Basic Health Program: Proposed Federal Funding Methodology for Program Year 2015

SUMMARY: This document provides the methodology and data sources necessary to determine federal payment amounts made to states that elect to establish a Basic Health Program certified by the Secretary under section 1331 of the Patient Protection and Affordable Care Act (the Affordable Care Act) to offer health benefits coverage to low-income individuals otherwise eligible to purchase coverage through Affordable Insurance Exchanges.

EFFECTIVE DATE: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on January 22, 2014.

ADDRESSES: In commenting, refer to file code CMS-2380-PN. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (please choose only one of the ways listed):

1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the "Submit a comment" instructions.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-2380-PN, P.O. Box 8016, Baltimore, MD 21244-8016.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-2380-PN, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. Alternatively, you may deliver (by hand or courier) your written ONLY to the following addresses: a. For delivery in Washington, DC--Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

b. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Christopher Truffer, (410) 786-1264; or Jessica Schubel, (410) 786-3032.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Table of Contents

I. Background

II. Provisions of the Proposed Methodology

A. Overview of the Funding Methodology and Calculation of the Federal Payment Amount

1. Equation 1: Estimated PTC by Rate Cell

2. Equation 2: Estimated CSR by Rate Cell

3. Equation 3: Adjusted Reference Premium Variable

4. Equation 4: Determination of Total Monthly Payment for BHP Enrollees in Each Rate Cell

B. Required Rate Cells

C. Sources and State Data Considerations

D. Discussion of Specific Variables Used in Payment Equations

1. Reference Premium (RP)

2. Premium Trend Factor (PTF)

3. Population Health Factor (PHF)

4. Income (I)

5. Premium Tax Credit Formula (PTCF)

6. Income Reconciliation Factor (IRF)

7. Tobacco Rating Adjustment Factor (TRAF)

8. Factor for Removing Administrative Costs (FRAC)

9. Actuarial Value (AV)

10. Induced Utilization Factor (IUF)

11. Change in Actuarial Value ([delta]AV)

E. Adjustments for American Indians and Alaska Natives

F. Example Application of the BHP Funding Methodology

III. Collection of Information

IV. Response to Comments

V. Regulatory Impact Statement

A. Overall Impact

1. Need for Notice

2. Alternative Approaches

3. Transfers

B. Unfunded Mandates Reform Act

C. Regulatory Flexibility Act

D. Federalism

I. Background

The Affordable Care Act provides for the establishment of state Affordable Insurance Exchanges (Exchanges, also called the Health Insurance Marketplace) that provide access to affordable health insurance coverage offered by qualified health plans (QHPs) for most individuals under age 65 who are not eligible for health coverage under other federally supported health benefits programs or through affordable employer-sponsored insurance coverage, and who have incomes above 100 percent of the federal poverty line (FPL), or whose income is below that level but are lawfully present non-citizens ineligible for Medicaid because of immigration status. Individuals enrolled through Exchanges in coverage offered by QHPs with incomes below 400 percent of the FPL may qualify for the federal premium tax credit (PTC) and federally-funded cost-sharing reductions (CSRs) based on their household income, to ensure that such coverage meets certain standards for affordability.

In the states that elect to operate a Basic Health Program (BHP), BHP will make affordable health benefits coverage available for individuals under age 65 with household incomes between 133 percent and 200 percent of the FPL who are not otherwise eligible for Medicaid, the Children's Health Insurance Program (CHIP), or affordable employer sponsored coverage. (For many states, the lower income threshold for BHP eligibility is effectively 138 percent due to the application of a required 5 percent income disregard in determining the upper limits of Medicaid income eligibility.) Federal funding would be available for BHP based on the amount of PTC and CSRs that BHP enrollees would have received had they been enrolled in QHPs through Exchanges.

In the September 25, 2013Federal Register (78 FR 59122), we published a proposed rule entitled the "Basic Health Program: State Administration of Basic Health Programs; Eligibility and Enrollment in Standard Health Plans; Essential Health Benefits in Standard Health Plans; Performance Standards for Basic Health Programs; Premium and Cost Sharing for Basic Health Programs; Federal Funding Process; Trust Fund and Financial Integrity" proposed rule (hereinafter referred to as the BHP proposed rule) implementing section 1331 of the Patient Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010), together with the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 collectively referred as the Affordable Care Act, which requires the establishment of BHP. The BHP proposed rule proposes to establish the requirements for state and federal administration of BHP, including provisions regarding eligibility and enrollment, benefits, cost-sharing requirements and oversight activities. While the BHP proposed rule proposed to codify the overall statutory requirements and basic procedural framework for the funding methodology, it does not contain the specific information necessary to determine federal payments. We anticipated that the methodology would be based on data and assumptions that would reflect ongoing operations and experience of BHP programs as well as the operation of the Exchanges. For this reason, the BHP proposed rule indicated that the development and publication of the funding methodology, including any data sources, would be addressed in a separate annual Payment Notice process.

--This is a summary of a Federal Register article originally published on the page number listed below--

Proposed methodology.

CFR Part: "42 CFR Part 600"

Citation: "78 FR 77399"

Document Number: "CMS-2380-PN"

Federal Register Page Number: "77399"

"Proposed Rules"