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

Letter

Background

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.

Current Eligibility Requirements and Enrollment Policies for Medicaid and CHIP

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.

Eligibility Requirements for Medicaid, CHIP, and the Premium Tax Credit under PPACA

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.

Enrollment Policies for Medicaid, CHIP, and the Premium Tax Credit under PPACA

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.

PPACA’s Private Health Insurance Market Provisions

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.

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

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.

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

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.

CMS Has Provided States with Tools to Increase Enrollment, and States Express a Need for Further Guidance and Note Budget Constraints

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.

CMS Has Provided States with Financial and Technical Assistance to Facilitate the Enrollment and Retention of Eligible Children in Medicaid and CHIP

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.

Conclusions

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.

Recommendation for Executive Action

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.

Agency Comments

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.

Appendix I: Scope and Methodology of the Survey of Income and Program Participation Analysis

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.

Analysis Variables

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.

Methodology

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.

Appendix II: Federal Initiatives and Funding Available to States to Facilitate Enrollment of Eligible Children and Implement PPACA

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.

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.