Children's Health Insurance: Opportunities Exist for Improved Access to Affordable Insurance
Released: 2012-07-23T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: PPACA sought to increase access to affordable health insurance, and major provisions, such as a tax credit to offset the cost of private insurance premiums, will become effective in 2014. GAO estimated the extent to which (1) uninsured children would be eligible for Medicaid, CHIP, or the premium tax credit under PPACA, and (2) children would experience a change in eligibility among Medicaid, CHIP, and the premium tax credit under PPACA because of income changes. GAO also assessed CMS steps thus far to help states enroll children and related state challenges. GAO applied proposed and final 2014 PPACA eligibility rules to nationally representative 2009 data from the U.S. Census Bureau and interviewed officials from CMS and IRS, two federal agencies responsible for implementing relevant PPACA provisions, and six states that received federal funds for enrollment efforts.

section_title: What GAO Found
paragraphs: GAO estimates that under the 2010 Patient Protection and Affordable Care Act (PPACA), about three-quarters of approximately 7 million children who were uninsured in January 2009 would be eligible for Medicaid, the State Children’s Health Insurance Program (CHIP), or the new premium tax credit. The remaining children had family incomes too high to be eligible, were noncitizens, or would be ineligible for the premium tax credit because they would be considered to have access to affordable employer-sponsored insurance per the Internal Revenue Service’s (IRS) proposed affordability standard, in which IRS interpreted PPACA as defining affordability for an employee’s eligible family members based on the cost of an employee-only plan. Some commenters raised concerns that IRS’s interpretation was inconsistent with PPACA’s goal of increasing access to affordable health insurance as it does not consider the higher cost of family insurance and could result in some children remaining uninsured. Under PPACA, CHIP is not funded beyond 2015, and states may opt to reduce CHIP eligibility or eliminate programs in fiscal year 2020. Without CHIP, more children could become uninsured. In May 2012, IRS finalized its rule but deferred finalizing the proposed affordability standard.

GAO estimates that about 14 percent of children in January 2009 who met 2014 PPACA eligibility criteria for these programs experienced a change in household income that would affect eligibility within 1 year. Changes in eligibility among children in states without policies allowing them to remain eligible for Medicaid and CHIP for a full year were estimated to be higher than in states with such policies. Frequent eligibility changes could deter enrollment if the process for changing enrollment is burdensome.

The Centers for Medicare & Medicaid Services (CMS) has provided states with financial incentives and technical guidance to improve enrollment and to implement PPACA provisions. States reported challenges to enrolling eligible children, including the need for guidance to implement certain provisions—which CMS indicated was forthcoming—and state budget constraints.

section_title: What GAO Recommends
paragraphs: GAO recommends that in future rule making, the Secretary of the Treasury, in consultation with the Commissioner of Internal Revenue, consider the impact of the proposed standard for determining affordability of employer-sponsored insurance on eligible family members, and whether it would be consistent with PPACA to adopt an approach that would consider the cost of insuring eligible family members, or as necessary, seek clarification from Congress regarding its intent with respect to this standard. HHS and Treasury were given a draft of this report for review, but neither provided formal comments. Treasury provided technical comments, which GAO incorporated as appropriate.

section_title: Letter
paragraphs: Approximately 7 million children in the United States had no health  insurance for some or all of 2010, many of whom were in families with low  incomes. Medicaid and the State Children’s Health Insurance Program  (CHIP), federal-state programs that finance health care for certain low- income populations, play an important part in providing health insurance  for low income children.insurance are eligible for these publicly financed programs. In addition,  some uninsured children who are eligible for these programs do not  enroll.

However, not all children who lack health  Recent federal legislation has aimed to maintain and increase Americans’  access to affordable health insurance. The Patient Protection and  Affordable Care Act (PPACA), as amended by the Health Care and  Education Reconciliation Act of 2010, extended CHIP funding through  2015, prohibited states from lowering children’s existing Medicaid and  CHIP eligibility through 2019, and included provisions that aim to expand  adults’ and certain children’s eligibility for and enrollment in these  programs. While the majority of uninsured individuals gaining eligibility  for health insurance under PPACA are adults, who make up the majority  of the uninsured population, children also gain new eligibility—particularly  beginning in 2014, by which time major provisions of PPACA must be in  place, including the following:

American Health Benefit Exchanges (hereafter referred to as  exchanges), which are marketplaces where eligible families and  individuals can purchase private health insurance.

A new refundable health insurance premium tax credit generally paid  on an advance basis (hereafter referred to as the premium tax credit)  to offset the cost of health insurance purchased through state  exchanges by eligible low- to moderate-income families with incomes  too high to qualify for Medicaid or CHIP.

Methods to determine eligibility and increase enrollment, which will  generally be consistent across Medicaid, CHIP, and the new premium  tax credit.

PPACA builds upon prior federal legislation, namely the Children’s Health  Insurance Program Reauthorization Act of 2009 (CHIPRA), which  established new Medicaid and CHIP enrollment policy options for states,  and incentives, such as performance bonuses, for adopting them.

States, the Department of Health and Human Services (HHS), and the  Department of the Treasury all play a role in implementing this  legislation. While states manage and run their individual Medicaid and  CHIP programs, and may choose to run their own exchanges, HHS’s  Centers for Medicare & Medicaid Services (CMS) and the Department of  the Treasury’s Internal Revenue Service (IRS) are responsible for  implementing PPACA’s eligibility rules. For example, CMS is responsible  for implementing changes to Medicaid eligibility under PPACA in addition  to providing guidance, grant funding, and other assistance to the states;  overseeing enrollment provisions of CHIPRA and PPACA; and providing  performance bonuses to states that meet or exceed specified Medicaid  enrollment goals. IRS is responsible for overseeing tax-related provisions  of PPACA, including issuing regulations to implement certain eligibility  rules for the premium tax credit. As states, CMS, and IRS work to  implement the various PPACA provisions, questions remain regarding  PPACA’s anticipated effect on children’s access to affordable health  insurance. For example, uncertainty exists regarding whether some low- income children will remain ineligible for any of these types of assistance,  whether changes in eligibility caused by shifting family circumstances or  differences in eligibility between children and their parents could deter  enrollment, and whether states will be able to fully implement key  provisions of PPACA by 2014.

Because of your interest in ensuring that all children have access to  affordable health insurance, you asked for information about children’s  access to health insurance under PPACA. This report examines the  following questions:  1.  To what extent would uninsured children be eligible for Medicaid,  CHIP, or the premium tax credit under PPACA? 2.  To what extent would children experience a change in eligibility  among Medicaid, CHIP, or the premium tax credit because of  changes in household income during the course of a year, under  PPACA? 3.  What steps has CMS taken thus far to help states enroll eligible  children, and what challenges have states encountered?

To examine the extent to which uninsured children would be eligible for  Medicaid, CHIP, or the premium tax credit under PPACA, we analyzed  2009 data from the Survey of Income and Program Participation (SIPP)— a nationally representative survey conducted by the U.S. Census Bureau.  The SIPP follows households over a multiple-year period and collects  relevant information for each individual on a monthly basis, such as type  of health insurance (if any), amount and types of income, age, citizenship  status, and state of residence. To determine the reliability of SIPP data,  we reviewed related documentation and conducted electronic testing for  missing data, outliers, and apparent errors, and determined that the SIPP  data were sufficiently reliable for our purposes. For purposes of this  analysis, we used final or proposed 2014 eligibility rules in place as of  April 2012. To estimate the percentage of uninsured children that would  be eligible for Medicaid, CHIP, or the premium tax credit, we applied final  CMS and proposed IRS 2014 PPACA eligibility rules to SIPP data  representing the United States population of noninstitutionalized children  ages 0 through 18 in January 2009. Specifically, we calculated  household income expressed as a percentage of the federal poverty level  (FPL), based on IRS and CMS rules for counting household income and  family size for Medicaid, CHIP, and the premium tax credit. We compared  these calculations to federally specified FPL eligibility levels for the  premium tax credit and Medicaid and to state-specific Medicaid and CHIP  FPL eligibility levels, accounting for variation in eligibility levels for  children of specific ages. We also considered other eligibility criteria, such  as citizenship status, in our analyses. The estimates are based on 2009  data and do not project forward to 2014; rather, they illustrate what  uninsured children’s eligibility for health insurance assistance would be  had 2014 PPACA eligibility rules as issued by CMS and IRS to date been  in place in 2009. (See app. I for more information on our analysis of SIPP  data and limitations of the analysis.) We also interviewed IRS officials and  reviewed comments submitted by state agencies and certain other  organizations in response to IRS’s 2011 proposed rule implementing the  premium tax credit.

To estimate how many changes in eligibility within 1 year would have  occurred among children eligible for Medicaid, CHIP, or the premium tax  credit because of changes in household income if the proposed IRS and  final CMS 2014 PPACA eligibility rules had been in place in 2009, we also  relied on the SIPP analysis. In developing our estimates, we considered  whether states had policies—known as continuous eligibility—that  allowed children to remain eligible for Medicaid and CHIP for a full year,  regardless of changes in household income. We also analyzed the extent  to which the frequency of eligibility changes differed among children living  in states with such policies versus children in states without such policies.

To identify the steps that CMS has taken to help states enroll eligible  children, and the challenges that states have encountered, we reviewed  CMS data on grants and bonuses awarded to states, reviewed CMS  guidance implementing relevant provisions of CHIPRA and PPACA, and  interviewed CMS officials about plans for future guidance. To identify the  challenges that states have encountered, we spoke to Medicaid, CHIP,  and exchange officials from six states, which we selected from among  those states that had received a CHIPRA performance bonus reflecting  state progress in increasing enrollment of uninsured children in Medicaid,  or a PPACA grant reflecting state progress in implementing an  exchange.and national associations of state officials in response to CMS’s 2011   We also reviewed all comments submitted by state agencies  proposed rules implementing PPACA eligibility and enrollment  provisions.

We conducted this performance audit from June 2011 through June 2012  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The federal government has historically established minimum eligibility  requirements for Medicaid and CHIP and provided states with  considerable flexibility in expanding eligibility to individuals in households  with higher incomes. PPACA made numerous changes to existing federal  Medicaid and CHIP eligibility requirements and specified eligibility criteria  for new types of assistance, such as the premium tax credit. PPACA also  provided for a continued focus on certain CHIPRA initiatives; specified  additional policies to facilitate eligible children’s enrollment in Medicaid,  CHIP, and the premium tax credit; and included provisions to facilitate  children’s access to private health insurance. Federal and state  implementation of PPACA enrollment and eligibility provisions is under  way.
subsections: section_title: Current Eligibility Requirements and Enrollment Policies for Medicaid and CHIP
paragraphs: Eligibility for Medicaid and CHIP is limited to U.S. citizens and certain  legally residing immigrants and is generally based on household income  in relation to the FPL. For Medicaid, the federal government requires that  states cover children with household incomes at or below specific  eligibility levels, which range from 100 through 133 percent of FPL  depending on the age of the child. States have flexibility to increase  eligibility levels beyond the federally required levels for children of   specific ages. For example, several states have Medicaid eligibility levels  of 185 percent of FPL for infants, and a more limited number of states  also have eligibility levels higher than the federal requirement for children  older than age 1. Because Medicaid eligibility levels vary by children’s  age, some members of a given family may qualify for Medicaid, while  others do not. With CHIP programs, states cover children whose  household incomes are too high for Medicaid eligibility; most states’ CHIP  eligibility levels are between 200 and 300 percent of FPL. States use  different methods for counting household income; for example, some  states disregard portions of certain types of income, such as earned  income, and states have varying standards regarding which household  members to include when determining family size.

section_title: Eligibility Requirements for Medicaid, CHIP, and the Premium Tax Credit under PPACA
paragraphs: With regard to changes to children’s eligibility for Medicaid and CHIP and  eligibility specifications for the new premium tax credit, which are to be  fully effective in 2014, PPACA included the following provisions.

PPACA expanded Medicaid eligibility to children and adults under age  65 with household incomes at or below 133 percent of FPL. As a  result, minimum eligibility levels for Medicaid will generally be the  same for all family members. Some children with household  incomes higher than 133 percent of FPL will continue to be eligible for  Medicaid in states that have established higher eligibility levels for  children. These states are not allowed to lower their Medicaid  eligibility levels for children until fiscal year 2020.

PPACA required a uniform method of counting household income,  based on a household’s modified adjusted gross income (MAGI) to  determine eligibility for Medicaid, CHIP, and the premium tax credit.  As a result, household income for Medicaid and CHIP, as well as for  the premium tax credit, will be determined consistently in all states.

PPACA defined eligibility criteria for the new premium tax credit,  which will apply in all states. Similar to Medicaid and CHIP, eligibility  for the premium tax credit will be limited to U.S. citizens and legally  residing immigrants. Eligibility will also be limited to individuals with  household incomes between 100 and 400 percent of FPL. In addition,  to be eligible for the premium tax credit, an individual cannot have  access to public insurance such as Medicaid or CHIP or to affordable  employer-sponsored health insurance that provides a minimum  value.

A child’s eligibility for Medicaid, CHIP, and the premium tax credit can  change over time under PPACA as his or her household income  fluctuates. For example, a child who begins the year eligible for the  premium tax credit may become eligible for Medicaid or CHIP if  household income declines during the year. Conversely, depending on  the state, a child who begins the year eligible for Medicaid or CHIP may  lose eligibility for these programs if household income increases.

section_title: Enrollment Policies for Medicaid, CHIP, and the Premium Tax Credit under PPACA
paragraphs: PPACA also contained provisions to facilitate eligible children’s  enrollment in Medicaid, CHIP, and private health insurance subsidized by  premium tax credits. For example, PPACA extended funding for CHIPRA  outreach and enrollment grants through fiscal year 2015, prohibited states  from requiring in-person interviews for enrollment beginning in 2014,  provided for income to be verified through a federally managed hub of  data electronically accessible to states, and specified a coordinated  enrollment process, whereby with one federally defined uniform  application, states will assess families for eligibility for Medicaid, CHIP, or  the premium tax credit. PPACA also made funding available to states to  plan and implement exchanges, which will provide eligible individuals and  families—including those eligible for premium tax credits—the ability to  compare, select, and enroll in participating private health insurance plans  with standardized benefit and cost-sharing packages. Under PPACA,  exchanges must be established in every state by January 1, 2014, either  by the state itself or by the Secretary of HHS.

section_title: PPACA’s Private Health Insurance Market Provisions
paragraphs: Although not the focus of this report, PPACA also contained provisions to  facilitate children’s access to private health insurance, apart from the  provision of the premium tax credit. For example, as of September 2010,  PPACA prohibited health plans and issuers from limiting or denying  coverage for children under age 19 because of preexisting health  conditions. (See table 1.)

Implementing PPACA’s changes to Medicaid and CHIP eligibility  determination and enrollment policies and preparing for implementation of  the premium tax credit and other provisions of PPACA will require  significant state and federal efforts. In August 2011, CMS and IRS  separately issued three proposed rules to implement key PPACA  provisions related to eligibility and enrollment for Medicaid, CHIP, and the  premium tax credit; the CMS rules were finalized in March 2012.  According to CMS, more detailed guidance, such as the specific  information to be collected in the uniform application or the nature of the  data available from the federal hub, will be distributed at a later date. The  IRS proposed rule specified how to calculate household MAGI for  determining premium tax credit eligibility, and the CMS rules adopted  these methods for determining Medicaid and CHIP eligibility, with certain  exceptions. IRS finalized its proposed rule in May 2012 with minimal  change to these methods. The IRS proposed rule also described the  standard for determining whether an individual has access to affordable  employer-sponsored insurance for purposes of determining eligibility for  the premium tax credit. Under the proposed affordability standard,  employer-sponsored insurance is considered affordable if the cost of a  self-only plan—meaning a plan that only covers the employee—does not  exceed 9.5 percent of household income. Under the proposed standard, if  one family member has access to affordable self-only employer- sponsored insurance, all other family members who are eligible to enroll  in the employee’s plan are also considered to have access to affordable  insurance and are therefore ineligible for the premium tax credit. In this  manner, the proposed rule applied the same standard to all family  members eligible for the employee’s plan, even if the cost of enrolling the  family as a whole exceeds the 9.5 percent threshold. In the preamble to  its proposed rule, IRS stated that the PPACA statute specifies using the  self-only insurance affordability standard for employees as well as for  spouses and dependents of an employee, citing a report issued by the  Joint Committee on Taxation that similarly interpreted the law. Some who  commented on the proposed rule suggested that it would be more  consistent with congressional intent to interpret the statute to require the  use of the cost to an employee of insuring all eligible family members in  determining access to affordable employer-sponsored insurance. In its  final premium tax credit rule, IRS confirmed that the proposed self-only  insurance affordability standard would apply to employees, but it deferred  a decision on the affordability standard for other eligible family members,  such as children, to future rule making. Therefore, because this report  focuses on children, the relevant affordability standard remains a  proposed standard, and is referred to as such for the remainder of the  report.

section_title: An Estimated Three- Quarters of Uninsured Children Would Be Eligible for Medicaid, CHIP, or the Premium Tax Credit under PPACA, but the Proposed Affordability Standard May Result in Some Children Remaining Uninsured
paragraphs: Over three-quarters of uninsured children in January 2009 would be  eligible for Medicaid, CHIP, or the premium tax credit under 2014 PPACA  eligibility rules, according to our estimates. Applying final CMS and  proposed IRS rules for 2014 program eligibility to 2009 SIPP data, we  estimate that on the basis of household income and other eligibility  criteria, such as citizenship, nearly 68 percent of the approximately   7 million children who were uninsured in January 2009 would be eligible  for Medicaid or CHIP—about 48 percent for Medicaid and about   20 percent for CHIP. In addition, 7.5 percent of the uninsured children  would be eligible for the premium tax credit. Nearly 13 percent of the  uninsured children were noncitizens for whom we did not estimate  eligibility because of limitations in the data.approximately 12 percent of uninsured children would be ineligible for   We estimate that the final  Medicaid, CHIP, or the premium tax credit. Specifically, 5.5 percent would  be ineligible because they were in families with a household income that  was too high—at greater than 400 percent of FPL. The remaining   6.6 percent would be ineligible because, though their families were  considered low-income in that they met the household income  requirements for the premium tax credit, they were considered to have  access to affordable employer-sponsored insurance based on IRS’s  proposed affordability standard. In particular, these children had at least  one parent with employer-sponsored insurance that had an estimated  cost below 9.5 percent of household income for a self-only plan. (See  fig. 1.)These children would not be automatically eligible for the premium  tax credit if the affordability standard were instead based on a family plan;  their eligibility would depend on the cost of the family plan to which they  had access. See appendix I for more information about our estimates.

The proposed affordability standard could potentially affect significantly  more children than the approximately 460,000 uninsured children we  estimated above under certain scenarios. Many children eligible for CHIP  have a parent with employer-sponsored insurance. Under PPACA,  CHIP is not funded beyond 2015, and, even if federal funding is  extended, states may opt to reduce eligibility levels for CHIP or eliminate   Without CHIP- CHIP programs altogether beginning in fiscal year 2020.funded Medicaid expansion or separate CHIP programs, we estimate that  an additional 1.9 million children who would otherwise be eligible for CHIP  would be considered to have access to affordable insurance under this  proposed standard and would be ineligible for the premium tax credit.(See fig. 2.)

In commenting on IRS’s proposed rule on eligibility for the premium tax  credit, some states and other organizations noted that IRS’s proposed  interpretation of access to affordable employer-sponsored insurance— defining affordability on the basis of the cost of a self-only plan, and not  on the cost of a family plan—could result in some children remaining  uninsured. They explained that although a self-only plan for the employee  may cost less than the 9.5 percent threshold, a family plan that would  also insure the employee’s eligible family members could exceed it. As a  result, some employees would not be able to afford the higher premiums  to insure their family members, who therefore could remain uninsured.  We did not estimate the cost associated with defining the affordability  standard based on the cost of a family plan. The cost of such a change  would depend on multiple factors, many of which remain uncertain, such  as the availability of CHIP funding beyond 2015, the extent to which  eligible families avail themselves of the premium tax credit, employer  decisions, and the extent to which additional enrollees could affect the  aggregate cost of premiums. The Congressional Budget Office has  commented on the high degree of uncertainty inherent in projecting the  future actions of employees and employers under PPACA as well as  other factors that may affect federal costs, such as the number of  individuals and families who will have household income in specific  eligibility ranges in future years.

We did not examine how many of the children estimated to be ineligible  for the premium tax credit because of access to affordable employer- sponsored insurance would become eligible if the affordability standard  were instead based on the cost of a family plan; the cost of family plans  available to employees who chose not to purchase them was not  available in the data we analyzed. However, separate data on the cost of  family plans among employees who purchased a family plan suggest that  some of these uninsured children, particularly those in families facing  higher-than-average premium contributions, could become eligible for the  premium tax credit if the affordability standard were based on the cost of  a family plan. For example, in a 2011 survey, the Kaiser Family  Foundation and Health Research & Education Trust found that on  average, employees contributed $4,129 annually for a family plan, or   28 percent of the total cost to the employer of an annual family premium,  which averaged $15,073. For a family of four with household income  equivalent to 250 percent of the FPL, $4,129 represents about 7 percent  of household income. However, the percentage of the annual premium  paid by employees ranged widely around this average, and 15 percent of  employees with family plans paid more than 50 percent of the annual  premium. For a family of four with household income equivalent to   250 percent of the FPL, paying 51 percent of the average annual  premium (or $7,687) would represent just over 13 percent of household  income, exceeding the 9.5 percent threshold. Whether families ultimately  choose to purchase insurance for children will depend on many factors,  including individual decisions regarding what they can afford for health  insurance.

section_title: An Estimated 14 Percent of Children Eligible for Medicaid, CHIP, or the Premium Tax Credit under PPACA Would Experience a Change in Eligibility within 1 Year
paragraphs: Applying final CMS and proposed IRS 2014 PPACA eligibility rules to  children in 2009, we estimate that nationally, 9 percent of children eligible  for Medicaid, CHIP, or the premium tax credit experienced a change in  household income within 6 months that would affect their eligibility for a  specific form of assistance, and 14 percent of these children experienced   (See table 2.) In addition, some  at least one such change within 1 year.children experienced multiple income changes within these time periods  that would affect their eligibility for assistance more frequently. We  estimate that, nationally, 2 percent of eligible children experienced  changes in household income that would affect eligibility two or more  times within 6 months, and 6 percent experienced two or more such  changes within 1 year.

The effect of continuous eligibility policies for Medicaid and CHIP on the  frequency of eligibility changes becomes apparent when we consider  children in states with versus states without such policies separately.  Eligibility changes are higher than the national average in states without  continuous eligibility policies in either their Medicaid or CHIP programs,  and lower than the national average in states with them. In states with  continuous eligibility policies for Medicaid and CHIP, eligibility changes  under PPACA would be limited to children who begin the year eligible for  the premium tax credit but experience a decrease in household income  that would result in eligibility for Medicaid or CHIP instead. Therefore, the  percentage of children experiencing changes in eligibility, and at risk of  experiencing disruptions in coverage, is lower than the national average  among children in the 23 states that have adopted continuous eligibility in  both their Medicaid and CHIP programs and greater than the national  average among children in the 18 states that do not have continuous  eligibility in either program. Specifically, we estimate that about 3 percent  of eligible children in states with continuous eligibility for Medicaid and  CHIP experienced a change in household income that would affect  eligibility under PPACA within 1 year. In contrast, we estimate that about  19 percent of eligible children in states without continuous eligibility  experienced a change in household income that would affect program  eligibility under PPACA at least once within 6 months, and about   30 percent experienced such a change within 1 year. (See table 3.)

Changes in eligibility caused by income fluctuations could deter children’s  enrollment in relevant programs if the process for changing enrollment is  burdensome for the families and could further complicate other eligibility  complexities, such as variation in eligibility within households. Eligibility  for specific types of assistance can vary within households because   low- to moderate-income adults with household incomes greater than   133 percent of FPL will typically be ineligible for any assistance or will be  eligible for the premium tax credit rather than Medicaid or CHIP, while  children in some of these households—particularly in states with higher  income eligibility levels for Medicaid and CHIP—will be eligible instead for  Medicaid or CHIP. We estimate that based on 2009 data, 21 percent of  children eligible for Medicaid, CHIP, or the premium tax credit under  PPACA would have different eligibility from their parents as of the  beginning of the year. However, because of income fluctuations that  occurred over the course of the year, we estimate that an additional 9  percent of eligible children would encounter this situation.

section_title: CMS Has Provided States with Tools to Increase Enrollment, and States Express a Need for Further Guidance and Note Budget Constraints
paragraphs: CMS has provided states with incentives and guidance to implement  current initiatives to improve enrollment policies and has made progress  assisting states in implementing PPACA requirements aimed at further  simplifying Medicaid and CHIP enrollment. State officials reported  ongoing challenges with regard to enrolling eligible children, including the  need for timely guidance to implement PPACA provisions, concerns  about enrolling family members who are not eligible for the same  program, and state budget constraints.
subsections: section_title: CMS Has Provided States with Financial and Technical Assistance to Facilitate the Enrollment and Retention of Eligible Children in Medicaid and CHIP
paragraphs: Through an array of financial incentives and technical assistance, CMS  has worked with states to enroll and retain eligible children in Medicaid  and CHIP and to set up state exchanges under PPACA. Many of these  efforts were initiated with funds appropriated under CHIPRA and continue  under PPACA. For example, CHIPRA appropriated $100 million for fiscal  years 2009 through 2013 in outreach grants and related efforts to improve  the enrollment and retention of underserved populations in Medicaid and  CHIP, and by the end of fiscal year 2011, CMS had awarded $80 million  in such grants. CMS awarded the first round of outreach grants in fiscal  year 2009 to 69 applicants in 43 states, which included state agencies  and community-based and other nonprofit groups, and the second round  in fiscal year 2011 to 39 applicants in 23 states.officials from selected states, officials noted that the outreach grants had  helped the agencies reach eligible children. For example, Oregon  Medicaid officials said that the CHIPRA outreach grant their agency  received was crucial to reaching the state’s Hispanic population. The  grant sought to support outreach by safety net providers, public health  departments, and school-based health centers.

Since fiscal year 2009, CMS has also awarded performance bonuses  annually to states that implemented at least five of the eight enrollment  initiatives outlined in CHIPRA and met specific enrollment goals, which  are based on the state’s current Medicaid enrollment and population  growth. (See table 4.) The number of states receiving these bonuses  has more than doubled over the 3 years that bonuses have been  awarded, increasing from 10 states in fiscal year 2009 to over 23 states in  fiscal year 2011. In 2011, the amount of the performance bonuses  ranged from approximately $1.3 million for Idaho to over $28 million for  Maryland. (See app. II for a summary of the states that received these  performance bonuses and the amounts of the awards.) In addition,  among the 23 states that received a performance bonus in 2011,   16 received an enhanced bonus for exceeding their enrollment target by  more than 10 percent.bonuses annually through fiscal year 2013.

section_title: Conclusions
paragraphs: A key goal of PPACA was to increase Americans’ access to affordable  health insurance. PPACA expanded eligibility for existing federal health  programs and private health insurance, offered a new premium tax credit  to offset the cost of private health insurance for some low- to moderate- income families whose incomes are too high to qualify for Medicaid or  CHIP, and provided means for streamlining enrollment. Although our  estimates are based on 2009 data, they illustrate the potential impact of  PPACA, when fully implemented in 2014, on children’s access to  affordable health insurance, and highlight the importance of many of the  policies introduced in CHIPRA and continued in PPACA. For example,  our estimates suggest that about 68 percent of children who were  uninsured in 2009 would be eligible for Medicaid or CHIP under PPACA,  underscoring the continued importance of outreach and simplified  enrollment policies to ensure that eligible children are enrolled in the  appropriate program. Similarly, significantly higher estimates of changes  in eligibility within a year among children in states without continuous  eligibility policies compared to states with such policies underscore the  importance of a continued emphasis on such policies to minimize  changes in eligibility.

In addition, a small but significant number of uninsured children from low-  to moderate-income families whose incomes are too high to qualify for  Medicaid or CHIP would be ineligible for the premium tax credit under  IRS’s proposed definition of access to affordable employer-sponsored  insurance, which is based on the cost of a self-only plan available to the  employee. Yet the cost of insuring other eligible family members could be  higher and potentially unaffordable for some families. One implication of  this proposal is that some families in which one member has an offer of  self-only, employer-sponsored health insurance could be less likely to  obtain family insurance than if no employer insurance were offered,  because of their ineligibility for the premium tax credit. We recognize that  in finalizing the affordability standard for an employee’s eligible family  members, IRS must weigh many complex factors, such as costs to the  federal government and effects on employers and families, some of which  are difficult to predict, as well as the scope of its authority. However,  under the proposed standard, an offer of affordable employer-sponsored  health insurance to one family member could impede other family  members’ access to affordable insurance—an outcome which would not  further the broader goals of PPACA.

section_title: Recommendation for Executive Action
paragraphs: In the Department of the Treasury’s future rule making, we recommend  that the Secretary of the Treasury, in consultation with the Commissioner  of Internal Revenue, consider the impact of the proposed standard for  determining affordability of employer-sponsored insurance on children  and other family members who are eligible to enroll, and whether it would  be consistent with the goals of PPACA to adopt an alternative approach  that would consider the cost of insuring eligible family members, or as  necessary, seek clarification from Congress regarding its intent with  respect to this standard.

section_title: Agency Comments
paragraphs: We provided a draft of this report for comment to HHS and the  Department of the Treasury. Neither HHS nor the Department of the  Treasury provided general comments on the report or its  recommendation. Department of the Treasury officials provided technical  comments, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to relevant congressional  committees, the Secretary of Health and Human Services, the Secretary  of the Treasury, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III.

section_title: Appendix I: Scope and Methodology of the Survey of Income and Program Participation Analysis
paragraphs: Our first two objectives were to assess the extent to which uninsured  children would be eligible for Medicaid, the State Children’s Health  Insurance Program (CHIP), or the premium tax credit available under the  Patient Protection and Affordable Care Act (PPACA) and the extent to  which they would experience a change in eligibility among these forms of  assistance because of changes in household income during a year. We  identified the Survey of Income and Program Participation (SIPP), a  nationally representative, longitudinal survey conducted by the U.S.  Census Bureau, as a useful data set for our purposes because it provides  detailed monthly information over a multiyear period about specific types  of income, family relationships, and health insurance status of individuals  and households representing the civilian, noninstitutionalized population  of the United States. We analyzed data from the most recently available  SIPP, which began in 2008, and surveyed the occupants of approximately  42,000 households.

Our analysis of SIPP data is subject to limitations. The analysis uses  2009 data to illustrate the extent to which uninsured children would be  eligible for Medicaid, CHIP, or the premium credit program had proposed  and final 2014 PPACA eligibility rules been in effect at that time. To the  extent that patterns in household income, insurance status, or other  eligibility criteria differ in 2014, eligibility in 2014 will also differ. In  addition, the estimates are based on a sample of the population and may  differ from estimates that would be obtained if the full population had  been surveyed using the same methods, and the estimates are based on  self-reported information that may contain errors because of factors such  as differing interpretation of survey questions, inability or unwillingness of  survey participants to provide correct information, or data processing  errors. The Census Bureau reported that quality control and edit  procedures were used to reduce such errors.data have shown that the SIPP captures less income compared to other   Studies of SIPP income  surveys, particularly for higher-income survey participants.analysis focuses on lower-income survey participants, to the extent that  the SIPP data underrepresent income in this population as well, our  estimates would indicate that more children meet income requirements  for Medicaid or CHIP versus the premium tax credit, and for the premium  tax credit versus being ineligible for any type of assistance, than other  surveys might suggest. Our analysis variables approximate but do not  always fully capture key PPACA eligibility criteria, such as household  income or citizenship status, as described further below. To determine the  reliability of SIPP data, we reviewed related documentation and  conducted electronic testing for missing data, outliers, and apparent  errors. For example, we tested whether persons who reported being  uninsured in January 2009 had reported having health insurance in the  prior and following month. We also compared our results to estimates  based on data from another Census Bureau survey, the American  Community Survey, and to other studies that addressed related research  questions. We determined that the SIPP data were sufficiently reliable for  the purposes of our engagement.
subsections: section_title: Analysis Variables
paragraphs: A child’s eligibility for Medicaid, CHIP, or the premium tax credit under  PPACA is based in part on having household income below specified  limits relative to the federal poverty level (FPL). The Centers for Medicare  & Medicaid Services (CMS) and the Internal Revenue Service (IRS) have  specified methods for determining a child’s household income under  PPACA in final and proposed eligibility rules, and differences exist in how  household income is determined for Medicaid and CHIP versus the  premium tax credit. A child’s eligibility for these programs is also based  on citizenship or legal residence, and, for the premium tax credit, on  whether the child is considered to have access to other affordable  insurance. From the available SIPP data, we developed variables for our  analysis based on these eligibility rules.

Household composition. We created two household composition  variables for children on the basis of final CMS and proposed IRS rules  for determining household composition for the premium tax credit and for  Medicaid or CHIP. The premium tax credit household composition  variable defined households as composed of a taxpayer and spouse, if  applicable, and tax dependents. Tax dependents were defined as follows:

Children under age 19 (or ages 19 through 23 who were full-time  students) whose taxable income (together with a spouse’s income, if  applicable) was not more than half of household income.

Other family members, who (together with a spouse, if applicable),  earned less than the IRS threshold and whose total income was not  more than half of household income.

Taxpayers were those who did not meet the above definition of a tax  dependent. This definition of a tax dependent excluded those with  significant income, but did not capture tax rules about the amount of  financial support a taxpayer must provide for children or other dependents  in order to claim them as tax dependents.

For example, most children under age 19 were defined as tax  dependents. Households of tax-dependent children included the child, the  child’s taxpayer parents or guardians, and any other tax dependents of  the taxpayers, such as the child’s siblings. When children lived with two  unmarried parents, the parent with the higher income was designated as  the taxpayer parent. This household composition variable did not account  for children who may be claimed as tax dependents by a noncustodial  parent or for spouses who choose to file taxes separately.

The Medicaid household composition variable was the same as the  premium tax credit household composition variable, with certain  exceptions. When a tax-dependent child did not live with a taxpayer  parent or lived with two parents who were not married to one another, or  had household income below tax filing thresholds, the child’s household  for purposes of determining Medicaid and CHIP eligibility was composed  of the child, the child’s parents, siblings under age 19 (or ages 19 and 20  who were full-time students), and any children of the child. In addition,  pregnant women were counted as two household members when  determining Medicaid and CHIP eligibility. Pregnancy status is not directly  available from the SIPP data; we estimated that women were pregnant in  a given month if they had a new infant during one of the following   8 months.

Household income. We constructed four household income variables for  children based on rules for counting income for Medicaid and CHIP and  for the premium tax credit under PPACA. Tax dependent’s income was  not included in any household income variable if it was less than the  amount that would necessitate filing a tax return.

To approximate modified adjusted gross income (MAGI) household  income under PPACA, a child’s premium tax credit household income  was defined as the sum of all income, less means-tested assistance  income; child support or foster care payments; veterans and workers  compensation or sickness or accident insurance payments; or gifts  from relatives or friends—self-reported by individuals included in the  premium tax credit household composition variable defined above,  during calendar year 2009.

A child’s baseline Medicaid household income was the sum of the  same income types in the Medicaid household composition variable  defined above, during specific months of 2009.

A child’s adjusted Medicaid household income was equal to the  baseline Medicaid household income variable, less income  deductions applied in specific states in their Medicaid eligibility  determination processes, including deductions of certain amounts of  earned income and child care expenses.

A child’s adjusted CHIP household income was equal to the baseline  Medicaid household income variable, less income deductions applied  in specific states in their CHIP eligibility determination processes,  including deductions of certain amounts of earned income and child  care expenses.

FPL. We constructed four percentages of FPL variables based on the  four household income variables and two household composition  variables defined above.

A child’s baseline Medicaid percentage of FPL was the Medicaid  household income variable divided by the 2009 poverty threshold  applicable to the child’s state and family size contained in the  Medicaid household composition variable.

A child’s adjusted Medicaid percentage of FPL was the adjusted  Medicaid household income variable divided by the 2009 poverty  threshold applicable to the child’s state and family size contained in  the Medicaid household composition variable.

A child’s adjusted CHIP percentage of FPL was the adjusted CHIP  household income variable divided by the 2009 poverty threshold  applicable to the child’s state and family size contained in the  Medicaid household composition variable.

A child’s premium tax credit percentage of FPL was the premium tax  credit household income variable divided by the 2009 poverty  threshold applicable to the child’s state and household size contained  in the premium tax credit household composition variable.

Insurance status. Employer-sponsored insurance was defined as  insurance obtained through an individual’s or a family member’s  employer, former employer, union, or the military. Individuals were not  categorized as having employer-sponsored insurance if they also had  Medicaid or CHIP coverage. We used a procedure that the Census  Bureau has adopted for the American Community Survey to address  under-reporting of Medicaid coverage. Specifically, respondents were  recategorized as having Medicaid if they were one of the following: a child under age 19 and the unmarried child of a parent with public a citizen parent with public assistance, a citizen parent married to a citizen with public assistance or a foster child, or a Supplemental Security Income recipient who met one of the  following conditions: (1) did not have children or (2) had children but  was not working.

Individuals were defined as uninsured if they were not categorized as  having employer-sponsored or other private insurance, Medicaid, CHIP,  or other public insurance.

Access to affordable employer-sponsored insurance. Children who  had a taxpayer parent as part of their household composition who had  employer-sponsored insurance, and children who were taxpayers and  had employer-sponsored insurance, were defined as having met the  proposed standard for access to affordable employer-sponsored  insurance if the average annual employee contribution for a self-only  plan, $921, was less than or equal to 9.5 percent of premium tax credit  household income. This definition of access to affordable employer- sponsored insurance did not take into account the requirement that  employer-sponsored insurance must provide a minimum value in order to  be considered affordable, and it assumed that children were eligible to  enroll in a parent’s employer-sponsored insurance.

Citizenship or legal residence. Citizenship status is available in SIPP  data, but the legal status of noncitizens is not directly available from SIPP  data. We defined noncitizens as legally residing if they or a parent  reported receiving public insurance, such as Medicaid, or other public  assistance, which requires documentation of citizenship or legal  residence. The remaining noncitizens were defined as potentially  ineligible noncitizens.

section_title: Methodology
paragraphs: Based on the variables defined above, we categorized children as eligible  or ineligible for Medicaid, CHIP, and the premium tax credit under  proposed and final 2014 PPACA eligibility rules.

We defined children as eligible for Medicaid under PPACA if they  were citizens or legally residing noncitizens whose baseline Medicaid  percentage of FPL was less than or equal to 138 percent, or who had  an adjusted Medicaid percentage of FPL that was less than or equal  to the 2012 state-specific income eligibility level for their age group.

Foster children and Supplemental Security Income recipients were  also defined as Medicaid eligible.

We defined children as eligible for CHIP under PPACA if they were  citizens or legally residing noncitizens not estimated to be eligible for  Medicaid, with an adjusted CHIP percentage of FPL that was less  than or equal to the applicable 2012 CHIP state-specific income  eligibility level. CHIP included both CHIP-funded Medicaid expansion  programs and separate CHIP programs. Children with employer- sponsored or other private insurance were defined as ineligible for  separate CHIP programs.

We defined children as eligible for the premium tax credit under  PPACA if they were citizens or legally residing non-citizens not  estimated to be eligible for Medicaid or CHIP, with premium tax credit  percentage of FPL between 100 and 400 percent and without access  to affordable employer-sponsored insurance.

Our analyses considered three groups of children: uninsured children  ages 0 through 18, CHIP-eligible children ages 0 through 18 who were  uninsured or publicly insured, and all children ages 0 through 18 eligible  for Medicaid, CHIP, or the premium tax credit. We limited our analysis to  children who participated in the SIPP for all of calendar year 2009.

Among uninsured children, we used January 2009 SIPP data to  estimate the percentage who would be eligible for Medicaid, CHIP,  and the premium tax credit based on the above definitions of 2014  PPACA eligibility rules, as well as the percentage who would be  ineligible.

Among uninsured or publicly insured children estimated to be eligible  for CHIP, we used January 2009 SIPP data to estimate the  percentage who would be eligible for the premium tax credit based on  the above definitions of 2014 PPACA eligibility rules, as well as the  percentage who would be ineligible, if CHIP were not available.

Among all children estimated to be eligible for Medicaid, CHIP, or the  premium tax credit in January 2009, we used calendar year 2009  SIPP data to estimate the percentage who would have experienced  one or two changes in eligibility for specific types of assistance,  including becoming ineligible for any type of assistance, under 2014  PPACA eligibility rules within 6 months and a year. We incorporated  state-specific continuous eligibility policies; for children living in states  that according to CMS had a continuous eligibility policy in place as of  2012, we did not count them as changing eligibility for the relevant  program even if their income eligibility changed.

Among all children estimated to be eligible for Medicaid, CHIP, or the  premium tax credit in January 2009, we used calendar year SIPP data  to estimate the percentage who would be eligible for Medicaid and  CHIP under 2014 PPACA eligibility rules with a Medicaid percentage  of FPL higher than 138 percent in January 2009 and during 2009 as a  whole, in order to examine the percentage of children who could be  eligible for different program than their parents.

For all estimated percentages, we used the SIPP 2009 calendar   year sampling weight and calculated a lower and upper bound at the   95 percent confidence level using replicate weights that took into account  the complex survey design.

section_title: Appendix II: Federal Initiatives and Funding Available to States to Facilitate Enrollment of Eligible Children and Implement PPACA
paragraphs: The Children’s Health Insurance Program Reauthorization Act of 2009  (CHIPRA) and PPACA included a number of initiatives and provisions  under which states may obtain federal funding to assist in enrolling  eligible children, and most states have taken advantage of at least one of  these. For example, CHIPRA provided incentives to states to undertake  eight enrollment initiatives. Beginning in fiscal year 2009, CMS awarded  performance bonuses to states that implemented at least five of the eight  enrollment initiatives and also achieved specific enrollment goals. (See  fig. 3.) PPACA authorized the provision of planning grants and  establishment grants to assist states with the implementation of the  American Health Benefit Exchanges (referred to as exchanges)— marketplaces where eligible families and individuals can purchase private  health insurance. Recognizing that states will need to upgrade their  Medicaid information technology systems to comply with PPACA, CMS  has provided states with the opportunity to claim an enhanced Federal  Medical Assistance Percentage (FMAP)—the federal share of Medicaid  expenditures—through fiscal year 2015 for the costs associated with  certain systems improvements, such as updates to their claims  processing and enrollment systems. Specifically, instead of the   50 percent FMAP that has historically been available for most Medicaid  administrative expenses, qualified states can obtain a 90 percent FMAP  for the costs of implementing new information systems and a 75 percent  FMAP for the costs of administering these new systems.

section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Susan T. Anthony, Assistant  Director; Susan Barnidge; Emily Beller; Sandra George; Eagan Kemp;  and Roseanne Price made key contributions to this report.


Question-summary annotations: questions: question: How did PPACA affect uninsured children?
answer: GAO estimates that under the 2010 Patient Protection and Affordable Care Act (PPACA), about three-quarters of approximately 7 million children who were uninsured in January 2009 would be eligible for Medicaid, the State Children’s Health Insurance Program (CHIP), or the new premium tax credit.
child_questions: question: Why were the remaining children not eligible?
answer: The remaining children had family incomes too high to be eligible, were noncitizens, or would be ineligible for the premium tax credit because they would be considered to have access to affordable employer-sponsored insurance per the Internal Revenue Service’s (IRS) proposed affordability standard, in which IRS interpreted PPACA as defining affordability for an employee’s eligible family members based on the cost of an employee-only plan.

question: What concerns have been raised about the IRS's interpretation?
answer: Some commenters raised concerns that IRS’s interpretation was inconsistent with PPACA’s goal of increasing access to affordable health insurance as it does not consider the higher cost of family insurance and could result in some children remaining uninsured.

question: How is CHIP funded?
answer: Under PPACA, CHIP is not funded beyond 2015, and states may opt to reduce CHIP eligibility or eliminate programs in fiscal year 2020. Without CHIP, more children could become uninsured.

questions: question: How common is PPACA eligibility fluctuation?
answer: GAO estimates that about 14 percent of children in January 2009 who met 2014 PPACA eligibility criteria for these programs experienced a change in household income that would affect eligibility within 1 year.
child_questions: question: How does this vary between states?
answer: Changes in eligibility among children in states without policies allowing them to remain eligible for Medicaid and CHIP for a full year were estimated to be higher than in states with such policies.

question: How might frequent eligibility fluctuations affect program enrollment rates?
answer: Frequent eligibility changes could deter enrollment if the process for changing enrollment is burdensome.

questions: question: What was the goal of PPACA?
answer: PPACA sought to increase access to affordable health insurance, and major provisions, such as a tax credit to offset the cost of private insurance premiums, will become effective in 2014.
child_questions: question: What did GAO review regarding PPACA?
answer: GAO estimated the extent to which (1) uninsured children would be eligible for Medicaid, CHIP, or the premium tax credit under PPACA, and (2) children would experience a change in eligibility among Medicaid, CHIP, and the premium tax credit under PPACA because of income changes.

question: How did GAO assess CMS actions regarding PPACA?
answer: GAO also assessed CMS steps thus far to help states enroll children and related state challenges.

question: What data did GAO collect for this report?
answer: GAO applied proposed and final 2014 PPACA eligibility rules to nationally representative 2009 data from the U.S. Census Bureau and interviewed officials from CMS and IRS, two federal agencies responsible for implementing relevant PPACA provisions, and six states that received federal funds for enrollment efforts.

questions: question: What did GAO recommend?
answer: GAO recommends that in future rule making, the Secretary of the Treasury, in consultation with the Commissioner of Internal Revenue, consider the impact of the proposed standard for determining affordability of employer-sponsored insurance on eligible family members, and whether it would be consistent with PPACA to adopt an approach that would consider the cost of insuring eligible family members, or as necessary, seek clarification from Congress regarding its intent with respect to this standard.
child_questions: question: How did HHS and Treasury respond to this report?
answer: HHS and Treasury were given a draft of this report for review, but neither provided formal comments.
child_questions: question: How did GAO make use of Treasury's technical comments?
answer: Treasury provided technical comments, which GAO incorporated as appropriate.