The Patient Protection and Affordable Care Act (Affordable Care Act or ACA) seeks to reduce the size of the nation’s uninsured population through policies aimed at improving the accessibility and affordability of health insurance coverage. Two insurance affordability programs targeting the low- and moderate-income uninsured are the legislation’s centerpieces: a Medicaid expansion serves the lowest-income population, and a combination of premium tax credits and cost-sharing reductions helps those with somewhat higher incomes purchase coverage in health insurance exchanges, or Marketplaces.
The ACA’s Medicaid expansion was originally designed as mandatory in all states to cover adults with incomes up to 138 percent of the federal poverty level (FPL). However, a June 2012 Supreme Court ruling effectively made the expansion optional.1 Since October 2013, consumers in every state and the District of Columbia have been able to purchase qualified health plans through Marketplaces, subject to new regulations intended to promote greater transparency and competition, among other policy goals. Federal sliding-scale subsidies to purchase coverage in the new Marketplaces have been offered, starting in January 2014, to individuals who have incomes above Medicaid levels and between 100 and 400 percent of the FPL and who also lack access to affordable employer-sponsored insurance (ESI).2 The Congressional Budget Office projects that that the ACA will reduce the number of uninsured by about 12 million in 2014, 19 million in 2015, 25 million in 2016, and 26 million each subsequent year through 2024.3
The ACA also makes major changes to the eligibility determination process for health and human services programs with the aims of reducing consumers’ burdens when they seek coverage (thereby increasing participation levels), cutting administrative costs, and preventing eligibility errors—changes that have required major improvements to information technology (IT) systems.4 The legislation required the U.S. Department of Health and Human Services (HHS) to “develop interoperable and secure standards and protocols that facilitate enrollment of individuals in Federal and State health and human services programs,” including “electronic matching against existing Federal and State data,” “simplification and submission of electronic documentation, digitization of documents, and systems verification of eligibility,” and “reuse of stored eligibility information.”5 Marketplace web portals seek to share information in “real time” with insurers, state agencies, and the federal government, which has built a Federal Data Services Hub to help verify the income, citizenship, and lawful immigration status of many people applying for Marketplace subsidies or Medicaid.6 The term “human services programs” as used here includes the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), the Low Income Home Energy Assistance Program (LIHEAP), Supplemental Security Income (SSI), the Child Care and Development Fund (CCDF), and similar programs.
This report draws on the insights from neoclassical and behavioral economics to assist federal, state, and local agencies as they move towards modernized and integrated program administration. We review the literature on consumer decision-making, with a special focus on low-income consumers, and identify approaches to improve the integration of health and human services and program participation. We focus on research questions related to two operational contexts:
- When human services program data are used to qualify consumers for Medicaid, how can enrollment be structured to increase Medicaid participation among eligible consumers? For this context, we focus primarily on the behavioral economics literature involving procrastination, default choices, aversion to paperwork completion, and the like. Such literature suggests that even modest opt-in or form-completion requirements can considerably reduce participation levels.
- When consumers apply for health coverage at Marketplaces, how can they be helped to receive human services benefits that they may want and for which they qualify? For this context, we primarily focus on the behavioral economics research related to cognitive and choice overload. Consumers applying for subsidized coverage in the Marketplace could already be overwhelmed with the challenges of first qualifying for assistance, which may involve demonstrating financial eligibility, citizenship status, and, in the case of Marketplace subsidies, lack of access to ESI that the ACA defines as affordable. Many consumers must then select a health plan, weighing the impact of premiums, benefits, cost-sharing, and provider networks. Layering on top of that complexity a further interaction with human services programs could be challenging for many consumers to process.
Among human services programs, we focus on SNAP for two main reasons. First, SNAP currently serves 39 percent (13.7 million) of the 39.5 million adults estimated to be newly eligible for Medicaid if all states expand eligibility—reaching more such adults than any other state- or locally administered human services program.7 SNAP currently serves more than 47 million poor or near-poor individuals.8 This includes an estimated 4.8 million childless adults, who have an average household income at approximately 29 percent of FPL.9
Second, SNAP aids all eligible people who apply. Most other state- and locally administered human services programs, such as TANF, LIHEAP, and CCDF, are funded by federal block grants. Unlike the latter programs, SNAP can help additional eligible individuals without reducing the assistance it provides to current participants. SNAP can thus improve access to benefits by providing information about SNAP eligibility and facilitating enrollment among low-income residents seeking health coverage under the Affordable Care Act. Among the estimated 14.5 million people who qualified for but did not receive SNAP benefits in 2010, 80 percent would be eligible for Medicaid or the Children’s Health Insurance Program (CHIP) if all states implement the ACA’s Medicaid expansion and an additional 8 percent would qualify for Marketplace subsidies.10
This report begins with general background information on traditional and behavioral economics as they relate to these questions. We then provide in-depth analysis of each operational context, working towards developing a menu of practical, research-based approaches for linking health and human services programs to reach eligible consumers more effectively. In each area, we review the relevant behavioral economics literature to help support consumer decision-making at the intersection of health and human services programs.