Basic Health Program; Federal Funding Methodology for Program Years 2017 and 2018

SUMMARY: This document provides the methodology and data sources necessary to determine Federal payment amounts made in program years 2017 and 2018 to states that elect to establish a Basic Health Program under the Affordable Care Act to offer health benefits coverage to low-income individuals otherwise eligible to purchase coverage through Affordable Insurance Exchanges (hereinafter referred to as the Exchanges).

EFFECTIVE DATE: These regulations are effective on January 1, 2017.

FOR FURTHER INFORMATION CONTACT: Christopher Truffer, (410) 786-1264; or Stephanie Kaminsky (410) 786-4653.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

II. Summary of Proposed Provisions and Analysis of and Responses to Public Comments on the Proposed Methodology

A. Background

B. Overview of the Funding Methodology and Calculation of the Payment Amount

C. Required Rate Cells

D. Sources and State Data Considerations

E. Discussion of Specific Variables Used in Payment Equations

F. Adjustments for American Indians and Alaska Natives

G. State Option To Use 2016 or 2017 QHP Premiums for BHP Payments

H. State Option To Include Retrospective State-Specific Health Risk Adjustment in Certified Methodology

III. Provisions of the Final Methodology

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

B. Federal BHP Payment Rate Cells

C. Sources and State Data Considerations

D. Discussion of Specific Variables Used in Payment Equations

E. Adjustments for American Indians and Alaska Natives

F. State Option To Use 2016 or 2017 QHP Premiums for BHP Payments

G. State Option To Include Retrospective State-Specific Health Risk Adjustment in Certified Methodology

IV. Collection of Information Requirements

V. Regulatory Impact Statement

A. Overall Impact

B. Unfunded Mandates Reform Act

C. Regulatory Flexibility Act

D. Federalism

Acronyms

To assist the reader, the following acronyms are used in this document.

[delta]AV Change in Actuarial Value

APTC Advance payment of the premium tax credit

ARP Adjusted reference premium

AV Actuarial value

BHP Basic Health Program

CCIIO CMS' Center for Consumer Information and Insurance Oversight

CDC Centers for Disease Control and Prevention

CHIP Children's Health Insurance Program

CPI-U Consumer price index for all urban consumers

CSR Cost-sharing reduction

EHB Essential Health Benefit

FPL Federal poverty line

FRAC Factor for removing administrative costs

IRF Income reconciliation factor

IRS Internal Revenue Service

IUF Induced utilization factor

QHP Qualified health plan

OTA Office of Tax Analysis [of the U.S. Department of Treasury]

PHF Population health factor

PTC Premium tax credit

PTCF Premium tax credit formula

PTF Premium trend factor

RP Reference premium

SBE State Based Exchange

TRAF Tobacco rating adjustment factor

I. Background

Section 1331 of the Patient Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010), as amended by 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) provides states with an option to establish a Basic Health Program (BHP). In the states that elect to operate 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 Federal poverty level (FPL) who are not otherwise eligible for Medicaid, the Children's Health Insurance Program (CHIP), or affordable employer-sponsored coverage, or for individuals whose income is below these levels but are lawfully present non-citizens ineligible for Medicaid. (For those states that have expanded Medicaid coverage under section 1902(a)(10)(A)(i)(VIII) of the Social Security Act (the Act), 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 (section 1902(e)(14)(I) of the Act)).

BHP provides another option for states in providing affordable health benefits to individuals with incomes in the ranges previously described. States may find BHP a useful option for several reasons, including the ability to potentially coordinate standard health plans in BHP with their Medicaid managed care plans, or to potentially reduce the costs to individuals by lowering premiums or cost-sharing requirements.

Federal funding will be available for BHP based on the amount of premium tax credit (PTC) and cost-sharing reductions (CSRs) that BHP enrollees would have received had they been enrolled in qualified health plans (QHPs) through Exchanges. These funds are paid to trust funds dedicated to BHP in each state, and the states then administer the payments to standard health plans within BHP.

In the March 12, 2014 Federal Register (79 FR 14112), we published a final 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" (hereinafter referred to as the BHP final rule) implementing section 1331 of the Affordable Care Act), which directs the establishment of BHP. The BHP final rule establishes the standards for state and Federal administration of BHP, including provisions regarding eligibility and enrollment, benefits, cost-sharing requirements and oversight activities. While the BHP final rule codifies 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 final rule indicated that the development and publication of the funding methodology, including any data sources, would be addressed in a separate annual BHP Payment Notice.

In the BHP final rule, we specified that the BHP Payment Notice process would include the annual publication of both a proposed and final BHP Payment Notice. The proposed BHP Payment Notice would be published in the Federal Register each October, and would describe the proposed methodology for the upcoming BHP program year, including how the Secretary considered the factors specified in section 1331(d)(3) of the Affordable Care Act, along with the proposed data sources used to determine the Federal BHP payment rates. The final BHP Payment Notice would be published in the Federal Register in February, and would include the final BHP funding methodology, as well as the Federal BHP payment rates for the next BHP program year. For example, payment rates published in February 2016 would apply to BHP program year 2017, beginning in January 2017. As discussed in section III.C of this methodology, and as referenced in SEC 600.610(b)(2), state data needed to calculate the Federal BHP payment rates for the final BHP Payment Notice must be submitted to CMS.

As described in the BHP final rule, once the final methodology has been published, we will only make modifications to the BHP funding methodology on a prospective basis with limited exceptions. The BHP final rule provided that retrospective adjustments to the state's BHP payment amount may occur to the extent that the prevailing BHP funding methodology for a given program year permits adjustments to a state's Federal BHP payment amount due to insufficient data for prospective determination of the relevant factors specified in the payment notice. Additional adjustments could be made to the payment rates to correct errors in applying the methodology (such as mathematical errors).

Under section 1331(d)(3)(A)(ii) of the Affordable Care Act, the funding methodology and payment rates are expressed as an amount per eligible individual enrolled in a BHP standard health plan (BHP enrollee) for each month of enrollment. These payment rates may vary based on categories or classes of enrollees. Actual payment to a state would depend on the actual enrollment of individuals found eligible in accordance with a state's certified blueprint eligibility and verification methodologies in coverage through the state BHP. A state that is approved to implement BHP must provide data showing quarterly enrollment of eligible individuals in the various Federal BHP payment rate cells. Such data should include the following:

* Personal identifier;

* Date of birth;

* County of residence;

* Indian status;

* Family size;

* Household income;

* Number of person in household enrolled in BHP;

* Family identifier;

* Months of coverage;

* Plan information; and

* Any other data required by CMS to properly calculate the payment.

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

Final methodology.

CFR Part: "42 CFR Part 600"

RIN Number: "RIN 0938-ZB21"

Citation: "81 FR 10091"

Document Number: "CMS-2396-FN"

Federal Register Page Number: "10091"

"Rules and Regulations"