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Obamacare & The Medicaid Expansion

Many states have chosen to expand Medicaid in conjunction with the implementation of the Affordable Care Act. This has wide ranging implications for the law’s Individual Mandate including the Obamacare fine.

Your location could have a huge effect on your Obamacare penalty, if any, and your health coverage in general. If you live in a state which has expanded the Medicaid program you may be able to obtain qualified health insurance and, in the process, avoid an Obamacare fine.

Minimum Essential Coverage

If you obtain health insurance through Medicaid, either from an existing plan or due to the expansion, you are covered and exempt from any possible Obamacare fine. Medicaid counts as Minimum Essential Coverage under the law’s provisions.

Which States

If you live in one of the following states and you qualify for Medicaid, you may be in luck:

Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia (Washington D.C), Hawaii, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Rhode Island, Vermont, Washington and West Virginia

However, the following states are not expanding the Medicaid program under the Affordable Care Act:

Alabama, Alaska, Florida, Georgia, Idaho, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin and Wyoming

Collectively, this second list of states will likely have higher rates of uninsured people. As a result, they may have slightly more people paying an Obamacare fine.

However, most of these folks won’t be filing a tax return due to their income being below the filing threshold. In that case, they will be exempt from paying any Obamacare fine. Unfortunately, this won’t be the case for everyone.

If you are required to file a tax return because you just barely make it over the filing threshold based on your filing status, you may have a unique problem and be subject to the Obamacare penalty. Read about the so-called ‘Medicaid Gap’ below to find out how you may be affected.

The Medicaid Gap

Unfortunately, a few million Americans will not be able to enroll in Medicaid because their state rejected an offer by the federal government to expand Medicaid. Ironically, these people will not even qualify for subsidies on the federal exchange either because their income is too low.

Suppose you, a single person, live in New Jersey and earned, say, $13,000 in 2014. Since New Jersey expanded Medicaid you would be eligible for free health insurance under Medicaid. You would then avoid any Obamacare fine and be covered under the law.

However, if you lived in North Carolina your situation would be drastically different. Not only would you not have access to Medicaid but you would also be subject to an Obamacare fine since you would need to file a tax return.

Catch-22 of Medicaid

To make matters worse, in such as case, you wouldn’t even qualify for subsidies on the federal marketplace’s exchange. This is because the government intended for someone in that income range to be eligible for Medicaid in all 50 states.

If you wanted coverage in this situation, you would have to buy insurance at the full price even though you likely cannot afford it. It’s truly a catch-22 which is why it has been labeled the Medicaid Gap.

This is not to be confused with a general coverage gap.