income up to the poverty level. As noted above, South Dakota will expand Medicaid in mid-2023, eliminating its coverage gap. And Georgia’s coverage gap will be reduced in mid-2023, but the state’s addition of a work requirement to its partial Medicaid expansion means that far fewer low-income people in the state will actually qualify for Medicaid than would have been the case with a no-strings-attached expansion of Medicaid.)

The special enrollment period

In 2015, HHS added a special enrollment period (see page 171 of the Benefit and Payment Parameters) for people in the coverage gap who experience an increase in income that makes them eligible for premium subsidies. The new rules are codified in 45 CFR 155.420(d)(6)(iv).

The SEP applies to an individual who:

• Lives in a state that hasn’t expanded Medicaid.
• Was previously ineligible for premium subsidies solely due to having an income below the poverty level.
• Was also ineligible for Medicaid because the state has not expanded coverage
• Experiences an increase in household income to an amount at or above 100% of the poverty level, and thus eligible for premium subsidies. This could occur due to a simple increase in income, or due to a marriage between two people who both had income just below the poverty level, but whose combined income is above the poverty level for two people.

The individual/couple then has a 60-day window to enroll in a health plan through the exchange, with premium subsidies.

In states that haven’t expanded Medicaid, people in the coverage gap are allowed to purchase coverage – on or off-exchange – if they pay full price for the premiums. This is a very rare situation, as most people with income below the poverty level cannot afford to pay for unsubsidized health insurance. But if they do, they are still eligible to switch to a plan with subsidies if their income increases to at least 100% of the poverty level. The fact that they have obtained alternate health insurance does not eliminate their SEP.

The SEP applies to people in the coverage gap in the following states: Alabama, Florida, Georgia (until July 2023 for people who can meet the work requirement rules), Kansas, Mississippi, North Carolina, South Carolina, South Dakota (until July 2023), Tennessee, Texas, and Wyoming.

Prior to 2020, this SEP was an exception to the rule

It’s important to note that prior to 2020, a change in income was not otherwise a qualifying event for anyone who wasn’t already enrolled in a plan through the exchange.

• Low-income residents in states that have expanded Medicaid are not eligible for an income-related SEP in the exchange unless they were already enrolled in Medicaid and then became ineligible for Medicaid due to an increase in income. (The qualifying event, in that case, is loss of coverage, since they’re losing access to Medicaid; note that during the COVID pandemic, states have not terminated Medicaid coverage unless an enrollee requests the termination or moves out of state, but regular eligibility redeterminations and disenrollments resume in April 2023.)

• From 2014 through 2019, people enrolled in plans outside the exchange were not eligible to switch to an exchange plan when they experienced a change in income that made them eligible for subsidies. For example, a person enrolled in an off-exchange plan with an income too high for subsidies could not switch to an exchange plan in order to obtain subsidies if she lost her job and experienced an income decrease mid-year. (Loss of a job is not a qualifying event; neither was a change in income — through 2019 — unless you were already enrolled in a plan through the exchange.) But HHS created a new SEP for people in this situation (it is optional for state-run exchanges). People utilizing this SEP have to prove that they had minimum essential coverage (outside the exchange) prior to the income change that makes them subsidy-eligible. But there is no prior coverage requirement for the SEP that applies to people in the coverage gap whose income increases to a subsidy-eligible level, since obtaining coverage while in the coverage gap is financially unrealistic.

(If you’re uncertain about your eligibility for a special enrollment period, call (619) 367-6947 to discuss your situation with a licensed insurance professional.)

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.