NCCP’s report on Benefit Cliffs Affecting Kentucky Families and Related Policy Recommendations includes estimated costs of benefit cliffs to parents and their children and, more broadly, the negative impacts of the cliffs on the economic health of the state. Based on the results and existing guidelines of state-specific benefit policies, the report presents recommendations for reducing or eliminating benefit cliffs and potential benefits of advancing these recommendations to families and the state economy.
Key recommendations that emerged from the results and available opportunities for policy change in Kentucky to address the most serious benefit cliffs affecting low- and middle-income families with children include the following:
- Require lower copayment amounts for low-income families using subsidized child care. While currently in some counties certain families can spend as much as 15 percent of their income on copayments at just 120-percent of the Federal Poverty Level (FPL), we recommend that copayments would start at no more than three percent of earnings when families’ income reaches $17,000 and gradually increase to no more than seven percent of earnings when families’ earnings reach 85 percent of the state median income (SMI), which is the current exit threshold for subsidized care.
- Extend the exit income threshold for subsidized child care to 125-percent SMI. Moving the exit threshold to a higher income level means that when parents lose access to child care assistance, they will have more income to cover the very high costs of private care.
- Between 85-percent SMI and the new exit threshold (125-percent SMI), the state should require subsidy copayments that steeply increase as parents’ earnings grow and come close to the cost of private care just as families reach the exit threshold. Implementing the second recommendation above on its own would just shift the cliff up to a higher income level. However, increasing copayments steeply will mitigate the benefit cliffs, support families in becoming independent, and enable parents to share responsibility for subsidized care with the state government, thereby limiting the investment level needed by the state.
- Conduct a strong campaign to inform low-income families about the importance and benefits of enrollment in premium silver-level Qualified Health Plans (QHPs), which effectively reduce premiums
to $0 for families with incomes under 150-percent FPL. This is needed, given currently low enrollment rates in the QHPs. It is important to encourage those families losing Medicaid for adults at just 138-percent FPL to transition quickly to a plan that will, until they earn 150-percent FPL, require no contributions toward policy premiums and provide coverage featuring very low deductibles for needed care. Investment in an enrollment campaign would serve to actively implement a solution Kentucky is already providing to ensure that families can access medical care at reasonable cost. It could involve community outreach, enrollment assistance to individuals, and health education. - Adopt a state-funded Basic Health Program (BHP) as a transitional measure, enabling parents who rely on a network of trusted doctors through Medicaid to continue with those providers to access a “bridge insurance program” for adults earning from 139- to 200-percent FPL. This would afford low-income families more time as their earnings increase to become informed about Qualified Health Programs. This is an especially important aim for parents since families will no longer be covered by KCHIP for their children at 218-percent FPL.
The NCCP team is grateful to all, including those from the Kentucky Workforce Innovation Board and stakeholders in the Kentucky policy community, who provided input on the many important questions raised during this work. NCCP acknowledges support from the Ford Foundation for additional support with this work.