Employers of low-wage workers may face new Medicaid paperwork requirements

Workers who lose eligibility for Medicaid because they fail to show that they meet the new work requirements will also lose their eligibility to use Affordable Care Act premium subsidy tax credits to buy individual or family coverage through the ACA public exchange system, Schultz said.

The new work requirement "introduces operational and administrative considerations for employers," Schultz said. "These demands are particularly concentrated in sectors such as hospitality and food service, which employ large numbers of lower-wage workers."

What it means: Federal and state officials could end up postponing implementation of at least some work requirements and ease implementation of others.

But, if the new verification system works the way Schultz expects, an employer that fails to provide work verification documentation quickly, a low-income worker with serious health problems could end up losing the ability to get any kind of commercial or government health coverage.

Medicaid basics: Medicaid is a U.S. program that serves low-income adults and many low-income children.

The Centers for Medicare & Medicaid Services, a division of the U.S. Department of Health and Human Services, writes and enforces federal Medicaid program rules.

Each state runs its own Medicaid program, using a combination of state and federal money, in compliance with federa and state laws and regulations.

Medicaid work requirements: CMS recently adopted final Medicaid work requirement regulations.

Related: What will new Medicaid work rules mean for employee benefits plans?

The interim final rule includes exceptions for adults who act as caregivers and those who are disabled or medically frail.

Supporters argue that the work requirement could help low-income people who use Medicaid benefits stay involved in the community and increase the odds that they will eventually be able to work full-time.

Critics say the requirements could be hard on Medicaid plan participants who meet the eligibility requirements but are bad with paperwork.

Groups like Easterseals say the exemptions for people with disabilities or medical problems are written in such a way that some people with disabilities or serious illnesses may not be able to use the exemptions.

30-day response deadline: A state that questions whether a Medicaid participant meets the new work requirements is supposed to send a noncompliance notice. A worker will have 30 days to respond to the noncompliance notice.

The 30-day response deadline will cause problems for the human resources and payroll teams trying to help workers gather the pay stubs and letters needed to show they qualify for Medicaid coverage, Schultz said.

Once an employer provides the necessary verification documents, it may have to provide new verification documents six months later, because a state is supposed to determine whether a Medicaid participant meets the work requirements every six months, he said.

Schultz predicted that the documentation requirements will be especially hard on low-income workers who are trying to work while facing serious health problems.

"For employees with significant medical conditions, states must determine whether a condition materially affects compliance, and missing or stale employer data could result in loss of coverage," Schultz said.

Executives at Softheon have experience with the challenges involved with health coverage eligibility verification programs, because the company helps some states run their ACA public exchange programs.