New Rule Opens the Affordable Care Act Marketplaces to DACA Recipients

May, 10, 2024

New Rule Opens the Affordable Care Act Marketplaces to DACA Recipients

Sabrina Corlette, Georgetown University’s Center on Health Insurance Reforms, and Julian Polaris, Manatt Health

On May 3, 2024, the U.S. Department of Health and Human Services (HHS) released a final regulation that allows people who receive Deferred Action for Childhood Arrivals (DACA) to sign up for subsidized Marketplace or Basic Health Program (BHP) coverage. The new policy goes into effect on November 1, 2024 and is expected to enable 100,000 DACA recipients to enroll in health insurance coverage. Notably, HHS did not finalize its proposal to make DACA recipients eligible for Medicaid or the Children’s Health Insurance Program (CHIP) in states that have extended coverage to lawfully residing children and pregnant people, citing concerns about state administrative burdens in light of ongoing unwinding activities. This expert perspective summarizes the provisions of the new regulation and discusses their implications for states.

Background and Regulatory History

The Affordable Care Act (ACA) allows individuals who are “lawfully present” in the U.S. to enroll in subsidized coverage via the health insurance Marketplaces or the BHP if they meet other eligibility criteria. Federal law also gives states the option to enroll children and/or pregnant people who are “lawfully residing” in the U.S. in Medicaid or CHIP, which HHS has interpreted as requiring both lawful presence in the U.S. and residence in the relevant state.

HHS has generally interpreted “lawfully present” to include individuals granted deferred action by the Department of Homeland Security (DHS) as an exercise of enforcement discretion. However, following the DHS June 2012 announcement of a new DACA policy—which offers deferred action to undocumented immigrants who were brought to the U.S. as children before 2007 (among other eligibility requirements)—HHS amended its definition of “lawfully present” to exclude DACA recipients. As a result, DACA recipients have not been eligible to enroll in Marketplace, BHP, Medicaid, or CHIP coverage.

In 2022, DHS issued regulations formalizing its DACA policy. Among other things, the DACA final rule reiterated the agency’s view that a non-citizen who has been granted deferred action is deemed “lawfully present” for purposes of Social Security benefits. In September 2023, the U.S. District Court for the Southern District of Texas found the DACA policy unlawful, but issued a stay of that order for DACA recipients who received their DACA status prior to July 16, 2021, pending appeal. The case is currently under review by the Fifth Circuit Court of Appeals.

New Final Rule: “Lawfully Present” for the Marketplace but not for Medicaid/CHIP

Consistent with the proposed rule, the final rule amends the definition of lawfully present to treat DACA recipients the same as other deferred action individuals for purposes of Marketplace and BHP eligibility, as well as eligibility for premium tax credits and cost-sharing subsidies. However, the agency declined to finalize a proposal that would change the definition of lawfully present for Medicaid and CHIP eligibility.

In reconsideration of Marketplace and BHP policies by HHS, the agency concluded there was “no reason” to treat DACA recipients differently than other people granted deferred action. They also pointed to recent survey data showing that 27% of DACA recipients are uninsured, making them three times more likely than the general population to have no health insurance. Several public comments observed that the prior definition of lawfully present contributed to health disparities, as more than 90% of DACA recipients are Latino/a. In general, Latino/a’s have an uninsurance rate of 18%, compared to only 8.4% for non-Hispanic Whites. In light of these disparities, HHS explained, defining DACA recipients as lawfully present better aligns with the goals of the ACA of reducing the numbers of uninsured and making affordable health insurance available to more people.

The final rule is effective beginning November 1, 2024, the first day of open enrollment for plan years beginning January 1, 2025. Moreover, DACA recipients will be eligible at that time for a special enrollment period (SEP) for 2024 coverage, meaning that coverage could begin as early as December 1, 2024. HHS estimates that approximately 100,000 DACA recipients will enroll in a Marketplace plan or through the BHP.

With respect to Medicaid and CHIP, HHS did not finalize its proposal to make DACA recipients newly eligible in states that have extended coverage to lawfully residing children and pregnant people. The agency says it needs more time to consider public comments on the issue. State commenters in particular noted that their agencies are facing many urgent and competing demands, including the continued workload associated with the Medicaid unwinding and the implementation of new federal requirements, such as mandatory 12-month continuous eligibility for children, new requirements for justice-involved individuals, and new expectations for state Medicaid and CHIP agencies relating to benefits, data collection, and eligibility.

HHS confirmed, however, that DACA recipients between 0 to 100% of the federal poverty level can qualify for subsidized Marketplace plans due to their ongoing ineligibility for Medicaid and CHIP. Those up to 150% of the federal poverty level can qualify for $0 premium silver plans in 2025, if they otherwise qualify for premium tax credits. DACA recipients can also continue to be eligible for Medicaid coverage in the case of an emergency medical condition.

Clarification of Other Non-Citizen Statuses

With this final rule, HHS also took the opportunity to update and clarify various regulations relating to other non-citizen categories. First, the rule confirms that the following categories of people are considered lawfully present for purposes of the Marketplaces and BHP:

Citizens of the Freely Associated States living in the U.S. under the Compacts of Free Association (COFA), commonly referred to as COFA migrants.
Individuals granted employment authorization to work in the U.S.
Children under 14 years of age who have filed an application for asylum, withholding of removal, or protection under the Convention Against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment, without being subject to a 180-day waiting period.
Children with an approved petition for Special Immigrant Juvenile classification.

Second, the final rule updates the definition of “qualified non-citizen” to include the following individuals, all of whom may qualify for Medicaid or CHIP without the five-year waiting period that applies to certain other groups of qualified non-citizens:

Non-citizens who are victims of a severe form of trafficking in persons, who are eligible for Medicaid and CHIP to the same extent as refugees under section 107 of the Victims of Trafficking and Violence Protection Act of 2000 and the members of a trafficking victim’s family who are granted derivative T non-immigrant status.
Iraqi and Afghan special immigrants, who are eligible for Medicaid and CHIP to the same extent as refugees under the National Defense Authorization Act for Fiscal Year 2008.
Amerasian immigrants, who are treated the same as refugees for purposes of Medicaid and CHIP eligibility in accordance with a joint resolution making further continuing appropriations for the fiscal year 1988.
Certain Afghan parolees who are eligible for Medicaid and CHIP to the same extent as refugees in accordance with section 2502 of the Extending Government Funding and Delivering Emergency Assistance Act (Pub. L. 117-43 as amended, enacted September 30, 2021).
Certain Ukrainian parolees who are also eligible for Medicaid and CHIP to the same extent as refugees under section 401 of the Additional Ukraine Supplemental Appropriations Act (Pub. L. 117-128 as amended, enacted May 21, 2022).

Considerations for States

State-Based Marketplaces (SBMs) will need to update their eligibility and enrollment systems to accept DACA recipient applicants in time for the next open enrollment period. They may also wish to conduct outreach and provide targeted consumer assistance, to encourage these individuals to enroll. (HHS has committed to outreach and education with respect to the Federally Facilitated Marketplace.) HHS estimates that it will take each SBM, and each BHP, 100 hours to develop and code the necessary changes to their eligibility systems. As of implementation of the final rule, two states–Minnesota and Oregon–will have a BHP.

HHS received public comments noting that the SBMs and BHPs could face challenges implementing the required system changes. To address these concerns, the agency plans to release technical guidance to states, and to provide one-on-one assistance as needed. HHS acknowledges that some SBMs may not be able to fully implement the changes by November 1, and urges those states to provide manual workarounds to ensure that DACA recipients can obtain Marketplace coverage without delays.

At the same time, HHS argues that the technical changes it has made to the definition of lawfully present will, over the long term, reduce application processing burdens for SBMs. These changes are expected to make it easier for SBMs to verify applicants’ immigration status via the Systematic Alien Verification for Entitlements system administered by DHS, reducing the current need for manual intervention regarding DACA recipients.

Several states are already providing health insurance coverage to DACA recipients using state-only funds, either via a Medicaid-like public program or through subsidized private coverage. These states will need to determine whether the eligibility rules of those programs require DACA recipients to transition to newly available Marketplace coverage. If not, states may decide to update eligibility rules to require this transition or maintain these individuals in the state-funded program (including consideration of whether the state program is certified as “minimum essential coverage” such that eligible individuals are not simultaneously eligible for subsidized Marketplace coverage). Such a decision is complicated by legal uncertainty surrounding the underlying DACA policy by DHS, as well as potential future legal challenges to the new HHS regulation. To the extent states require DACA recipients in existing state coverage programs to move to a Marketplace plan, their SBMs will need to provide sufficient notice and support to effectuate a smooth transition.

The authors thank Justin Giovannelli, Jason Levitis, Patti Boozang, and Kaylee O’Connor for their review and comments on this expert perspective.