Health Insurance Coverage in the Houston-Galveston Area Under the Patient Protection and Affordable Care Act

Health Insurance Coverage in the Houston-Galveston Area Under the Patient Protection and Affordable Care Act 

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The Journal of Texas Medicine – November 2012 

Tex Med. 2012;108(11):e1.

By Charles Begley, PhD; Ashish Deshmukh, MPH; Karl Eschbach, PhD; Negin Fouladi, MS, MPH; Qian June Liu; and Thomas Reynolds, PhD  

Charles Begley, PhD, professor; Ashish Deshmukh, MPH, student/graduate research assistant; Negin Fouladi, MS, MPH, student/graduate research assistant; and Thomas Reynolds, PhD. research associate, The University of Texas School of Public Health, Houston, Texas; Karl Eschbach, PhD, professor, The University of Texas Medical Branch, Galveston, Texas; and Qian June Liu, health policy analyst, Community Health Choice, Inc. Send correspondence to Charles Begley, PhD, UTSPH, 1200 Herman Pressler, Houston, TX 77030; email: 


This study projects the number of nonelderly people who could gain coverage under the Patient Protection and Affordable Care Act (PPACA) for the period from 2014 through 2020 in the 13-county Houston-Galveston area region. The major PPACA provisions aimed at expanding coverage as well as the populations targeted by those provisions are described. Projections of the impact of PPACA on coverage in the area are based on estimates of growth in the size of targeted populations in each county and the anticipated responses of those populations to the major provisions of PPACA. The projections indicate that, if fully implemented, PPACA could cut the uninsurance rate in the region by half, from 26% in 2010 to 13% in 2020. This change translates into health insurance coverage for approximately 2 million additional people, from the current 4.2 million to a projected 5.9 million. The number of Medicaid enrollees could increase by an estimated 600,000 (a 79% increase), although private insurance coverage, which could increase by as much as 1 million enrollees (a 30% increase), will remain the primary source of coverage for most people. Coverage gains from PPACA will vary considerably by county, depending on the age-income-citizenship characteristics of the population, current uninsurance rates, and the rate of population growth.    


The percentage of uninsured among the nonelderly population (younger than 65 years) in the 13-county Houston-Galveston region (Harris, Austin, Brazoria, Fort Bend, Galveston, Chambers, Montgomery, Waller, Liberty, Colorado, Matagorda, San Jacinto, and Walker counties) is markedly higher than the national average. In 2010, the Houston-Galveston region had an uninsurance rate of 25.8%, compared with the national rate of 16.7%.1 County uninsurance rates within the region ranged from a low of 19.1% in Fort Bend, a relatively high-income suburban county, to a high of 29.8% in rural Colorado County. The Harris County (Houston) uninsurance rate was 27.7%, and the Galveston County (Galveston) uninsurance rate was 22.5%. The relatively high rate of uninsurance in the area creates the potential for large benefits from the coverage provisions of the Patient Protection and Affordable Care Act (PPACA). 

In 2010, a total of 45.1% of the uninsured in the region were earning less than 138% of the federal poverty level (FPL), an income group targeted for Medicaid expansion under PPACA.1 Another 42.9% were at 138%-400% of FPL, an income group targeted for premium tax assistance under PPACA. The annual household income for various FPLs and family sizes in 2010 are shown in Table 1. Most of the uninsured (71.3%) were adults between ages 19 and 65 years, and more than 95% have citizenship or legal immigrant status, as required for most PPACA provisions.  

A primary objective of PPACA is to expand health insurance coverage by requiring most persons to obtain coverage, expanding Medicaid to low-income adults, providing premium assistance for the purchase of private insurance, using tax credits and penalties to encourage employers to offer coverage, and increasing regulation of the benefits of private coverage. The impact of these provisions at the community level will be influenced by a number of implementation factors as well as by the size and characteristics of the population eligible for the new coverage provisions.  

Coverage projections of PPACA that have been made so far have not considered population growth,2 have been limited to Medicaid coverage only,3 and/or have not been projected at the county level.4 This study projects PPACA coverage at the county level in Southeast Texas, combining projections of the size and characteristics of future populations with assumptions of the likely responses of persons to PPACA. A summary of the major coverage provisions of PPACA is provided below, followed by the projection methods and results.  

PPACA Coverage Provisions 

The following PPACA coverage provisions are already in effect for the population younger than 65 years:   

  • Elimination of lifetime coverage limits and prohibition of cancellation of coverage of policyholders who get sick; 
  • Limit on insurance companies' administrative costs and profits; 
  • Prohibition of denial of coverage of children with preexisting medical conditions; 
  • Temporary federal high-risk insurance pool for adults and children with preexisting conditions; 
  • Young adults aged from 19 to 25 years who cannot get health insurance at a job can stay on their parents' health plan;  
  • Narrowing the gap known as the "doughnut hole" in the Medicare Part D prescription drug plan;  
  • Tax credits for certain small businesses to help cover the cost of premiums; 
  • Early retiree insurance program assistance to help employers cover early retirees aged from 55 to 64 years; and 
  • Coverage of certain preventive services with no out-of-pocket costs, such as breast cancer screenings and cholesterol tests. 

Although existing provisions are significant, the provisions with the largest potential impact on coverage do not begin until 2014 and are expected to be fully implemented by 2019-20. Table 2 lists these provisions and their target populations. Brief summaries follow and more detailed descriptions are available from other sources.5,6 

Individual Mandates and Penalties 

The individual insurance coverage mandate and tax penalties will require most citizens and legal immigrants in the United States to have qualifying health insurance coverage, effective January 1, 2014. Penalties will be phased in according to the following schedule for each person: $95 or 1.0% of taxable income in 2014 (whichever is greater), $325 or 2.0% of taxable income in 2015, and $695 or 2.5% of taxable income in 2016. After 2016, the penalty will be increased annually by the cost-of-living adjustment. For families, the flat dollar amount penalty is multiplied by the number of household members up to 3; the percentage of taxable income is calculated the same. Individuals exempt from the mandate include the following: those with religious objections, Native American Indians, undocumented immigrants, incarcerated individuals, those without coverage for fewer than 3 months, those for whom the lowest cost plan available exceeds 8% of income and for whom an employer-sponsored plan is not available, and those with incomes below the tax filing threshold ($9,500 for single taxpayers under age 65 years and $19,000 for couples in 2011).5 

Medicaid Expansion 

PPACA will expand Medicaid eligibility to all citizens and legal immigrants younger than 65 years with family income up to 133% of FPL. A 5% income disregard will replace the asset and resource tests, effectively raising the Medicaid income eligibility limit to 138% of FPL. The Figure compares PPACA income eligibility thresholds with the current Medicaid and Children's Health Insurance Program (CHIP) thresholds in Texas. The Figure suggests that in Texas, Medicaid eligibility will probably expand the most for low-income, nondisabled, childless adults, who currently are ineligible for Medicaid, and for parents, whose Medicaid eligibility currently stands at 12% of FPL. The impact is likely to be less on children as the combined Medicaid and CHIP income thresholds already extend to 200% of FPL.7 

PPACA also requires that eligibility procedures for Medicaid and CHIP be further streamlined and coordinated. For example, persons applying for private coverage in the health insurance exchange (described below) will also be screened for Medicaid and CHIP and enrolled if they qualify. PPACA includes federal funds to assist states to expand and improve eligibility and enrollment resources and services.   

Health Insurance Exchanges and Premium Subsidies 

PPACA creates health insurance exchanges that will offer businesses and individuals a range of health plans at affordable prices. According to federal rules,8 an exchange must, at a minimum, do the following:   

  • Attract and certify private qualified health plans, classify them in terms of coverage and co-pay provisions, and offer them to the public;  
  • Assist the public by offering navigators, a toll-free telephone hotline, and a website with information on the plans and how to enroll;  
  • Screen persons for eligibility for Medicaid, CHIP, premium discounts, and other available public coverage, and enroll them in these programs if eligible;  
  • Calculate the tax credit and cost-sharing subsidy that persons with certain income and family characteristics could receive to purchase coverage; 
  • Screen for and grant coverage exemptions; and 
  • Transfer relevant information to the federal government and employers regarding persons covered and exempted from coverage requirements. 

PPACA requires each state to establish a fully operational health insurance exchange by January 1, 2014, or the federal government will make an exchange available. Readiness must be established by January 1, 2013, although regulations allow conditional approval to be given to states making acceptable progress.9 Texas has not yet passed legislation authorizing a state-run exchange, but state agencies are making efforts to determine the basic structure of a state-sponsored exchange if the decision is made to have one.  

Before 2017, only individuals and employers with 100 or fewer employees can participate in an exchange. States may limit employers to those with 50 or fewer employees for plan years beginning before 2016. Starting in 2017, states may allow larger employers to obtain coverage for their employees through an exchange.  

Health plans in an exchange will fall into one of four benefit tiers based on the percentage a plan pays for covered health care expenses incurred by a typical enrollee. Bronze tier plans have an actuarial value of 60%, silver 70%, gold 80% and platinum 90%. A separate catastrophic plan will be available for persons younger than 30 years. Participating employers may limit their workers' choice of plans to a particular tier.10  

Exchanges will subsidize coverage by offering advanced refundable tax credits to individuals and families with incomes between 133% and 400% of FPL. The tax credits will be tied to the second lowest-cost silver plan that is offered  and will be provided on a sliding scale basis such that recipients up to 133% of FPL will spend a maximum of 2% of income on premiums, while recipients from 300% to 400% of FPL spend a maximum of 9.5% of income on premiums.11  

Insurance Reforms  

Dependent Coverage: Beginning in 2010, PPACA allows young adults up to age 26 years to remain on their parent's insurance policy, if that policy is from a private insurer that offers dependent coverage. The regulation specifies that even if the young adult is no longer living with parents, is not listed as a dependent on a parent's tax returns, and/or is no longer a student, this coverage option still applies. Both married and unmarried young adults can qualify for the dependent coverage extension, although that coverage does not extend to the young adult's spouse or children.12 At the present time, this provision does not apply if the adult child has another offer of employer-based coverage. Beginning in 2014, children up to age 26 years can stay on their parent's plan even if they have another offer of coverage.13 

Lifetime and Annual Limits: PPACA prohibits lifetime or annual limits on the dollar value of essential health benefits.13 With respect to lifetime limits, the prohibition applies to plan or policy years beginning on or after September 23, 2010, and with respect to annual limits, the prohibition applies to plan or policy years beginning on or after January 1, 2014, subject to a 3-year phased implementation of restricted annual limits.  

PPACA requires that all plans offered in an exchange cover essential health benefits including ambulatory services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse disorder services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive services and chronic disease management; and pediatric dental and vision care.14  

Preexisting Conditions: Health plans may not deny coverage because of preexisting conditions for children since September 23, 2010, and for adults beginning in 2014. PPACA directed the federal government to establish a temporary high-risk health insurance pool to provide affordable coverage for uninsured adults with preexisting conditions until exchanges will be available, through which individuals can obtain coverage.  

 Tax Credits and Penalties for Employers 

Under PPACA, certain small businesses that offer insurance are currently eligible to receive a tax credit for a portion of their premium costs. To qualify, businesses must pay at least half of their workers' insurance premium, and they must have 25 or fewer full time equivalent employees, with average annual wages below $50,000. The tax credit is scaled such that businesses with fewer employees and lower annual wages receive a greater percentage of their premium contribution.  

After 2014, businesses with 50 or more full-time equivalent employees will face an annual penalty if at least one of their employees receives a premium subsidy for coverage in an exchange. For businesses that do not offer insurance, the fine will be $2,000 times the number of employees, minus the first 30. For employers offering coverage, the plan must pay at least 60% of covered health care expenses for a typical employee, and it may not require employees to pay more than 9.5% of family income for their portion of the premium. If the coverage fails to satisfy these two conditions, the employer will be penalized $3,000 annually for each full-time employee covered by a subsidized plan in an exchange, or $2,000 times the number of full-time employees (minus the first 30), whichever is less.5 Businesses with 26 to 49 employees will not be eligible for the tax credits nor will they be subject to the coverage penalties.       

Projection Methods 

The first step in projecting the impact of PPACA on coverage in the region involved obtaining current data on the characteristics of the population in each county as well as on the number and percent of insured and uninsured. The 2008 and 2009 American Community Survey (ACS) Public Use Microdata file data15 were used for this purpose, weighted by age, income, and citizenship status. Health insurance coverage information was obtained for 3 age groups, 3 income groups, and 3 citizenship status groups selected for correspondence with populations targeted by the PPACA provisions. 

For each county, the size of each group for the 2014-2020 period was projected based on the Texas state demographer's 2000-2007 population projection scenario.16 This scenario takes into account post-2000 trends in natural growth and immigration. The ACS coverage rates for 2008 and 2009 were then applied to the projected populations of each age, income, and citizenship status group to project coverage without PPACA.  

To project coverage with PPACA, participation rates (the percent of the eligible population likely to enroll in Medicaid or purchase private insurance in an exchange or elsewhere) were applied to the projected number of uninsured in applicable groups. The participation rates are informed assumptions based on the best evidence available from public and private insurance studies currently available in the literature, as discussed below. 

Medicaid/CHIP Enrollment 

The Texas Health and Human Services Commission estimated that under PPACA, Medicaid and CHIP participation rates for persons who are currently eligible but not enrolled (primarily children) and for new eligibles (primarily adults) would lead to an overall 91% participation rate of persons in 2014, increasing to 93% in 2015 and 94% thereafter. The HHSC rates are much higher than current participation rates of children in the 13-county study region, which averaged 65% in 2009.15 They also are high compared with estimates that have appeared in the published literature, ranging from 49% to 74%.17 Based on this information, a midpoint Medicaid and CHIP participation rate of 81% was selected for 2014, rising to 83% in 2015, and 84% thereafter.  

Large-Group Employer-Based Coverage  

The PPACA-related impact on employer-based private insurance coverage in the region was assumed to be similar to projections developed by the federal government for the country as a whole.18  Changes are based on microsimulation models of the behavioral response of individuals and businesses to PPACA coverage incentives and penalties as well as to changes in insurance regulations. The Centers for Medicare & Medicaid Services estimated an initial postreform increase in employer-based coverage of 1.20% in 2014, followed by slight declines by about 0.5% a year until 2019.18 The national percentages were applied to the study region to predict the changes in employer-based private insurance coverage. 

Individual and Small-Group Insurance  

Changes in coverage of persons in the individual and small business insurance market were based on projections developed for Texas by researchers at the RAND Corporation.4 Using a microsimulation model and Texas demographic and economic data, RAND researchers estimate that 4 million people will obtain coverage in exchanges in Texas by 2016.  They also predict that 894,000 currently uninsured people (14.3% of all uninsured) in the state will gain coverage through an exchange. The RAND enrollment percentages for the state were applied to targeted populations in the region (persons in families with incomes ranging from 138% to 400% FPL). 

Undocumented and Recent Immigrant Residents 

In projecting the population eligible for Medicaid and CHIP coverage under PPACA, the percentage of undocumented residents and legal adult noncitizens who had not resided in the United States for at least 5 years (populations not eligible for PPACA-related coverage) were removed. The number of undocumented in the region was based on the Urban Institute's national estimate that 41.5% of noncitizens are undocumented.19 Another assumption was that the 60% private coverage rate of the undocumented19 will stay the same through 2020.  


The current nonelderly population in the 13-county region, uninsured, and insured by type of coverage are shown in Table 3. Out of 5.6 million nonelderly persons in the year 2010, some 1.5 million (25.8%) lacked any sort of coverage. The highest proportion (55.3%) of covered nonelderly persons had coverage through their employer. Medicaid covered approximately 13.2% of these employees. 

Projections of the number and percent of the nonelderly population in the region uninsured and insured by type of coverage in 2014 and 2020 with and without PPACA are presented in Table 4. The projected number of nonelderly people in the region without health insurance in 2020 will be about 60% fewer than the number in the absence of the law (942,754 uninsured instead of almost 1.76 million).  The projected number of people with coverage in 2020 with PPACA will be about 17% higher than without PPACA (6 million versus 5.1 million).   

Medicaid enrollment is projected to be 53% higher than what it would be in the absence of PPACA. Most of the increase in Medicaid enrollment will come from persons who are newly eligible as a result of PPACA (not shown in the table).  Despite the large increase in public coverage through Medicaid, the most common source of coverage in the region will remain employer-sponsored private insurance, but the percentage of the nonelderly population with this type of coverage will fall slightly from 55.3% currently (Table 3) to 53.5%. Almost half a million people in the region will obtain coverage through an exchange, representing 5.3% of the insured, nonelderly population. 

The remaining tables show the impact of PPACA on the number and percent of the population uninsured by county (Table 5), by age (Table 6), by income (Table 7), and by citizenship status (Table 8). The largest decreases in the projected uninsurance rate, accounting for population growth, with and without PPACA will be in Austin, Colorado, Matagorda, Wharton, and Walker counties, with reductions ranging from 67% to 71%. Harris, Brazoria, Fort Bend, and Chambers counties will see reductions in the 47% to 52% range (Table 5). The remaining counties will experience reductions in the 42% to 45% range.  

With PPACA, only 5.2% of children in the region will remain uninsured by 2020 compared with 17.0% without PPACA, a decrease of 66.4% (Table 6). The projected percentage of uninsured adults aged from 26 to 64 years will decrease under PPACA by 45.21%, from 26.8% of the population to 15.2%. The uninsurance rate for the group aged from 19 to 25 years, projected to be 44.6% without PPACA, will decrease to 28.5% under PPACA, a reduction of 36.4%. 

Low- and middle-income US citizens will be the primary beneficiaries of the coverage provisions of PPACA (Table 7). By 2020, the percentage of persons below 138% of FPL who will remain uninsured will decrease by 68.0% (Table 7). For the population between 138% and 400% of FPL, access to the exchange and insurance subsidies will bring the uninsurance rate down by 36.9%. Among persons over 400% of FPL, who are not eligible for subsidies in the exchange, the uninsurance rate will remain largely unchanged. 

Coverage for undocumented noncitizens will not change, and coverage for recent legal immigrants will increase by a small amount (Table 8). By 2020, a total of 11.7% of citizens will remain uninsured with PPACA, down from 25.0% without PPACA, a decrease of 51.4% (Table 8). However, 41.5% of noncitizens will remain uninsured, compared with the projected rate of 39.7% without PPACA, an increase of 4.2%. 


Health care reform under PPACA could substantially reduce the number of uninsured in Southeast Texas and significantly change the composition of coverage among the insured. The region could benefit much more than the rest of the country, but will likely continue to have one of the highest uninsurance rates (13% of the nonelderly population versus a projected 6.9% for the nation18 and a projected 5.0% to 5.8% for Texas).3,4 The relatively high percentage of uninsured that will remain with PPACA reflects regional demographic characteristics including higher unemployment, higher than average poverty, and larger numbers of undocumented and recent immigrant residents. These factors also explain the variation in projected uninsured among the counties in the region. 

The projections do not consider the various implementation issues that create uncertainties about the future impact of PPACA. Perhaps the most controversial aspect of PPACA is the individual insurance coverage mandate, which may not be implemented at all as it is being challenged in the courts. Even if the major provisions of PPACA are implemented, the response of new and existing eligibles will depend on yet-to-be-defined efforts to expand and streamline eligibility processes and promote the new programs. Texas will have to establish enrollment and coordination procedures, determine benefit packages, and update arrangements with providers. People applying for coverage through a yet-to-be-determined exchange will supposedly be assessed for eligibility for Medicaid and CHIP as well as for subsidized private insurance. Federal estimates are that states will bear little of the cost of these activities, but some in the state disagree. If costly, Texas may not be able to afford the outreach and eligibility resources needed to achieve expected participation rates in Medicaid, CHIP, and the exchange.   

The impact that the mandates, penalties, regulatory requirements, and premium subsidies have on insurance purchasing behavior is difficult to predict. For example, the estimates of participation rates in Medicaid and CHIP used in this study are considerably higher than what exists now but lower than what has been projected by state officials.3 Any change in participation will occur only with considerable outreach effort to promote the changes in eligibility, help people become certified for coverage, and keep them certified over time.   

As 2014 approaches, more study and analysis are needed to monitor the many factors that create uncertainties about the impact of PPACA. Communities  and, in particular, safety net programs and providers that serve the low income uninsured and underinsured (public hospitals and hospital districts, county indigent programs, and federally qualified health centers) need this information to plan for the surge in demand for services that will come from the newly covered and to be able to meet the needs of those who will remain uninsured. The projections provided in this study should be viewed as initial rough estimates that will need to be revised on the basis of more reliable information going forward.   


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  2. Center for Public Policy Priorities. Health Reform and Texas: The View from Fall 2011. Austin, TX; November 4, 2011. Accessed fall 2011. 
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  6. To Provide Affordable Quality Healthcare to all Americans and reduce the growth in healthcare spending, and for the purposes. HR 3962. 2009. Accessed spring 2011. 
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  8. Texas Department of Insurance, Federal Healthcare Reform, Exchange Planning Symposium: Background Information and Requested Stakeholder Input. 2011. Accessed spring 2011. 
  9. Collins S, Garber T. State Health Insurance Exchange Legislation: A progress report. 2011. The Commonwealth Fund. Accessed spring 2011. 
  10. Chaikind H, Fernandez B. Private Health Insurance Provisions in PPACA (PL 111-148). Congressional Research Service. 2010. Accessed spring 2011. 
  11. Focus on Health Reform: Side by Side Comparison of Major Healthcare Reform Proposal. 2010. Kaiser Family Foundation. Accessed summer 2011. 
  12. The White House, State by State Fact Sheets, Texas: The Affordable Care Act: Immediate Benefits for Texas. 2010. Available: Accessed spring 2011. 
  13. US Department of Health and Human Services. Group Health Plans and Health Insurance Issuers Relating to Dependant Coverage of Children to Age 26 Under the Patient Protection and Affordable Care Act; Interim Final Rule and Proposed Rule. Federal Register. 2010. Accessed spring 2011. 
  14. Westfall L, Kelly M, Kohla D. Interim Final Regulation Under PPACA: Preexisting Condition Exclusion, Lifetime and Annual Limits, Recession and Patient Protections. 2010. Accessed spring 2011. 
  15. ACS 2009. 2009 American Community Survey 1-year estimate PUMS data. Accessed spring 2011. 
  16. Texas State Demographer's Data for Population Projections, Texas State Data Center. Accessed spring 2011. 
  17. Holahan J, Headen I. Medicaid Coverage and Spending in Health Reform: National and StatebyState Results for Adults at or Below 133% FPL. Urban Institute. 2010. Accessed spring 2011. 
  18. Richard S. Foster. Estimated Financial Effects of the "Patient Protection and Affordable Act" as Amended. Centers for Medicare and Medicaid Services. 2010. Accessed spring 2011. 
  19. Dubay L, Haley, Kenny. G. Progress Enrolling Children in Medicaid/CHIP: Who is Left and What are the Prospects for Covering More Children? The Urban Institute. 2009. Accessed spring 2011.  

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