Minimum-Wage Hike May Cost Workers Medicaid But ACA Will Kick In

‘Coverage gap’ will affect relatively few low-income workers, but lawmakers and policymakers moving to protect them

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Some 24,000 lower-income New Jersey workers could lose their Medicaid coverage as a result of the state’s new minimum-wage increase, according to a report the Urban Institute will release today.

But the Washington, D.C.-based researchers also found all these individuals would instead qualify for coverage through the Affordable Care Act’s health insurance marketplace. And many would get government help to pay some or most of the additional costs, the advance copy of the report provided to NJ Spotlight notes.

Closing the coverage gap

The group in the potential “coverage gap” makes up less than 3 percent of the more than 810,000 workers who will eventually benefit from the new pay policy, the institute found. But some New Jersey officials are already looking at ways to ensure those residents don’t lose healthcare coverage. The change in the minimum wage from $8.85 an hour to $15, which will roll out incrementally through 2024, was enacted in February.

“We’re getting ahead of it — and it’s a good thing we are being forced to deal with it,” said Brandon McKoy, president of New Jersey Policy Perspective, a liberal think tank that has backed the wage increase and expanded healthcare protections. The state benefits from the fact that it has a generous Medicaid program, he said, that was expanded significantly under the federal Affordable Care Act.

“So by the time we get to where we have a problem, we’re going to have a solution in place,” McKoy said.

Part of that fix could come from Sen. Joseph Vitale (D-Middlesex) who is working on legislation likely to involve a combination of outreach assistance — to ensure these workers are aware of their coverage options — and possibly additional funding to help cover extra costs. “We’re mapping out a plan to protect people,” he said.

In addition, the state budget includes a requirement that the Department of Banking and Insurance (DOBI) thoroughly study what the state can do when designing the new individual insurance marketplace to help workers who become ineligible for Medicaid as a result of the wage increase. (DOBI was unable to provide an update on this process late Wednesday.)

State to take over

The department is now in the process of building its own marketplace, or exchange, a system created through the ACA to help provide coverage to all residents who do not qualify for Medicaid and can’t access insurance through work. New Jersey’s system is now run by the federal government. The new one — which is scheduled to be available in some form later this year — is to be integrated with the Medicaid enrollment system.

“Establishing a state exchange by itself will be not enough to make insurance affordable and improve access,” said Raymond Castro, the health policy expert with NJPP, which supported the budget language. “The state needs to use the flexibility that comes with a state exchange to make innovative, cost-effective changes that will achieve these goals.”

According to the Urban Institute’s study — the first to look at the impact of a state wage change — of the 810,000 workers expected to benefit from the change, 250,000 currently qualify for Medicaid. (The research was funded by the Robert Wood Johnson Foundation, which also provides financial assistance to NJ Spotlight.)

However, the report notes only about a quarter of these individuals are currently using this benefit; more than half now have private insurance and nearly 18 percent are uninsured. In addition, most — given their current income levels and work profiles — will still be eligible for the state and federally funded insurance program when their wages rise. In New Jersey, Medicaid is available to individuals who earn slightly less than $1,400 a month, or nearly $1,900 for couples.

Other questions

Other questions remain, however, explained Anuj Gangopadhyaya, a research assistant with the Urban Institute’s Health Policy Center. Changes in work hours, job status, and the larger economy could all impact the numbers, and some husbands or wives could also experience coverage changes as their spouses start to earn more. (Children are likely to be protected, given New Jersey’s generous program for minors; roughly one-third of those expected to benefit are now parents.)

“The minimum-wage increase and the scale of what is going to happen in New Jersey is big — there’s no way around that,” Gangopadhyaya said. “It’s not a small policy by any means,” he added, “but the interesting thing is, a relatively small number of Medicaid members will be impacted.”

In addition, higher wages have been repeatedly linked to health benefits, especially for children, the report notes; overall, the increase is expected to benefit one in four of all working citizens in New Jersey who aren’t classified as disabled. Still, the cost of marketplace policies involves more out-of-pocket expenses than Medicaid, and it is possible the income change could make these workers ineligible for other benefit programs. (The Urban Institute focused on Medicaid alone.)

NJPP’s McKoy, Castro, and other policy experts promised they would be watching the process as it evolves. “We’re aware there is still more to do,” McKoy said.