Treatment of Noncitizens Under the Patient Protection and Affordable Care Act
Released: 2011-03-22T00:00:00

Introduction

The 111 th Congress enacted the Patient Protection and Affordable Care Act ( P.L. 111-148 , PPACA) and the Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ). On January 19, 2011, the House passed H.R. 2 , which would repeal PPACA. Nonetheless, it is possible that the 112 th Congress will examine other legislation to amend parts of PPACA. During any debate to amend PPACA, one issue that may arise is the eligibility of aliens (noncitizens) for some of the key provisions of the act.

This report discusses alien eligibility for the provisions in PPACA that have restrictions based on immigration status: participation in high-risk pools, the requirement to maintain health insurance, the ability to purchase insurance through an exchange, and eligibility for premium credits and cost-sharing subsidies. The report concludes with an analysis of data from the Current Population Survey (CPS) that illuminate some of the possible effects of PPACA on the health insurance coverage of the noncitizen population.

The Noncitizen Population

Table 1 presents the definitions of some of the terms related to the noncitizen population and several of the different immigration statuses. In addition, because alien eligibility under PPACA is governed by the term "aliens who are lawfully present," the table outlines which aliens are considered to be lawfully present.

The Estimated Size of the Noncitizen Population in the United States

Using the March 2010 Current Population Survey (CPS), the Congressional Research Service (CRS) estimated that as of March 2010 there were approximately 37.6 million foreign-born persons in the United States, approximately 12% of the U.S. population. The foreign-born population was comprised of approximately 16 million naturalized U.S. citizens and 21.6 million noncitizens.

The literature often cites estimates published by the Pew Hispanic Center. Researchers at the Pew Hispanic Center used the same data but adjusted the survey weights to account for perceived noncitizen undercounts in the survey. They also assigned a specific immigration status (e.g., legal permanent resident, unauthorized alien) to each foreign-born survey respondent and used a methodology to estimate the illegally present population. The Pew Hispanic Center estimated that in March 2010 there were approximately 40.2 million foreign-born persons in the United States, and of the foreign-born population, approximately 14.9 million (37%) were naturalized U.S. citizens, 12.4 million (31%) were legal permanent residents (LPRs), 1.7 million (4%) were temporarily in the United States (i.e., nonimmigrants), and 11.2 million (28%) were estimated to be unauthorized (illegal) aliens.

Treatment of Noncitizens in the Patient Protection and Affordable Care Act (PPACA)

The following section discusses alien eligibility for the following provisions under PPACA: high-risk pools, the heath insurance mandate, the exchanges, and premium credits and cost-sharing subsidies. In general, aliens are separated into two groups for eligibility purposes under PPACA: aliens who are "lawfully present in the United States" are eligible for the provisions discussed below while aliens who are not "lawfully present in the United States" (i.e., unauthorized/illegal aliens) are ineligible.

High-Risk Pools

PPACA (§ 1101) required the Secretary of the Department of Health and Human Services (Secretary) to establish a temporary high-risk pool program to provide health insurance coverage for eligible individuals during the period beginning on the date the program was established and ending on January 1, 2014, the date when the exchanges will be operational. This program began offering coverage on August 1, 2010. Individuals are eligible for the high-risk pool if they have not been covered under creditable coverage during the six-month period prior to application for coverage in the high-risk pool and have a pre-existing condition as determined following guidance issued by the Secretary. To participate in the temporary high-risk pool program, a person must be a citizen or national of the United States or be lawfully present in the United States. Thus, unauthorized aliens are ineligible for participation in the high-risk pool program because they are not lawfully present in the United States.

Health Insurance Mandate

PPACA includes an individual mandate as of 2014 to maintain health insurance and has tax penalties for noncompliance. In other words, individuals—with some exceptions—who do not maintain acceptable health insurance coverage for themselves and their dependents would be required to pay a penalty. All aliens who are lawfully present are covered by the requirement to maintain health insurance. Unauthorized (illegal) aliens are expressly exempted from this mandate. In addition, the act specifies that a person is only considered lawfully present if the person is, and is reasonably expected to be for the entire period of enrollment, a U.S. citizen or national or an alien who is lawfully present in the United States.

Until the exchanges are operational, it is unknown what the shortest period of enrollment will be and whether certain nonimmigrants who are in the United States for limited periods of time, in many cases under six months, would be covered by the mandate (e.g., tourists (B-visas), cultural exchange (J-visas), performers and athletes (O- and P-visas)). In addition, no penalty will be imposed on those without coverage for less than three months (with only one period of three months allowed in a year), so for aliens in the United States for less than three months (e.g., most tourists) there would be no consequences to not having health insurance.

Tax Liability of Noncitizens18

Because the penalties for noncompliance with the individual mandate are tax-based, the following section discusses the rules for taxation of noncitizens. In particular, understanding these rules might be important because there has been debate about the extent to which the Internal Revenue Service, in light of the limits PPACA places on enforcement, will be able to collect penalties from individuals who do not have other tax liability. To the extent that this might be a concern, it would seem to arise regardless of the individual's citizenship status.

All foreign nationals working in the United States are subject to U.S. tax laws. For federal tax purposes, foreign nationals working in the United States are classified as resident or nonresident aliens. These terms are in the Internal Revenue Code (I.R.C.) but do not exist in the Immigration and Nationality Act (INA). As a result, the specific immigration statuses under the INA do not align directly with the terms resident and nonresident alien.

In general, an individual is a nonresident alien unless he or she meets the qualifications under one of the following residency tests:

Green card test: the individual is a lawful permanent resident of the United States at any time during the current year, or Substantial presence test: the individual is present in the United States for at least 31 days during the current year and at least 183 days during the current year and previous two years. For computing the 183 days, a formula is used that counts all the qualifying days in the current year, one-third of the qualifying days in the immediately preceding year, and one-sixth of the qualifying days in the second preceding year.

While resident aliens are subject to the same tax treatment as U.S. citizens, nonresident aliens are subject to different treatment, such as generally being taxed only on income from U.S. sources. Nonetheless, their income that is "effectively connected" with a U.S. trade or business is generally taxed by the same rules and at the same rates as the income of U.S. citizens and resident aliens. There are several situations in which an individual may be classified as a nonresident alien even though he or she meets the substantial presence test. For example, an individual will generally be treated as a nonresident alien if he or she has a closer connection to a foreign country than to the United States, maintains a tax home in the foreign country, and is in the United States for fewer than 183 days during the year. Another example is that an individual in the United States under an F-, J-, M-, or Q-visa may be treated as a nonresident alien if he or she has substantially complied with visa requirements. Other individuals who may be treated as nonresident aliens even if they would otherwise meet the substantial presence test include employees of foreign governments and international organizations, regular commuters from Canada or Mexico, aliens who are unable to the leave the United States because of a medical condition, foreign vessel crew members, and athletes participating in charitable sporting events. Additionally, depending on where the individual is from, there may be an income tax treaty between that country and the United States with provisions for determining residency status.

Exchanges

Under PPACA, "American Health Benefit Exchanges" will begin operation by 2014. An exchange cannot be an insurer, but it will provide eligible individuals and small businesses with access to insurers' plans in a comparable way. In addition, based on income certain individuals may qualify for a tax credit toward their premium costs and a subsidy for their cost-sharing; the credits and subsidies will be available only through an exchange beginning in 2014. The law allows all lawfully present noncitizens to purchase insurance through an exchange and bars unauthorized aliens from obtaining insurance through an exchange.

Premium Credits and Cost-Sharing Subsidies

Based on their income, certain individuals may qualify for a tax credit toward their premium costs and a subsidy for their cost-sharing; the credits and subsidies will be available only through an exchange beginning in 2014. All lawfully present aliens who meet specified criteria are eligible for the premium tax credit and cost-sharing subsidies. Unauthorized (illegal) aliens are ineligible for the tax credit and subsidies. In addition, the law provides specific rules for calculating the credits and subsidies for mixed-status families.

Interaction Between Alien Eligibility for Credits and Medicaid Eligibility

Some have raised concerns that PPACA created an inequality between U.S. citizens and some noncitizens with incomes at or below 133% of the federal poverty level (FPL) with respect to eligibility to participate in an exchange and receive premium credits or cost-sharing subsidies. In general, all U.S. citizens and Medicaid-eligible noncitizens with incomes at or below 133% of the FPL will be eligible for Medicaid, while similarly situated Medicaid-ineligible lawfully present noncitizens will be eligible to participate in an exchange and possibly to receive the credits or subsidies. The following section explores the reasons for these differences.

Background: Noncitizen Eligibility for Medicaid

Under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), as amended, noncitizens' eligibility for Medicaid largely depends on their immigration status , whether they arrived in the United States (or were on a program's rolls) before August 22, 1996 , and how long they have lived and worked in the United States. Notably, to be eligible for Medicaid aliens must also meet the program's financial and categorical eligibility requirements. Most legal permanent residents (LPRs) entering the United States after August 22, 1996, are barred from Medicaid for five years, after which time they are eligible at the state's option. However, states may also choose to use state and federal Medicaid funds to cover pregnant women and children who are "lawfully residing" in the United States. In addition, states have the option to use state-only funds to provide medical coverage for other LPRs within five years of their arrival in the United States.

Refugees and asylees are eligible for Medicaid for seven years after arrival. After the seven years, they may be eligible for Medicaid at the state's option. LPRs with a substantial (10-year) U.S. work history or a military connection are eligible for Medicaid without regard to the five-year bar. LPRs receiving Supplemental Security Income (SSI) on or after August 22, 1996, are eligible for Medicaid because Medicaid coverage is required for all SSI recipients. Nonimmigrants and unauthorized aliens are barred from Medicaid. However, states may choose to cover these individuals using state-only funds.

Persons with Incomes up to 133% of Poverty

Beginning in 2014, or sooner at state option, PPACA requires states to expand Medicaid to certain individuals who are under age 65 with income up to 133% of the FPL. Thus, in 2014 all non-elderly U.S. citizens and certain noncitizens with income up to 133% FPL will be eligible for Medicaid. This reform not only expands eligibility to a group that is not currently eligible for Medicaid (low-income childless adults), but it also raises Medicaid's mandatory income eligibility level for certain existing groups to 133% of the FPL and is considered the most significant expansion of Medicaid eligibility in many years. Nonetheless, PPACA did not amend the current immigration status-based restrictions (i.e., alien eligibility requirements) on receiving Medicaid (discussed above).

As discussed above, beginning January 1, 2014, qualifying individuals will receive advanceable, refundable tax credits toward the purchase of an exchange plan. To be eligible for the premium credits, a taxpayer must have a household income that is above 100% of the FPL but does not exceed 400% of the FPL. In addition, lawfully present noncitizens who have household incomes that do not exceed 100% of the FPL and who are ineligible for Medicaid due to their alien status will be deemed to have income at 100% of the FPL and will be eligible for premium credits. Notably, if a person who applies for premium credits in an exchange is determined to be eligible for Medicaid, the exchange will have that person enrolled in Medicaid.

Under PPACA, lawfully present noncitizens (including some LPRs within five years of entry) who are ineligible for Medicaid due to their alien status are eligible to participate in an exchange and for premium credits. Similarly situated U.S. citizens and lawfully present noncitizens who are eligible for Medicaid would be enrolled in Medicaid and would not be eligible to participate in an exchange, and, as a result, they would be ineligible for the premium credits.

Verification of Alien Status Under PPACA

To enforce the alien eligibility requirements under the act, § 1411 of PPACA requires the Secretary of Health and Human Services (HHS) to establish a program to determine whether an individual who is to be covered through an exchange plan, or who is claiming a premium tax credit or reduced cost-sharing, is a citizen or national of the United States or an alien lawfully present in the United States. This requirement is similar to and compatible with the Department of Homeland Security (DHS) Systematic Alien Verification for Entitlements (SAVE) system established by § 1137(d) of the Social Security Act. The SAVE system is also the basis for the E-Verify electronic employment eligibility verification system, as discussed below.

The verification system created under PPACA will use three pieces of personal data to verify citizenship and immigration status. The Social Security Administration (SSA) will verify the name, social security number, and date of birth of the individual. For those attesting to be U.S. citizens, the attestation will be considered substantiated if it is consistent with SSA data. For individuals who do not claim to be U.S. citizens but attest to be lawfully present in the United States, the attestation will be considered substantiated if it is consistent with DHS data. PPACA requires such verification of all individuals seeking exchange coverage regardless of whether they would be federally subsidized or would pay premiums entirely on their own.

Some argue that because the proposed verification system does not include a biometric identifier, it could lead to identity theft; however, requiring applicants to provide documents with biometric identifiers could lead to the inappropriate denial of credits and subsidies to eligible persons. The system only verifies that the name, SSN, and date of birth match the SSA's records and that immigration documents match DHS records; as a result, a person (e.g., a U.S. citizen, an unauthorized alien) who is using the documents of an eligible person would not necessarily be denied access to an exchange or premium and cost-sharing subsidies. Nonetheless, while all lawfully present noncitizens have documents with biometric identifiers, U.S. citizens do not necessarily have such documents, and, as a result, requiring such biometric identifiers may make it more difficult for some eligible U.S. citizens to gain access to an exchange and the premium credits and cost-sharing subsidies.

In a recent evaluation of the E-Verify system for employment, a system that is often compared to the new system under PPACA because it electronically verifies both U.S. citizens and noncitizens, researchers estimate that 6.2% of all queries relate to unauthorized aliens, and that in about half (54%) of these queries the unauthorized aliens receive an inaccurate finding of being work-authorized primarily due to identity theft. Thus, the researchers estimate that about 3.3% of all queries receive a false positive verification. In other words, it is estimated that of the unauthorized aliens that are run through the system, approximately 54% who are using false documents are not identified by the system. In an effort to better detect and deter identity fraud, DHS (which administers E-Verify) is taking steps that include adding more photographs to the system and developing methods to prevent stolen identities from being used in the system.

Summary of Eligibility of Unauthorized Aliens under PPACA

As previously discussed, PPACA expressly exempts unauthorized (illegal) aliens from the mandate to have health coverage and bars them from a health insurance exchange. Unauthorized aliens are not eligible for the federal premium credits or cost-sharing subsidies. Unauthorized aliens are also barred from participating in the temporary high-risk pools.

Possible Effects of PPACA on Health Insurance Coverage for the Noncitizen Population

The following section uses analysis from the Current Population Survey (CPS) to provide an overview of the health insurance coverage of U.S. citizens and noncitizens, and to gain some insight into the possible effects of the changes in PPACA to Medicaid eligibility on the health insurance coverage of noncitizens.

Overview of Data and Methodology

The data used in this study are from the March 2010 supplement of the CPS, the main source of labor force data for the United States. The CPS is a household survey sample of the non-institutionalized civilian population conducted by the Census Bureau for the Bureau of Labor Statistics (BLS). The data are weighted to reflect the population. All differences discussed in the text of this report are statistically significant at the .05 level unless otherwise specified.

The comparisons in this report are based on three groups residing in the United States: (1) native-born U.S. citizens, (2) naturalized U.S. citizens, and (3) noncitizens. Although one of the issues surrounding health insurance coverage for noncitizens is the number of unauthorized aliens living in the United States, it is not possible using CPS data to differentiate between aliens who are in the United States legally or illegally, nor is it possible to differentiate between different categories of noncitizens (e.g., legal permanent residents, temporary workers, students, refugees, asylees).

The CPS asks whether the respondent has had various types of coverage during the previous year. Thus, respondents may have more than one type of health insurance during the year. Theoretically, an uninsured respondent is someone who lacked any type of health insurance during the past year and the term does not capture people who were uninsured for part of the year. However, research has shown that the CPS estimates appear to reflect the number of people uninsured at a point in time (that is, when the survey was taken) rather than the number uninsured for the entire previous year. The types of health insurance used in this report are private insurance (both employer sponsored and individually purchased), Medicare, Medicaid, and military or veterans coverage. If the respondent reported not having any of these types of coverage, they are considered uninsured.

Overview of Health Insurance Coverage, 2009

As shown in Figure 1 , noncitizens are more than three times as likely as native-born U.S. citizens, and more than two times as likely as naturalized U.S. citizens, to be uninsured: 46% of noncitizens lacked any type of health insurance, compared with 14.1% of the native-born population and 19% of the naturalized population. Similarly, noncitizens have the lowest rate of private insurance coverage (37.1%), while native-born citizens have a slightly higher rate of private health insurance than naturalized citizens (66.3% and 60.5%, respectively).

The noncitizen population also has the lowest rate of Medicare coverage, most likely due to the relatively young age of the population and the decreased likelihood that noncitizens would meet the eligibility requirements for Medicare. Naturalized citizens have the highest rate of Medicare coverage, which may be attributable to the fact that the naturalized population is, on average, older than both the native-born and the noncitizen populations. Noncitizens are slightly less likely to have Medicaid coverage (15.4%) than native-born citizens (15.9%), while naturalized citizens are the least likely to have Medicaid coverage (12.4%). Lastly, due to the fact that, in general, noncitizens must be legal permanent residents (LPRs) to join the Armed Forces, the noncitizen population has much lower rates of military/veterans coverage (0.8%) than the naturalized (3.2%) and native-born (4.4%) populations.

Poverty Levels, 2009

Overall, noncitizens tend to be poorer than native-born and naturalized citizens. Thirty-five percent of noncitizens have family incomes that are less than 133% of poverty, compared with 19.2% of native-born citizens and 16.9% of naturalized citizens (see Table 2 ). As shown in Table 3 , expectedly, as family income increases, people are more likely to have private health insurance. Nonetheless, for all levels noncitizens are less likely than citizens to have private insurance, but this difference is smallest for those whose family income is more than 400% of poverty. Only 12.9% of noncitizens with family incomes less than 133% of poverty have private insurance, while 24.5% of native-born citizens and 21.7% of naturalized citizens with similar family incomes have private insurance. For those with family incomes that are more than 400% of poverty, 76.6% of noncitizens, 88.4% of native-born citizens, and 82.8% of naturalized citizens have private insurance.

As discussed above (see Figure 1 ), although noncitizens are only slightly less likely overall to have Medicaid coverage (12.6%) than native-born citizens (14.4%), and naturalized citizens are the least likely to have Medicaid coverage (11.4%), when examining those at or below 133% of poverty, noncitizens are much less likely than the native born to be covered by Medicaid. For those with family incomes at or below 133% of poverty, 25.2% of noncitizens are covered by Medicaid, compared with 33.6% of naturalized citizens and 45.7% of native-born citizens. The difference between Medicaid coverage for those with family incomes above 133% and not exceeding 400% of poverty is much smaller, with 12.6% of noncitizens and 13.6% of native-born citizens being covered by Medicaid.

For all income levels, noncitizens are more likely to be uninsured than U.S. citizens. For example, as Table 3 illustrates, for those with incomes above 133% and not exceeding 400% of poverty, 46.8% of noncitizens are uninsured, compared to 15.6% of native-born citizens and 21.9% of naturalized citizens.

It is likely that due to the changes made in PPACA to Medicaid eligibility, the rates of Medicaid coverage for the U.S. citizen and noncitizen populations with incomes at or below 133% of poverty will increase. However, due to the alien eligibility requirements for Medicaid, which were unchanged by PPACA, this increase in Medicaid coverage (and the resulting decrease in the number of the uninsured) may not be as strong for noncitizens as for U.S. citizens. Nonetheless, the ability of lawfully present noncitizens who are Medicaid-ineligible to purchase insurance through an exchange may be a factor in decreasing the uninsured rate for noncitizen populations with incomes at or below 133% of poverty.