A key component of the ACA was the adoption of a uniform methodology for how to count income. This methodology, called Modified Adjusted Gross Income (MAGI), is based on Federal Income Tax rules. MAGI income counting rules are used by the Marketplace to determine eligibility for advance premium tax credits (APTC) and state Medicaid agencies to determine eligibility for certain categories of Medicaid. The Marketplace uses annual income to determine eligibility and the amount of APTCs. However, state Medicaid agencies use monthly income in most circumstances to determine eligibility for Medicaid (TennCare in Tennessee). This use of different budgeting periods (annual versus monthly) can create gaps in coverage for households with monthly income too high for Medicaid but annual income too low for APTCs.
There are special provisions in the Medicaid regulations for individuals who have monthly income above Medicaid income limits and annual income below 100% of the federal poverty level (FPL). These provisions are called the gap-filling provisions. The gap-filling rule requires state Medicaid agencies to use annual income when monthly income is above the Medicaid eligibility threshold and annual income is below 100% of the poverty line.
So what does the gap-filling rule look like in real life? We’ve come up with a couple of examples for you.
Example 1: The Crockett family has 4 members (dad, mom, 10 year old and 12 year old). The Crocketts apply for TennCare in July. At the time of application, their monthly income is $2,800. The Crockett’s monthly income is over the income thresholds for the children and parent categories of TennCare. But, the Crockett’s income from January through June was only $1,000/month. Based on an annual projection, their income is below 100% FPL. The Marketplace should apply the gap-filling rule and base eligibility for TennCare on annual income.
Example 2: The Washington family has 7 members (dad, mom, and 5 minor children). The Washingtons have a steady monthly income of $2,700. The monthly income limit for the parent/caretaker-relative category of TennCare is $2,672 (including a 5% income disregard). Based on monthly income, the parents are ineligible for TennCare. However, the Washington’s annual income is below the federal poverty level for family of 7. The Washingtons should be eligible for TennCare under the gap-filling provision.