Reform Update: DOMA ruling affects same-sex couples' Medicaid benefits

Wednesday's U.S. Supreme Court ruling in U.S. v. Windsor mandating federal recognition of same-sex marriages will affect eligibility for expanded Medicaid benefits and health insurance tax credits slated to begin next year under the healthcare reform law. And that may be good, bad, or mixed news for same-sex couples.

Eligibility for both programs is based on the size of a household and total income in relation to the federal poverty guidelines. But the Supreme Court decision to strike down the Defense of Marriage Act means that the federal government now must honor marriage certificates in states that have legalized same-sex marriages, which will affect the calculation of household size and income.

That means both incomes for same-sex married couples will be considered for eligibility purposes in states that recognize same-sex marriages. And that could make some Americans ineligible for these benefit programs who previously would have been eligible, or vice versa.

Take Medicaid. States expanding their Medicaid program under the reform law will have to offer enrollment to families with incomes of up to 138% of poverty starting next year. Using 2013 as a guide, an individual who earns just over $15,900 would be eligible. But if that person is legally married to a spouse who earns more than $21,400, they will exceed the eligibility criteria for a household of two people.

Experts say this could have a significant effect on same-sex married couples in Washington, D.C., and the 12 states where same-sex marriages are now recognized by federal programs.

“You could have a situation where you have a single parent and children who could be eligible, but once you add in the same-sex partners' income, they cease to be eligible,” said Timothy Jost, an author and health law professor with Washington and Lee University School of Law in Lexington, Va.

The state of Maryland—which recognizes same-sex marriages—is applying the DOMA decision immediately to its Medicaid program. But the state hasn't yet done an analysis on the net cost effect of the changes, said Charles Milligan, deputy secretary for healthcare financing in the state health department. “We've seen reports that including income from both spouses might affect eligibility positively and negatively, but we haven't seen any conclusions,” he said.

However, couples who lose Medicaid eligibility would likely then be able to benefit from the reform law's new system of federal income tax credits for private insurance that will be available to families with incomes between 138% and 400% of the poverty level who buy coverage through the new state insurance exchanges in 2014. The same income and household size considerations will arise for these tax subsidies.

Using the 2013 poverty-level figures, an individual with income of up to $46,000 would be eligible for some level of tax credit, while a legally married couple that files a joint tax return with income of $62,000 is eligible.

Benjamin Sommers, assistant professor of health policy and economics at the Harvard School of Public Health, gave the following example in which the breadwinner in a same-sex household with no children earned $40,000 while the partner had no income.

Before Wednesday's ruling, the spouse whose income was 350% of the poverty level would qualify for a modest tax credit while the spouse with no income would qualify for Medicaid, Sommers said. Now, the government will calculate that couple has a household income of about 250% of poverty, and they would both receive a tax credit for coverage under the same health plan.

The rules also say that legally married taxpayers who do not file joint tax returns are ineligible for the tax credits. The detailed eligibility rules were published last year in the Federal Register (PDF).

Maryland, which is operating its own state insurance exchange, will use IRS data on its residents' incomes to determine eligibility. “Our state exchange will be connecting to the federal data hub to obtain information on the households income, for purposes of determining eligibility for premium tax credits,” Milligan said. “So the treasury department will need to provide the correct information.”

Only 50% of employees under age 30 who were eligible to get health insurance through their job actually did so in 2013, according to a study released Wednesday by outsourcing and human capital management firm ADP. The authors said the healthcare reform law provision allowing young people to stay on their parent's plan until they reach 26 could have been a factor. The study found that overall, 88% of workers had employer-sponsored coverage available, and 65% of those participate in that coverage. And while health benefits eligibility has declined since 2010 in all age demographics, younger workers faced the steepest decline.

Supreme Court

The implementation of the Patient Protection and Affordable Care Act may be providing an unintended boost to temp hiring firms. In an effort to skirt the threshold of 51 full-time employees that exposes employers to penalties for not offering health insurance to their workers, many small businesses are hiring part-time temps instead of full-time workers, according to an article today in Time magazine. “In general, (the ACA) is viewed as something that will lead to increases in the penetration rate of temporary workers,” Tobey Sommer, an analyst with SunTrust Robinson Humphrey, told Time.com. “The increasing burden of these regulations will cause some clients to throw up their hands and say, 'I can't deal with all of this.”'

Some California lawmakers want to bar insurers from renewing clients' individual insurance policies before Jan. 1, 2014, so that they can put off having to meet ACA coverage mandates and qualify their plans for grandfathered status under the law. But those carriers that are participating in the Golden State's health insurance exchange, including Blue Shield of California, Kaiser Permanente and Anthem Blue Cross, want lawmakers to mandate that all individual policies in the state be compliant with the Affordable Care Act by Jan. 1, the Los Angeles Times reported Wednesday. But Dave Jones, California's insurance commissioner, appeared hesitant about changing the law. “People have been told they can keep their existing health coverage into 2014, so I am concerned about a change in state law that would undermine that," he told the newspaper. “There can always be winners and losers between companies. I'm concerned about changing the rules of the road now.”

Follow Joe Carlson on Twitter: @MHJCarlson

Follow Jonathan Block on Twitter: @MHjblock