On March 27, the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law. Among other provisions, the CARES Act provides a $1,200 tax rebate to people earning up to $75,000, and $2,400 to married persons filing jointly who make up to $150,000. Families receive an additional $500 per child. The CARES Act also expands unemployment benefits to those not previously eligible, like gig workers, extends benefits for an additional 13 weeks, and increases payments with an additional $600 per week.
The one-time $1,200/$2,400 payment is tax free. However, unemployment benefits, including the $600 per week payment increase, are not. Taxable income, like unemployment benefits, is included when determining someone’s financial eligibility for insurance affordability programs, including Medicaid, the Children’s Health Insurance Program (CHIP), as well as premium tax credits (PTCs) and cost sharing reductions (CSRs) for purchasing coverage through the Affordable Care Act (ACA) Marketplaces.
Congress included an important provision in the CARES Act to protect Medicaid/CHIP eligibility. Here’s how the CARES Act may affect health care eligibility for individuals and families:
Medicaid and CHIP
More than 70 million people obtain their health care through Medicaid and CHIP. More may be eligible as people lose their jobs and health coverage due to the COVID-19 pandemic. Fortunately, they can apply and enroll in Medicaid/CHIP at any time.
When determining whether someone is eligible for Medicaid/CHIP, states look at the person’s income, which can include unemployment benefits. (To learn more about how income gets counted for insurance affordability programs like Medicaid, check out NHeLP’s The Advocate’s Guide to Modified Adjusted Gross Income (MAGI)
The CARES Act instructs states to disregard the $600 per week unemployment benefit increase when calculating income “for any purpose” in Medicaid and CHIP (Section 2104(h)). The exclusion applies to all Medicaid eligibility categories, and other kinds of income determinations in Medicaid, such as, post-eligibility financial determinations governing spousal impoverishment.
In sum, the $600 payment bump, and the $1,200/$2,400 tax rebate, should have no effect on Medicaid/CHIP.
Unemployment benefits, including the $600 payment bump, are taxable income included in MAGI. However, unlike Medicaid/CHIP, Congress did not exempt the $600 payment increase when considering someone’s eligibility for subsidies to purchase health coverage through the ACA Marketplaces.
The ACA provides subsidies to help lower income people pay for health care. Individuals whose total household income is between 100-400% of the federal poverty line (FPL) qualify for premium tax credits (PTCs), based on a sliding scale according to income. (Note – lawfully present immigrants who are not Medicaid eligible because of their immigration status can obtain PTCs even if their income is 0-400% FPL). People with household income up to 250% FPL qualify for Cost Sharing Reductions (CSRs) to help reduce their copays and deductibles.
Health care consumers who currently receive Marketplace coverage who lose their jobs, or otherwise experience a loss of income, should report changes. Reduced income could qualify some consumers for Medicaid, or increase their PTC amount. Some consumers may be newly eligible for CSRs.
However, there may be some individuals for whom unemployment benefits, plus the $600 per week payment bump, actually increases their annual income. These consumers may have a lower PTC amount, and some may no longer be eligible for CSRs. However, it is highly unlikely that unemployment benefits, plus the $600 per week payment increase, would put someone over 400% FPL, making them ineligible for PTCs.
The $600 payment bump may also help close the coverage gap for persons in Medicaid non-expansion states. For example, a working parent in Florida making $500 per month (35% FPL) earns too much to qualify for the state’s Medicaid program, and too little to qualify for Marketplace subsidies. For some, unemployment benefits and the $600 per week payment increase will push their income to 100% FPL and thus qualify them for Marketplace coverage with PTCs and CSRs.
During the COVID-19 pandemic, we all have enough to worry about – from avoiding infection to caring for sick loved ones. Under the CARES Act, no one will lose Medicaid or CHIP coverage because of the $600 payment increase – which is at least one less thing to worry about.