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June 06, 2012

Sue Ducat
Director of Communications
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From Health Affairs


New Study Suggests Improvements For Estimating Who Is Eligible For Health Insurance Exchange Subsidies


Bethesda, MD -- State governments are preparing for the advent of individual health insurance exchanges in 2014, and for the projected seventeen million Americans who meet certain income eligibility criteria but are not eligible for Medicaid or an affordable employer-sponsored plan who will be awarded federal tax credits to offset the cost of purchasing coverage through an exchange.


The Congressional Budget Office has estimated that just less than half of the $1.8 trillion in gross federal outlays for coverage provisions under the Affordable Care Act will be used for this purpose. Eligibility for advance access to this credit is determined by projecting a household’s modified adjusted gross income at the time a member of the household applies. A new study, released as a Web First by Health Affairs, found that this method of determining eligibility could result in many “false positives” and “false negatives,” causing those eligible for the subsidies to be refused early access to them—and causing some households that are initially determined eligible to be required to pay back the subsidies they receive. In a simulation, the study determined that by augmenting data from prior tax returns with six months of current income to determine eligibility for Medicaid and the exchanges, the number of people incorrectly deemed ineligible with allowances for change decreased by more than 40 percent.


Better Methods Will Be Needed To Project Incomes To Estimate Eligibility For Subsidies In Health Insurance Exchanges

By John A. Graves

Graves is an assistant professor at the Vanderbilt University School of Medicine, in Nashville, Tennessee.

This study, also to appear in the July edition of Health Affairs, was supported by grants from the National Bureau of Economic Research and the National Institute on Aging.


For his analysis, the author used a longitudinal microsimulation model of the Affordable Care Act, factoring in income, employment, family composition, and taxes from the 2001 Survey of Income and Program Participation. Additionally, the simulation results showed that advance subsidies tended to overpay by $208 annually on average, but that there will be meaningful differences between advances and final subsidies for many low-income households.


“Adopting an eligibility determination policy that is transparent, consistent across Medicaid and the exchanges, and generous in allowing applicants to claim a change in circumstances will…be critical,” concluded the author. “Policy makers should consider statutory and regulatory changes that further align Medicaid and the exchanges under a single income standard.”

About Health Affairs

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and health policy briefs published twice monthly at You can also find the journal on Facebook and Twitter. Read daily perspectives on Health Affairs Blog. Download weekly Narrative Matters podcasts on iTunes.

The full text of each Health Affairs Web First paper is available free of charge to all Web-site visitors for a two-week period following posting, after which it switches to pay-per-view for nonsubscribers. Web First papers are supported in part by a grant from The Commonwealth Fund.