Basic Health Program; Federal Funding Methodology for Program Years 2019 and 2020
| Citation | 84 FR 59529 |
| Record Number | 2019-24064 |
| Published date | 05 November 2019 |
| Section | Rules and Regulations |
| Court | Centers For Medicare & Medicaid Services |
Federal Register, Volume 84 Issue 214 (Tuesday, November 5, 2019)
[Federal Register Volume 84, Number 214 (Tuesday, November 5, 2019)]
[Rules and Regulations]
[Pages 59529-59548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24064]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 600
[CMS-2407-FN]
RIN 0938-ZB42
Basic Health Program; Federal Funding Methodology for Program
Years 2019 and 2020
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final methodology.
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SUMMARY: This document provides the methodology and data sources
necessary to determine federal payment amounts for program years 2019
and 2020 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.
DATES: Effective January 6, 2020.
FOR FURTHER INFORMATION CONTACT: Christopher Truffer, (410) 786-1264;
or Cassandra Lagorio, (410) 786-4554.
SUPPLEMENTARY INFORMATION:
I. Background
A. Overview of the Basic Health Program
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 to as the Affordable Care
Act) provides states with an option to establish a Basic Health Program
(BHP). In the states that elect to operate a BHP, the 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).
A BHP provides another option for states in providing affordable
health benefits to individuals with incomes in the ranges described
above. States may find a BHP a useful option for several reasons,
including the ability to potentially coordinate standard health plans
in the BHP with their Medicaid managed care plans, or to potentially
reduce the costs to individuals by lowering premiums or cost-sharing
requirements.
Federal funding for a BHP under section 1331(d)(3)(A) of the
Affordable Care Act is based on the amount of premium tax credit (PTC)
and cost-sharing reductions (CSRs) that would have been provided for
the fiscal year to eligible individuals enrolled in BHP standard health
plans in the state if such eligible individuals were allowed to enroll
in a qualified health plan (QHP) through Affordable Insurance Exchanges
(``Exchanges''). These funds are paid to trusts established by the
states and dedicated to the BHP, and the states then administer the
payments to standard health plans within the BHP.
In the March 12, 2014 Federal Register (79 FR 14112), we published
a
[[Page 59530]]
final rule entitled ``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 governs the
establishment of BHPs. The BHP final rule established the standards for
state and federal administration of BHPs, 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 BHPs, 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 in October, 2 years prior to the
applicable program year,\1\ and would describe the proposed funding
methodology for the relevant 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 for the applicable BHP program
year. 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
applicable BHP program year. For example, payment rates in the final
BHP Payment Notice published in February 2020 would apply to BHP
program year 2021, beginning in January 2021. As discussed in section
III.C. of this final notice, and as referenced in 42 CFR 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.
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\1\ BHP program years span from January to December.
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As described in the BHP final rule, once the final methodology for
the applicable program year 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 applicable final BHP Payment Notice. For example, the
population health factor adjustment described in section III.D.3 of
this final notice allows for a retrospective adjustment (at the state's
option) to account for the impact that BHP may have had on the
individual market risk pool and QHP premiums in the Exchange.
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)(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 BHP Blueprint \2\ eligibility and
verification methodologies in coverage through the state BHP. A state
that is approved to implement a BHP must provide data showing quarterly
enrollment of eligible individuals in the various federal BHP payment
rate cells. Such data must include the following:
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\2\ The BHP Blueprint is a comprehensive written document
submitted by the state to the HHS Secretary to establish compliance
with program requirements. For more information on the BHP
Blueprint, please see 42 CFR 600.610.
Personal identifier;
Date of birth;
County of residence;
Indian status;
Family size;
Household income;
Number of persons in household enrolled in BHP;
Family identifier;
Months of coverage;
Plan information; and
Any other data required by CMS to properly calculate the
payment.
B. 2018 Funding Methodology and Changes in Final Administrative Order
In the February 29, 2016 Federal Register (81 FR 10091), we
published the final notice entitled ``Basic Health Program; Federal
Funding Methodology for Program Years 2017 and 2018'' (hereinafter
referred to as the February 2016 payment notice) that sets forth the
methodology that would be used to calculate the federal BHP payments
for the 2017 and 2018 program years. Updated factors for the program
year 2018 federal BHP payments were provided in the CMCS Informational
Bulletin, ``Basic Health Program; Federal Funding Methodology for
Program Year 2018'' on May 17, 2017.\3\
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\3\ Available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib051717.pdf.
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On October 11, 2017, the Attorney General of the United States
provided the Department of Health and Human Services and the Department
of the Treasury with a legal opinion indicating that the permanent
appropriation at 31 U.S.C. 1324, from which the Departments had
historically drawn funds to make CSR payments, cannot be used to fund
CSR payments to insurers. In light of this opinion--and in the absence
of any other appropriation that could be used to fund CSR payments--the
Department of Health and Human Services directed us to discontinue CSR
payments to issuers until Congress provides for an appropriation. In
the absence of a Congressional appropriation for federal funding for
CSRs, we cannot provide states with a federal payment attributable to
CSRs that BHP enrollees would have received had they been enrolled in a
QHP through an Exchange.
Starting with the payment for the first quarter (Q1) of 2018 (which
began on January 1, 2018), we stopped paying the CSR component of the
quarterly BHP payments to New York and Minnesota (the states), the only
states operating a BHP in 2018. The states then sued the Secretary for
declaratory and injunctive relief in the United States District Court
for the Southern District of New York. See State of New York, et al, v.
U.S. Department of Health and Human Services, 18-cv-00683 (S.D.N.Y.
filed Jan. 26, 2018). On May 2, 2018, the parties filed a stipulation
requesting a stay of the litigation so that HHS could issue an
administrative order revising the 2018 BHP payment methodology. As a
result of the stipulation, the court dismissed the BHP litigation. On
July 6, 2018, we issued a Draft Administrative
[[Page 59531]]
Order on which New York and Minnesota had an opportunity to comment.
Each state submitted comments. We considered the states' comments and
issued a Final Administrative Order on August 24, 2018 (Final
Administrative Order) setting forth the payment methodology that would
apply to the 2018 BHP program year.
The payment methodology we are finalizing in this final notice
applies the methodology described in the Final Administrative Order to
program years 2019 and 2020, with one additional adjustment, the Metal
Tier Selection Factor (MTSF), that will apply for program year 2020
only.
On the Exchange, if an enrollee chooses a QHP and the value of the
PTC to which the enrollee is entitled is greater than the premium of
the selected plan, then the PTC is reduced to be equal to the premium.
This usually occurs when enrollees eligible for larger PTCs choose
bronze-level QHPs, which typically have lower premiums on the Exchange
than silver-level QHPs. Prior to 2018, we believed that the impact of
these choices and plan selections on the amount of PTCs that the
federal government paid was relatively small. During this time, most
enrollees in income ranges up to 200 percent of FPL chose silver-level
QHPs, and in most cases where enrollees chose bronze-level QHPs, the
premium was still more than the PTC. Based on our analysis of the
percentage of persons with incomes below 200 percent of FPL choosing
bronze-level QHPs and the average reduction in the PTCs paid for those
enrollees, we believe that the total PTCs paid for persons with incomes
below 200 percent of FPL were reduced by about 1 percent in 2017. We
believe that the magnitude of this effect was similar from 2014 to 2016
as well. Therefore, we did not seek to make an adjustment based on the
effect of enrollees choosing non-silver-level QHPs in developing the
BHP payment methodology applicable to program years prior to 2018.
However, after the discontinuance of the CSR payments in October 2017,
several changes occurred that increased the expected impact of
enrollees' plan choices on the amount of PTC paid, as further described
in section III.D.6 of this final notice. These changes led to a larger
percentage of individuals choosing bronze-level QHPs, and for those
individuals who chose bronze-level QHPs, these changes also generally
led to larger reductions in PTCs paid by the federal government per
individual. The combination of more individuals with incomes below 200
percent of FPL choosing bronze-level QHPs and the reduction in PTCs had
an impact on PTCs paid by the federal government for enrollees with
incomes below 200 percent of FPL. Therefore, we believe that the
impacts due to enrollees' plan choices are now larger, have become
material, and are now a relevant factor necessary for purposes of
determining the payment amount as set forth by section
1331(d)(3)(A)(ii) of the Affordable Care Act.
Thus, we proposed and are finalizing an adjustment to account for
the impact of individuals selecting different metal tier level plans in
the Exchange, which we refer to as the Metal Tier Selection Factor
(MTSF). We will include the MTSF in the methodology for program year
2020, and we will not include the MTSF in the methodology for program
year 2019. Please see section III.D.6 of this final notice for a more
detailed discussion of the MTSF.
As specified in the BHP proposed payment notice for program years
2019 and 2020, we have been making BHP payments for program year 2019
using the methodology described in the Final Administrative Order.
Payments issued to states for 2019 will be conformed to the rates
applicable to the finalized 2019 payment methodology established in
this final notice through reconciliation. If a state chooses to change
its premium election for 2019, we will also apply that change through
reconciliation.
The scope of this final notice is limited to only the final payment
methodologies for 2019 and 2020, and any payment methodology for a
future year will be proposed and finalized through other rulemaking.
II. Summary of Proposed Provisions and Analysis of and Responses to
Public Comments
The following sections, arranged by subject area, include a summary
of the public comments that we received, and our responses. We received
a total of 47 timely comments from individuals and organizations,
including, but not limited to, state Medicaid agencies, health plans,
health care providers, advocacy organizations, and research groups.
For a complete and full description of the BHP proposed funding
methodology for program years 2019 and 2020, see the ``Basic Health
Program; Federal Funding Methodology for Program Years 2019 and 2020''
proposed notice published in the April 2, 2019 Federal Register (84 FR
12552) (hereinafter referred to as the April 2019 proposed payment
notice).
A. Background
In the April 2019 proposed payment notice, we proposed the
methodologies for how the federal BHP payments would be calculated for
program years 2019 and 2020.
We received the following comments on the background information
included in the April 2019 proposed payment notice:
Comment: Some commenters expressed general support for the BHP.
Response: We appreciate the support from these commenters; however,
since the comments were not specific to the BHP payment methodologies
for program years 2019 or 2020, they are outside the scope of this
rulemaking and will not be addressed in this final rule.
B. Overview of the Funding Methodology and Calculation of the
Payment Amount
We proposed in the overview of the funding methodology to calculate
the PTC and CSR as consistently as possible and in general alignment
with the methodology used by Exchanges to calculate the advance
payments of the PTC and CSR, and by the Internal Revenue Service (IRS)
to calculate the allowable PTC. We proposed four equations (1, 2a, 2b,
and 3) that would, if finalized, compose the overall BHP payment
methodology.
Comment: Many commenters recommended that CMS not include the MTSF
in the 2019 and 2020 BHP payment methodologies and offered several
rationales for not adopting the MTSF. Many commenters stated that CMS
should only make changes to the BHP payment methodology for future
program years. Two commenters expressed concern about the timing for
publication of the proposed and final payment methodologies, including
the proposed introduction of the MTSF for 2019 and 2020. Several
commenters questioned if the rationale for including the MTSF in the
2019 and 2020 payment methodologies was sufficient, and some commenters
specifically questioned whether the changes to the percentage of
enrollees choosing bronze-level QHPs and the decrease in the PTCs for
these enrollees were significant. Many commenters noted that we found
that the percentage of enrollees with incomes below 200 percent of FPL
choosing bronze-level QHPs rose by a small percentage (from 11 percent
in 2017 to 13 percent in 2018), and stated that this increase was
insufficient to justify including the MTSF in the payment methodology.
Some commenters also stated that individuals in non-BHP states could
have enrolled in bronze-level QHPs prior to 2018, asserting that CMS
should have accounted for that possibility starting in the beginning of
the BHP instead of waiting several years.
[[Page 59532]]
Some commenters stated that the MTSF is inappropriate because BHPs
are prohibited from offering bronze-level coverage to their enrollees.
Several commenters questioned whether the statute permits CMS to
include the MTSF in the payment methodology, as the MTSF is not
explicitly identified in the statute.
Several commenters disagreed with including the MTSF because it
would decrease federal funding and increase state costs for BHP, or
else result in decreased benefits for BHP enrollees.
Some commenters also stated that the trend of increased bronze-
level QHP enrollment and the increase in silver-level QHP premiums for
2017 and 2018 has slowed and/or reversed between 2018 and 2019, and
questioned whether the MTSF should be applied. Some commenters cited
analysis from the Kaiser Family Foundation of plan selection by metal
tier, which states that the percentage of enrollees nationwide across
all income levels that selected or were auto-enrolled in bronze-level
QHPs during open enrollment increased by about 6 percent from 2017 to
2018 (from 22.9 percent in 2017 to 28.6 percent in 2018) and by about 2
percent from 2018 to 2019 (from 28.6 percent to 30.6 percent).\4\
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\4\ https://www.kff.org/health-reform/state-indicator/marketplace-plan-selections-by-metal-level-2/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D. https://www.kff.org/health-reform/state-indicator/marketplace-plan-selections-by-metal-level-2/.
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In addition, commenters cited an analysis by the Kaiser Family
Foundation on QHP premium levels by state and by metal tier,\5\ which
states that the national average lowest cost bronze-level QHP premium
increased by 17.6 percent from 2017 to 2018, and decreased by 0.6
percent from 2018 to 2019.\6\ This analysis also found that the
national average benchmark silver-level QHP premium increased by 34.0
percent from 2017 to 2018 and decreased by 0.8 percent from 2018 to
2019.\7\ The ratio of the national average benchmark silver-level QHP
premium to the lowest cost bronze-level QHP premium in this analysis
increased from 123.8 percent in 2017 to 141.1 percent in 2018, and then
decreased to 140.7 percent in 2019.\8\
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\5\ https://www.kff.org/health-reform/state-indicator/average-marketplace-premiums-by-metal-tier/.
\6\ https://www.kff.org/health-reform/state-indicator/average-marketplace-premiums-by-metal-tier/.
\7\ https://www.kff.org/health-reform/state-indicator/average-marketplace-premiums-by-metal-tier/.
\8\ https://www.kff.org/health-reform/state-indicator/average-marketplace-premiums-by-metal-tier/.
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Response: We adopted the schedule reflected in Sec. 600.610 to
align with the approach for how payment parameters for Exchanges are
determined as well as how CHIP allotments were determined during the
initial implementation of the program.\9\ The schedule is also intended
to provide a state the information it needs to appropriately budget for
BHP each year.\10\ We recognize the timeline was not followed each year
and are considering whether modifications to the schedule captured in
regulation are appropriate based on lessons learned and experience with
the BHP. We would propose any such changes through notice and comment
rulemaking to allow stakeholders and interested parties an opportunity
to comment. After consideration of the comments received, and further
analysis of timing considerations, for 2019 we are finalizing our
proposal to apply the methodology described in the Final Administrative
Order, and we are not finalizing our proposal to apply the MTSF in
2019.
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\9\ See 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; 78 FR 59122 at 59135
(September 25, 2013).
\10\ Ibid.
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For program year 2020, we are finalizing our proposal to apply the
methodology described in the Final Administrative Order and to apply
the MTSF. We also proposed to update the value of the MTSF for 2020
with 2019 data. However, since the 2019 PTC and enrollment data
necessary to update the factor are not available at this time, we will
apply the MTSF at the value of 97.04 percent for 2020. We believe that
applying the MTSF value based on 2018 data is appropriate because the
discontinuation of CSR payments to issuers continued in 2019 as
Congress has not provided an appropriation for those payments. In
addition, our analysis of preliminary 2019 data that is available
suggests that the value of the MTSF would be similar (likely within 0.5
percentage points of the value of the MTSF based on 2018 data), which
further supports using 2018 data as the basis for calculating the 2020
MTSF value. Please see section III.D.6. of this final notice for a
description of how the MTSF was calculated.
As detailed in the April 2019 proposed payment notice and in this
final notice, we continue to believe that it is appropriate to update
the methodology for 2020 to take the MTSF into account following the
discontinuance of the CSR payments due to several changes that occurred
that increased the impact of enrollees' plan choices on the amount of
PTC paid by the federal government. First, silver-level QHP premiums
increased at a higher percentage in comparison to the increase in
premiums of other metal-tier plans in many states starting in 2018 (on
average, the national average benchmark silver-level QHP premium
increased about 17 percent more than the national average lowest-cost
bronze-level QHP premium). Second, there was an increase in the
percentage of enrollees with incomes below 200 percent of FPL choosing
bronze-level QHPs. Third, the likelihood that a person choosing a
bronze-level QHP would pay $0 premium also increased, as the difference
between the bronze-level QHP premium and the full value of APTC
widened. Finally, the average estimated reduction in APTC for enrollees
with incomes below 200 percent of FPL that chose bronze-level QHPs in
2017 compared to 2018 increased. Our analysis of 2017 and 2018 data
documents these effects.
In 2017, prior to the discontinuance of CSR payments, 11 percent of
QHP enrollees with incomes below 200 percent of FPL elected to enroll
in bronze-level QHPs, and on average the PTC paid on behalf of those
enrollees was 11 percent less than the full value of APTC. In 2018,
after the discontinuance of the CSR payments, 13 percent of QHP
enrollees with incomes below 200 percent of FPL chose bronze-level
QHPs, and on average, the PTC paid on behalf of those enrollees was 23
percent less than the full value of the APTC. In addition, the ratio of
the national average silver-level QHP premium to the national average
bronze-level plan premium increased from 17 percent higher in 2017 to
33 percent higher in 2018. While the increase in the percentage of QHP
enrollees with incomes below 200 percent of FPL who elected to enroll
in bronze-level QHPs between 2017 and 2018 is about 2 percent, the
accompanying percentage reduction of the PTC paid by the federal
government for QHP enrollees with incomes below 200 percent of FPL more
than doubled between 2017 and 2018. Consistent with section 1331(d)(3)
of the Affordable Care Act, which requires payments to states be based
on what would have been provided if BHP eligible individuals were
allowed to enroll in QHPs, we believe it is appropriate to consider how
individuals would have chosen different plans--including across metal
tiers--as part of
[[Page 59533]]
the BHP payment methodology and are finalizing the application of the
MTSF for program year 2020.
Regarding comments that BHPs are prohibited from providing bronze-
level coverage to enrollees and thus the BHP payment methodology should
not assume enrollees would have chosen bronze-level QHPs in the
Exchange, section 1331(d)(3)(A)(ii) of the Affordable Care Act directs
the Secretary to ``take into account all relevant factors necessary to
determine the value of the'' PTCs and CSRs that would have been
provided to eligible individuals if they would have enrolled in QHPs
through an Exchange. We further note the statute does not set forth an
exhaustive list of what those necessary relevant factors are, providing
the Secretary with discretion and authority to identify and take into
consideration factors that are not specifically enumerated in the
statute. In addition, section 1331(d)(3)(A)(ii) of the Affordable Care
Act requires the Secretary to ``take into consideration the experience
of other States with respect to participation on Exchanges and such
credit and reductions provided to residents of the other States, with a
special focus on enrollees with income below 200 percent of poverty.''
We believe that the data sources that commenters submitted
regarding bronze-level QHP enrollment and the data sources comparing
the increases in silver-level QHP premiums and bronze-level QHP premium
support, not undermine, our position that the MTSF is a relevant factor
that should be taken into account in the BHP payment methodology. As
previously stated, we believe that the MTSF is a relevant factor
because of the combined effects of increased bronze-level QHP
enrollment and the reduction of PTCs paid by the federal government
subsequent to the discontinuation of CSRs. The data sources submitted
by the commenters show increases in bronze-level QHP enrollment in both
2018 and 2019. We note that the commenters did not submit data sources
pertaining to bronze-level QHP enrollment specifically for enrollees
with incomes less than 200 percent of FPL. In addition, the analysis
cited by commenters shows that the average ratio of the national
average silver-level benchmark QHP premium to the average lowest cost
bronze-level QHP premium remained almost exactly the same (141.1
percent in 2018, 140.7 percent in 2019). This data supports the
conclusion that there is a continued effect of material reductions in
the amount of PTCs made by the federal government as a result of the
discontinuation of CSRs. We anticipate updating the MTSF value as
necessary and appropriate in future years.
We recognize that applying the MTSF would reduce BHP funding, but
we nonetheless believe that incorporating the MTSF into the BHP payment
methodology for program year 2020 accurately reflects the changes in
PTCs after the federal government stopped making CSR payments and is
consistent with section 1331(d)(3)(A)(ii) of the Affordable Care Act.
Regarding the comments about the potential impact of reduced BHP
funding on benefits available under BHPs, we note that the benefits
requirements at Sec. 600.405 are still applicable and therefore
benefits available under BHPs should not be impacted.
Comment: Several commenters questioned the methodology in
calculating the MTSF. One commenter noted that while most states permit
age rating, some states (including New York) do not use age rating and
other states' varying rating practices could result in variability in
the calculation of BHP payments. Several commenters stated that CMS
should not rely on the experience from other states in calculating the
BHP payments, specifically with regard to the MTSF. In particular, some
commenters suggested that the MTSF for New York should rely on the
experience of bronze-level QHP selection from 2015. These commenters
stated the experience in New York in 2015--before BHP was fully
implemented--showed that a smaller percentage of enrollees with incomes
below 200 percent of FPL chose bronze-level QHPs than the percentage of
such enrollees nationwide who chose bronze-level QHPs nationwide in
2017. Some commenters also stated that the amount of PTC reduction for
these enrollees in New York in 2015 was about $12 per enrollee per
month. These commenters recommended that these figures be used to
develop the MTSF for New York's BHP payments. Some commenters also
suggested applying the percentage increases in the enrollees choosing
bronze-level QHPs and the PTC reduction to the 2015 experience for New
York's BHP payments. Some commenters cited New York's enrollment
assistance efforts as the reason for a smaller percentage of enrollees
choosing bronze-level QHPs in 2015.
Response: We recognize that New York requires pure community rating
(and does not permit age rating); however, the BHP statute directs the
Secretary to take into consideration the experience of other states
when developing the payment methodology \11\ and doing so is a
reasonable basis for calculating the MTSF. In general, the increases in
the silver-level QHP premiums due to the discontinuance of CSR payments
were fairly similar across most states \12\ and we expect that
enrollees' decisions about which metal tier plan to enroll in is
generally comparable across all states. Fundamentally, enrollees in
each state are making decisions under similar conditions comparing
silver-level QHPs to other metal tier plans. It is not clear how states
that use different rating rules (age rating or pure community rating)
would have significantly different experiences in the amounts added to
the QHP premiums after the discontinuation of CSRs, nor is it obvious
that the use of one set of rating rules would lead to larger or smaller
effects on the QHP premiums than another set of rules. We also note
that the BHP payment rates are developed consistent with the state's
rules on age rating since the beginning of the BHP, and we are
continuing this policy for the payment methodologies finalized in this
rulemaking for program years 2019 and 2020. As such, the impact of age
rating, or the prohibition of age rating, in a BHP state has and will
be reflected in the BHP payment methodology, and it is unnecessary to
account for these state-specific differences as part of the MTSF.
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\11\ Section 1331(d)(3)(A)(ii) of the Affordable Care Act.
\12\ Based on data collected from QHPs to develop the PAF. In
addition, information collected by the Kaiser Family Foundation also
shows similar increases across states. See https://www.kff.org/health-reform/issue-brief/how-the-loss-of-cost-sharing-subsidy-payments-is-affecting-2018-premiums/.
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In addition, we believe that using 2015 data, as the basis for the
MTSF is not appropriate. Premiums and enrollment patterns have changed
over time, including changes in bronze-level and silver-level QHP
premiums, changes in the ratio of the silver-level to bronze-level QHP
premiums, and changes to the amount of PTC paid by the federal
government. While 2015 data provides some evidence of consumer plan
selections prior to the full implementation of New York's BHP, we do
not believe that the 2015 data should be relied upon for the
development of MTSF for the following reasons. First, New York did not
begin implementing its BHP until April 2015 (and did not fully
implement BHP until 2016). Second, the 2015 data predates the
discontinuance of the CSR payments in 2017 and the subsequent
adjustments to premiums in 2018 (particularly to
[[Page 59534]]
silver-level QHP premiums). Therefore, relying on data from 2015 does
not capture the more recent experience of New York and/or other states
subsequent to the discontinuation of CSRs, which the MTSF is intended
to reflect.
We also note that the statute does not require the Secretary to
address every difference in Exchange operations among the states
(including, but not limited to, enrollment assistance efforts by
individual Exchanges). Instead, section 1331(d)(3)(A)(ii) of the
Affordable Care Act directs the Secretary to take into account ``all
relevant factors necessary'' when establishing the payment methodology.
We further believe that it is not practicable to address every
potential difference in Exchange operations, and that not every
potential difference in Exchange operations would be a relevant factor
necessary to take into account.
Comment: Several commenters stated that they believed CMS did not
have the authority to exclude payment for the CSR portion of the BHP
payment rate. In addition, several other commenters recommended that
CMS add back the CSR portion of the payment.
Response: As noted in the April 2019 proposed payment notice, in
light of the Attorney General's opinion regarding CSR payments--and in
the absence of any other appropriation that could be used to fund CSR
payments--HHS directed CMS to discontinue CSR payments to issuers until
Congress provides for an appropriation. In the absence of a
Congressional appropriation for federal funding for CSRs, we also
cannot provide states with a federal payment attributable to CSRs that
BHP enrollees would have received had they been enrolled in a QHP
through an Exchange.
Comment: Several commenters discussed the interactions between the
reinsurance waiver approved for Minnesota under section 1332 of the
Affordable Care Act (``Minnesota reinsurance section 1332 waiver'') and
Minnesota's BHP. Some commenters expressed concern that the pass-
through funding amounts that Minnesota receives from the federal
government under the Minnesota reinsurance section 1332 waiver are
lower than they should be, as the Minnesota BHP is not taken into
account in those calculations because BHP enrollees are not eligible to
enroll in QHPs. Some commenters observed that the Minnesota reinsurance
section 1332 waiver reduced premiums in Minnesota, noting this has led
to a lower BHP funding amount for Minnesota because the PTC values are
therefore lower. One commenter stated that CMS did not take into
consideration the experience of other states, particularly states
without reinsurance programs where premiums were likely higher, in the
BHP payment methodology. One commenter recommended that CMS interpret
section 1331(d)(3)(A)(ii) of the Affordable Care Act as to consider the
Minnesota reinsurance section 1332 waiver as a relevant factor
necessary in determining the payment amount under the BHP payment
methodology by basing Minnesota's value of PTC for BHP on what the
state's reference premium would be absent the state-based reinsurance
program. In addition, a commenter questioned the appropriateness of
considering the experience of other states with respect to bronze-level
QHP selections for purposes of Minnesota's BHP payments when BHP
eligible individuals in Minnesota cannot enroll in bronze-level QHPs
and CMS did not take into consideration the experience of other states
without reinsurance programs.
Response: Calculations of pass-through funding amounts under
section 1332 waivers are outside the scope of this rulemaking, which is
specific to the BHP payment methodology for the 2019 and 2020 program
years. We also note there are separate statutes governing section 1332
waivers and BHP, including separate provisions outlining the
determination of payments under each program.\13\ As detailed above, we
believe it is appropriate to incorporate the MTSF in the 2020 BHP
payment methodology and to calculate the MTSF, taking into
consideration the experience of other states.
---------------------------------------------------------------------------
\13\ See sections 1331 and 1332 of the Affordable Care Act.
---------------------------------------------------------------------------
With respect to the comments regarding the BHP payment methodology
and its application in Minnesota, we do not believe it would be
appropriate to disregard the impact of the Minnesota reinsurance
section 1332 waiver in determining BHP payments, because section
1331(d)(3)(A)(i) of the Affordable Care Act requires that the payment
amount is what ``would have been provided for the fiscal year to
eligible individuals enrolled in standard health plans in the State if
such eligible individuals were allowed to enroll in qualified health
plans through an Exchange.'' The Minnesota reinsurance section 1332
waiver lowers the premium that eligible individuals would pay if they
were allowed to enroll in QHPs through the Exchange, and therefore is a
necessarily relevant factor to take into account for purposes of
determining the BHP payment amount because it has the effect of
lowering the value of PTCs. Therefore, we do not believe it would be
appropriate to base Minnesota's value of PTC for BHP payments based on
what the state's reference premium would be absent the state-based
reinsurance program. We further note that we do not take into
consideration the experience of other states that do not have state-
based reinsurance programs because the changes created by the Minnesota
section 1332 reinsurance waiver directly affect the PTCs paid for
enrollees participating in the Exchange in Minnesota. We believe taking
into account the specific impact of the Minnesota section 1332
reinsurance waiver is the best reflection of the PTCs that would have
been provided if BHP enrollees were allowed to enroll in a QHP through
an Exchange and receive PTCs, as required by section 1331(d)(3)(A)(i)
of the Affordable Care Act.
Regarding metal tier selection, as detailed above, we believe that
considering which metal level plans enrollees would have selected if
they were enrolled in QHPs through the Exchange is another relevant
factor necessary to determine what would have been paid if eligible
individuals in a BHP were allowed to enroll in QHPs through an
Exchange. Consistent with the direction under the last sentence of
section 1331(d)(3)(A)(ii) of the Affordable Care Act, when developing
the MTSF, we took into consideration the experience of other states
with respect to participation in an Exchange and the PTCs provided to
residents of other states, with a special focus on enrollees with
income below 200 percent of FPL. In the case of the MTSF, if not for
the BHP, persons with incomes below 200 percent of FPL would be
expected to enroll in QHPs on the Exchanges and receive PTC. Based on
the current experience of states without BHPs, the cessation of CSR
payments to issuers caused many QHP issuers to increase premiums to
account for the costs of providing CSRs to consumers. The increased
premiums caused PTCs to increase and led some enrollees to select
bronze-level QHPs, which resulted in the federal government paying less
than the full value of PTCs it would have paid had those enrollees
selected silver-level QHPs. However, there is an important difference
in the impact of the enrollee metal tier selection when considering how
much PTC and CSRs would have been provided to individuals enrolled in a
BHP if they were instead enrolled in a QHP on an
[[Page 59535]]
Exchange in a state with a state reinsurance program. Holding all other
things equal, in a state with a reinsurance program, we expect that the
QHP premiums on the Exchange, as well as PTCs paid for eligible
enrollees, would be similar with or without BHP in place. Thus, there
would be no need to make a separate adjustment for the impacts of a
state reinsurance program.
Comment: Several commenters recommended that the BHP payments
should be sufficient to ensure that American Indian and Alaska Native
enrollees in BHPs do not pay higher premiums than they would have paid
if they had enrolled in a bronze-level QHP through an Exchange.
Response: Section 1331(a)(2)(A)(i) of the Affordable Care Act
requires that states operating BHPs must ensure that individuals do not
pay a higher monthly premium than they would have if they had been
enrolled in the second lowest cost silver-level QHP in an Exchange,
factoring in any PTC individuals would have received. Therefore, we
have not adopted this recommendation.
Comment: Several commenters recommended that for the purpose of
calculating BHP payments, CMS assume that American Indian and Alaska
Native enrollees in BHPs would have enrolled in the second-lowest cost
bronze-level QHP instead of the lowest-cost bronze-level QHP on the
Exchanges.
Response: We did not propose and are not adopting this
recommendation. The only portion of the rate affected by the use of the
lowest-cost bronze-level QHP is the CSR portion of the BHP payment; due
to the discontinuance of CSR payments and the accompanying modification
to the BHP payment methodology, the CSR portion of the payment is
assigned a value of 0, and any change to the assumption about which
bronze-level QHP is used would therefore have no effect on the BHP
payments.
C. Federal BHP Payment Rate Cells
In this section, we proposed that a state implementing BHP provide
us with an estimate of the number of BHP enrollees it will enroll in
the upcoming BHP program, by applicable rate cell, to determine the
federal BHP payment amounts. For each state, we proposed using rate
cells that separate the BHP population into separate cells based on the
following factors: Age; geographic rating area; coverage status;
household size, and income. For specific discussions, please refer to
the April 2019 proposed payment notice.
We received no comments on this aspect of the proposed methodology.
We are finalizing these policies as proposed.
D. Sources and State Data Considerations
We proposed in this section of the April 2019 proposed payment
notice to use, to the extent possible, data submitted to the federal
government by QHP issuers seeking to offer coverage through an Exchange
that uses HealthCare.gov to determine the federal BHP payment cell
rates. However, for states operating a State-based Exchange (SBE) that
do not use HealthCare.gov, we proposed that such states submit required
data for CMS to calculate the federal BHP payment rates in those
states. For specific discussions, please refer to the April 2019
proposed payment notice.
We received no comments on this aspect of the proposed methodology.
We are finalizing these policies as proposed, with one change. We
proposed that a SBE interested in obtaining the applicable federal BHP
payment rates for its state must submit such data accurately,
completely, and as specified by CMS, by no later than 30 days after the
publication of the final notice for CMS to calculate the applicable
rates for 2019, and by no later than October 15, 2019, for CMS to
calculate the applicable rates for 2020. Given the publication date for
this final notice, we are modifying the timeline for submitting the
applicable data for both program years 2019 and 2020. The data must be
submitted by no later than 30 days after the publication of this final
notice, which will allow states additional time to submit the required
2019 and 2020 data.
E. Discussion of Specific Variables Used in Payment Equations
In this section of the April 2019 proposed payment notice, we
proposed eight specific variables to use in the payment equations that
compose the overall BHP funding methodology. (seven variables are
described in section III.D. of this final notice, and the premium trend
factor is described in section III.E. of this final notice). For each
proposed variable, we included a discussion on the assumptions and data
sources used in developing the variables. For specific discussions,
please refer to the April 2019 proposed payment notice.
We received several comments that related to the MTSF. Those
comments and our responses are described in section II.B. of this final
notice. We did not receive comments on any other factors, and are
finalizing the other factors as proposed.
F. State Option To Use Prior Year QHP Premiums for BHP Payments
In this section of the April 2019 proposed payment notice, we
proposed to provide states implementing BHP with the option to use the
2018 or 2019 QHP premiums multiplied by a premium trend factor to
calculate the federal BHP payment rates instead of using the 2019 or
2020 QHP premiums, for the 2019 and 2020 BHP program years,
respectively. For specific discussions, please refer to the April 2019
proposed payment notice.
We received no comments on this aspect of the proposed methodology.
We are finalizing this policy as proposed.
G. State Option To Include Retrospective State-Specific Health Risk
Adjustment in Certified Methodology
In this section of the April 2019 proposed payment notice, we
proposed to provide states implementing BHP the option to develop a
methodology to account for the impact that including the BHP population
in the Exchange would have had on QHP premiums based on any differences
in health status between the BHP population and persons enrolled
through the Exchange. For specific discussions, please refer to the
April 2019 proposed payment notice.
We received no comments on this aspect of the methodology. We are
finalizing this policy as proposed, with one change. We proposed to
require a state that wanted to elect this option to submit its proposed
protocol within 60 days of the publication of the final payment
methodology for our approval for the 2019 program year, and by August
1, 2019 for the 2020 program year. Given the publication date of this
final notice, we are modifying this timeline and will require a state
electing this option to submit its proposed protocol within 60 days of
the publication of this final notice for our approval for both the 2019
and 2020 program years, which will allow a state additional time to
submit its proposed protocol for program years 2019 and 2020.
III. Provisions of the Final Methodology
A. Overview of the Funding Methodology and Calculation of the Payment
Amount
Section 1331(d)(3) of the Affordable Care Act directs the Secretary
to consider several factors when determining the federal BHP payment
amount, which, as specified in the statute, must equal 95 percent of
the value of the PTC and CSRs that BHP enrollees would have been
provided
[[Page 59536]]
had they enrolled in a QHP through an Exchange. Thus, the BHP funding
methodology is designed to calculate the PTC and CSRs as consistently
as possible and in general alignment with the methodology used by
Exchanges to calculate the advance payments of the PTC and CSRs, and by
the IRS to calculate final PTCs. In general, we have relied on values
for factors in the payment methodology specified in statute or other
regulations as available, and have developed values for other factors
not otherwise specified in statute, or previously calculated in other
regulations, to simulate the values of the PTC and CSRs that BHP
enrollees would have received if they had enrolled in QHPs offered
through an Exchange. In accordance with section 1331(d)(3)(A)(iii) of
the Affordable Care Act, the final funding methodology must be
certified by the Chief Actuary of CMS, in consultation with the Office
of Tax Analysis (OTA) of the Department of the Treasury, as having met
the requirements of section 1331(d)(3)(A)(ii) of the Affordable Care
Act.
Section 1331(d)(3)(A)(ii) of the Affordable Care Act specifies that
the payment determination shall take into account all relevant factors
necessary to determine the value of the PTCs and CSRs that would have
been provided to eligible individuals, including but not limited to,
the age and income of the enrollee, whether the enrollment is for self-
only or family coverage, geographic differences in average spending for
health care across rating areas, the health status of the enrollee for
purposes of determining risk adjustment payments and reinsurance
payments that would have been made if the enrollee had enrolled in a
QHP through an Exchange, and whether any reconciliation of PTC and CSR
would have occurred if the enrollee had been so enrolled. Under the
payment methodologies for 2015 (79 FR 13887) (published on March 12,
2014), for 2016 (80 FR 9636) (published on February 24, 2015), and for
2017 and 2018 (81 FR 10091) (published on February 29, 2016), the total
federal BHP payment amount has been calculated using multiple rate
cells in each state. Each rate cell represents a unique combination of
age range, geographic area, coverage category (for example, self-only
or two-adult coverage through the BHP), household size, and income
range as a percentage of FPL, and there is a distinct rate cell for
individuals in each coverage category within a particular age range who
reside in a specific geographic area and are in households of the same
size and income range. The BHP payment rates developed also are
consistent with the state's rules on age rating. Thus, in the case of a
state that does not use age as a rating factor on an Exchange, the BHP
payment rates would not vary by age.
Under the methodology in the Final Administrative Order, the rate
for each rate cell is calculated in two parts. The first part is equal
to 95 percent of the estimated PTC that would have been paid if a BHP
enrollee in that rate cell had instead enrolled in a QHP in an
Exchange. The second part, 95 percent of the estimated CSR payment that
would have been made if a BHP enrollee in that rate cell had instead
enrolled in a QHP in an Exchange, is assigned a value of zero because
there is presently no available appropriation from which we can make
the CSR portion of any BHP payment.
Equations (1a) and (1b) will be used to calculate the estimated PTC
for eligible individuals enrolled in the BHP in each rate cell. We note
that throughout this final notice, when we refer to enrollees and
enrollment data, we mean data regarding individuals who are enrolled in
the BHP who have been found eligible for the BHP using the eligibility
and verification requirements that are applicable in the state's most
recent certified Blueprint. By applying the equations separately to
rate cells based on age, income and other factors, we effectively take
those factors into account in the calculation. In addition, the
equations reflect the estimated experience of individuals in each rate
cell if enrolled in coverage through an Exchange, taking into account
additional relevant variables. Each of the variables in the equations
is defined in this section, and further detail is provided later in
this section of this final notice. In addition, we describe in Equation
(2a) and Equation (2b) how we proposed to calculate the adjusted
reference premium (ARP) that is used in Equations (1a) and (1b).
Equations (1a) and (1b): Estimated PTC by Rate Cell
We will continue to calculate the estimated PTC, on a per enrollee
basis, for each rate cell for each state based on age range, geographic
area, coverage category, household size, and income range. We will
calculate the PTC portion of the rate in a manner consistent with the
methodology used to calculate the PTC for persons enrolled in a QHP,
with the following adjustments. First, the PTC portion of the rate for
each rate cell will represent the mean, or average, expected PTC that
all persons in the rate cell would receive, rather than being
calculated for each individual enrollee. Second, the reference premium
(RP) (described in more detail later in the section) used to calculate
the PTC will be adjusted for the BHP population health status, and in
the case of a state that elects to use 2018 premiums for the basis of
the BHP federal payment, for the projected change in the premium from
2018 to 2019, to which the rates announced in the final payment
methodology would apply. These adjustments are described in Equation
(2a) and Equation (2b). Third, the PTC will be adjusted prospectively
to reflect the mean, or average, net expected impact of income
reconciliation on the combination of all persons enrolled in the BHP;
this adjustment, as described in section III.D.5. of this final notice,
will account for the impact on the PTC that would have occurred had
such reconciliation been performed. Fourth, for program year 2020, the
PTC will be adjusted to account for the estimated impacts of plan
selection; this adjustment, the MTSF, will reflect the effect on the
average PTC of individuals choosing different metal-tier levels of
QHPs. For program year 2019, the MTSF will not apply, and thus would
not change the value of the PTC amount of the BHP payment. Finally, the
rate is multiplied by 95 percent, consistent with section
1331(d)(3)(A)(i) of the Affordable Care Act. We note that in the
situation where the average income contribution of an enrollee would
exceed the ARP, we will calculate the PTC to be equal to 0 and will not
allow the value of the PTC to be negative.
We will use Equation (1a) to calculate the PTC rate for program
year 2019 and Equation (1b) to calculate the PTC rate for program year
2020, consistent with the methodology described above:
[GRAPHIC] [TIFF OMITTED] TR05NO19.000
[[Page 59537]]
PTCa,g,c,h,i = Premium tax credit portion of BHP payment rate
a = Age range
g = Geographic area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
h = Household size
i = Income range (as percentage of FPL)
ARPa,g,c = Adjusted reference premium
Ih,i,j = Income (in dollars per month) at each 1 percentage-point
increment of FPL
j = jth percentage-point increment FPL
n = Number of income increments used to calculate the mean PTC
PTCFh,i,j = Premium Tax Credit Formula percentage
IRF = Income reconciliation factor
[GRAPHIC] [TIFF OMITTED] TR05NO19.001
PTCa,g,c,h,i = Premium tax credit portion of BHP payment rate
a = Age range
g = Geographic area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
h = Household size
i = Income range (as percentage of FPL)
ARPa,g,c = Adjusted reference premium
Ih,i,j = Income (in dollars per month) at each 1 percentage-point
increment of FPL
j = jth percentage-point increment FPL
n = Number of income increments used to calculate the mean PTC
PTCFh,i,j = Premium Tax Credit Formula percentage
IRF = Income reconciliation factor
MTSF = Metal tier selection factor
Equation (2a) and Equation (2b): Adjusted Reference Premium (ARP)
Variable (Used in Equations (1a) and (1b))
As part of the calculations for the PTC component, we will continue
to calculate the value of the ARP as described below. Consistent with
the approach in previous years, we will allow states to choose between
using the actual current year premiums or the prior year's premiums
multiplied by the premium trend factor (as described in section III.E.
of this final notice). Therefore, we describe how we would calculate
the ARP under each option.
In the case of a state that elected to use the reference premium
(RP) based on the current program year (for example, 2019 premiums for
the 2019 program year), we will calculate the value of the ARP as
specified in Equation (2a). The ARP will be equal to the RP, which will
be based on the second lowest cost silver-level QHP premium in the
applicable program year, multiplied by the BHP population health factor
(PHF) (described in section III.D. of this final notice), which will
reflect the projected impact that enrolling BHP-eligible individuals in
QHPs through an Exchange would have had on the average QHP premium, and
multiplied by the premium adjustment factor (PAF) (described in section
III.D. of this final notice), which will account for the change in
silver-level QHP premiums due to the discontinuance of CSR payments.
[GRAPHIC] [TIFF OMITTED] TR05NO19.002
ARPa,g,c = Adjusted reference premium
a = Age range
g = Geographic area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
RPa,g,c = Reference premium
PHF = Population health factor
PAF = Premium adjustment factor
In the case of a state that elected to use the RP based on the
prior program year (for example, 2018 premiums for the 2019 program
year, as described in more detail in section III.F. of this final
notice), we will calculate the value of the ARP as specified in
Equation (2b). The ARP will be equal to the RP, which will be based on
the second lowest cost silver-level QHP premium in 2018, multiplied by
the BHP PHF (described in section III.D. of this final notice), which
will reflect the projected impact that enrolling BHP-eligible
individuals in QHPs on an Exchange would have had on the average QHP
premium, multiplied by the PAF (described in section III.D. of this
final notice), which will account for the change in silver-level QHP
premiums due to the discontinuance of CSR payments, and multiplied by
the premium trend factor (PTF) (described in section III.E. of this
final notice), which will reflect the projected change in the premium
level between 2018 and 2019.
[GRAPHIC] [TIFF OMITTED] TR05NO19.003
ARPa,g,c = Adjusted reference premium
a = Age range
g = Geographic area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
RPa,g,c = Reference premium
PHF = Population health factor
PAF = Premium adjustment factor
PTF = Premium trend factor
Equation 3: Determination of Total Monthly Payment for BHP Enrollees in
Each Rate Cell
In general, the rate for each rate cell will be multiplied by the
number of BHP enrollees in that cell (that is, the number of enrollees
that meet the criteria for each rate cell) to calculate the total
monthly BHP payment. This calculation is shown in Equation (3).
[GRAPHIC] [TIFF OMITTED] TR05NO19.004
[[Page 59538]]
(In this equation, we assign a value of zero to the CSR part of the BHP
payment rate calculation (CSRa,g,c,h,i) because there is presently no
available appropriation from which we can make the CSR portion of any
BHP payment. In the event that an appropriation for CSRs for 2019 or
2020 is made, we will determine whether to modify the CSR part of the
BHP payment rate calculation (CSRa,g,c,h,i) or include the PAF and the
MTSF in the BHP payment methodology.
PMT = Total monthly BHP payment
PTCa,g,c,h,i = Premium tax credit portion of BHP payment rate
CSRa,g,c,h,i = Cost sharing reduction portion of BHP payment rate
Ea,g,c,h,i = Number of BHP enrollees
a = Age range
g = Geographic area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
h = Household size
i = Income range (as percentage of FPL)
B. Federal BHP Payment Rate Cells
Consistent with the previous payment methodologies, a state
implementing a BHP will provide us an estimate of the number of BHP
enrollees it projects will enroll in the upcoming BHP program quarter,
by applicable rate cell, prior to the first quarter and each subsequent
quarter of program operations until actual enrollment data is
available. Upon our approval of such estimates as reasonable, we will
use those estimates to calculate the prospective payment for the first
and subsequent quarters of program operation until the state has
provided us actual enrollment data. These data are required to
calculate the final BHP payment amount, and to make any necessary
reconciliation adjustments to the prior quarters' prospective payment
amounts due to differences between projected and actual enrollment.
Subsequent quarterly deposits to the state's trust fund will be based
on the most recent actual enrollment data submitted to CMS. Actual
enrollment data must be based on individuals enrolled for the quarter
submitted who the state found eligible and whose eligibility was
verified using eligibility and verification requirements as agreed to
by the state in its applicable BHP Blueprint for the quarter that
enrollment data is submitted. Procedures will ensure that federal
payments to a state reflect actual BHP enrollment during a year, within
each applicable category, and prospectively determined federal payment
rates for each category of BHP enrollment, with such categories defined
in terms of age range, geographic area, coverage status, household
size, and income range, as explained above.
We will require the use of certain rate cells as part of the
methodology. For each state, we will use rate cells that separate the
BHP population into separate cells based on the five factors described
as follows:
Factor 1--Age: We will separate enrollees into rate cells by age,
using the following age ranges that capture the widest variations in
premiums under HHS's Default Age Curve: \14\
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\14\ This curve is used to implement the Affordable Care Act's
3:1 limit on age-rating in states that do not create an alternative
rate structure to comply with that limit. The curve applies to all
individual market plans, both within and outside the Exchange. The
age bands capture the principal allowed age-based variations in
premiums as permitted by this curve. The default age curve was
updated beginning with the 2018 benefit year to include different
age rating factors between children 0-14 and for persons at each age
between 15 and 20. More information is available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/StateSpecAgeCrv053117.pdf. Children under age 15
are charged the same premium. For persons age 15-64, the age bands
in this final notice divide the total age-based premium variation
into the three most equally-sized ranges (defining size by the ratio
between the highest and lowest premiums within the band) that are
consistent with the age-bands used for risk-adjustment purposes in
the HHS-Developed Risk Adjustment Model. For such age bands, see
Table 5, ``Age-Sex Variables,'' in HHS-Developed Risk Adjustment
Model Algorithm Software, June 2, 2014, http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ra-tables-03-27-2014.xlsx.
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Ages 0-20.
Ages 21-34.
Ages 35-44.
Ages 45-54.
Ages 55-64.
This provision is unchanged from the current methodology.
Factor 2--Geographic area: For each state, we will separate
enrollees into rate cells by geographic areas within which a single RP
is charged by QHPs offered through the state's Exchange. Multiple, non-
contiguous geographic areas will be incorporated within a single cell,
so long as those areas share a common RP.\15\ This provision is
unchanged from the current methodology.
---------------------------------------------------------------------------
\15\ For example, a cell within a particular state might refer
to ``County Group 1,'' ``County Group 2,'' etc., and a table for the
state would list all the counties included in each such group. These
geographic areas are consistent with the geographic areas
established under the 2014 Market Reform Rules. They also reflect
the service area requirements applicable to QHPs, as described in 45
CFR 155.1055, except that service areas smaller than counties are
addressed as explained below.
---------------------------------------------------------------------------
Factor 3--Coverage status: We will separate enrollees into rate
cells by coverage status, reflecting whether an individual is enrolled
in self-only coverage or persons are enrolled in family coverage
through the BHP, as provided in section 1331(d)(3)(A)(ii) of the
Affordable Care Act. Among recipients of family coverage through the
BHP, separate rate cells, as explained below, will apply based on
whether such coverage involves two adults alone or whether it involves
children. This provision is unchanged from the current methodology.
Factor 4--Household size: We will separate enrollees into rate
cells by the household size that states use to determine BHP enrollees'
household income as a percentage of the FPL under Sec. 600.320
(Administration, eligibility, essential health benefits, performance
standards, service delivery requirements, premium and cost sharing,
allotments, and reconciliation; Determination of eligibility for and
enrollment in a standard health plan). We will require separate rate
cells for several specific household sizes. For each additional member
above the largest specified size, we will publish instructions for how
we will develop additional rate cells and calculate an appropriate
payment rate based on data for the rate cell with the closest specified
household size. We will publish separate rate cells for household sizes
of 1 through 10. This provision is unchanged from the current
methodology.
Factor 5--Household Income: For households of each applicable size,
we will create separate rate cells by income range, as a percentage of
FPL. The PTC that a person would receive if enrolled in a QHP through
an Exchange varies by household income, both in level and as a ratio to
the FPL. Thus, separate rate cells will be used to calculate federal
BHP payment rates to reflect different bands of income measured as a
percentage of FPL. We will use the following income ranges, measured as
a ratio to the FPL:
0 to 50 percent of FPL.
51 to 100 percent of FPL.
101 to 138 percent of FPL.\16\
---------------------------------------------------------------------------
\16\ The three lowest income ranges would be limited to lawfully
present immigrants who are ineligible for Medicaid because of
immigration status.
---------------------------------------------------------------------------
139 to 150 percent of FPL.
151 to 175 percent of FPL.
176 to 200 percent of FPL.
This provision is unchanged from the current methodology.
These rate cells will only be used to calculate the federal BHP
payment amount. A state implementing a BHP will not be required to use
these rate cells or any of the factors in these rate cells as part of
the state payment to the standard health plans participating in the BHP
or to help define BHP
[[Page 59539]]
enrollees' covered benefits, premium costs, or out-of-pocket cost-
sharing levels.
We will use averages to define federal payment rates, both for
income ranges and age ranges, rather than varying such rates to
correspond to each individual BHP enrollee's age and income level. We
believe that the proposed approach will increase the administrative
feasibility of making federal BHP payments and reduce the likelihood of
inadvertently erroneous payments resulting from highly complex
methodologies. We believe that this approach should not significantly
change federal payment amounts, since within applicable ranges, the
BHP-eligible population is distributed relatively evenly.
The number of factors contributing to rate cells, when combined,
can result in over 350,000 rate cells which can increase the complexity
when generating quarterly payment amounts. In future years, and in the
interest of administrative simplification, we will consider whether to
combine or eliminate certain rate cells, once we are certain that the
effect on payment would be insignificant.
C. Sources and State Data Considerations
To the extent possible, we will continue to use data submitted to
the federal government by QHP issuers seeking to offer coverage through
an Exchange that uses HealthCare.gov in the relevant BHP state to
perform the calculations that determine federal BHP payment cell rates.
States operating a SBE in the individual market that do not use
HealthCare.gov, however, must provide certain data, including premiums
for second lowest cost silver-level QHPs, by geographic area, for CMS
to calculate the federal BHP payment rates in those states. We proposed
that a SBE that does not use HealthCare.gov interested in obtaining the
applicable federal BHP payment rates for its state must submit such
data accurately, completely, and as specified by CMS, by no later than
30 days after the publication of the final notice for CMS to calculate
the applicable rates for 2019, and by no later than October 15, 2019,
for CMS to calculate the applicable rates for 2020. Given the
publication date for this final methodology, we are modifying the
timeline for submitting the applicable data such that the data must be
submitted by no later than 30 days after the publication of this final
notice for both program year 2019 and 2020, which will allow states
additional time to submit the required 2019 and 2020 data. If
additional state data (that is, in addition to the second lowest cost
silver-level QHP premium data) are needed to determine the federal BHP
payment rate, such data must be submitted in a timely manner upon
request, and in a format specified by us to support the development and
timely release of annual BHP payment notices. The specifications for
data collection to support the development of BHP payment rates are
published in CMS guidance and are available in the Federal Policy
Guidance section at http://medicaid.gov (http://www.medicaid.gov/Federal-Policy-Guidance/Federal-Policy-Guidance.html).
States must submit enrollment data to us on a quarterly basis and
should be technologically prepared to begin submitting data at the
start of their BHP, starting with the beginning of the first program
year. This timeframe differs from the enrollment estimates used to
calculate the initial BHP payment, which states would generally submit
to CMS 60 days before the start of the first quarter of the program
start date. This requirement is necessary for us to implement the
payment methodology that is tied to a quarterly reconciliation based on
actual enrollment data.
We will continue the policy adopted in the February 2016 payment
notice that in states that have BHP enrollees who do not file federal
tax returns (non-filers), the state must develop a methodology, which
they must submit to us at the time of their Blueprint submission to
determine the enrollees' household income and household size
consistently with Marketplace requirements. We reserve the right to
approve or disapprove the state's methodology to determine household
income and household size for non-filers if the household composition
and/or household income resulting from application of the methodology
are different from what typically would be expected to result if the
individual or head of household in the family were to file a tax
return.
In addition, as the federal payments are determined quarterly and
the enrollment data is required to be submitted by the states to us
quarterly, the quarterly payment will continue to be based on the
characteristics of the enrollee at the beginning of the quarter (or
their first month of enrollment in the BHP in each quarter). Thus, if
an enrollee were to experience a change in county of residence,
household income, household size, or other factors related to the BHP
payment determination during the quarter, the payment for the quarter
will be based on the data as of the beginning of the quarter. Payments
will still be made only for months that the person is enrolled in and
eligible for the BHP. We do not anticipate that this will have a
significant effect on the federal BHP payment. The states must maintain
data that are consistent with CMS' verification requirements, including
auditable records for each individual enrolled, indicating an
eligibility determination and a determination of income and other
criteria relevant to the payment methodology as of the beginning of
each quarter.
As described in Sec. 600.610 (Secretarial determination of BHP
payment amount), the state is required to submit certain data in
accordance with this final notice. We require that this data be
collected and validated by states operating a BHP, and that this data
be submitted to CMS.
D. Discussion of Specific Variables Used in Payment Equations
1. Reference Premium (RP)
To calculate the estimated PTC that would be paid if BHP-eligible
individuals enrolled in QHPs through an Exchange, we must calculate a
RP because the PTC is based, in part, on the premiums for the
applicable second lowest cost silver-level QHP as explained in section
III.D.5. of this final notice, regarding the Premium Tax Credit Formula
(PTCF). This methodology is unchanged from the current method except to
update the reference years, and to provide additional methodological
details to simplify calculations and to deal with potential
ambiguities. Accordingly, for the purposes of calculating the BHP
payment rates, the RP, in accordance with 26 U.S.C. 36B(b)(3)(C), is
defined as the adjusted monthly premium for an applicable second lowest
cost silver-level QHP. The applicable second lowest cost silver-level
QHP is defined in 26 U.S.C. 36B(b)(3)(B) as the second lowest cost
silver-level QHP of the individual market in the rating area in which
the taxpayer resides that is offered through the same Exchange. We will
use the adjusted monthly premium for an applicable second lowest cost
silver-level QHP in the applicable program year (2019 or 2020) as the
RP (except in the case of a state that elects to use the prior plan
year's premium as the basis for the federal BHP payment for 2019 or
2020, as described in section III.F. of this final notice).
The RP will be the premium applicable to non-tobacco users. This is
consistent with the provision in 26 U.S.C. 36B(b)(3)(C) that bases the
PTC
[[Page 59540]]
on premiums that are adjusted for age alone, without regard to tobacco
use, even for states that allow insurers to vary premiums based on
tobacco use in accordance with 42 U.S.C. 300gg(a)(1)(A)(iv).
Consistent with the policy set forth in 26 CFR 1.36B-3(f)(6), to
calculate the PTC for those enrolled in a QHP through an Exchange, we
will not update the payment methodology, and subsequently the federal
BHP payment rates, in the event that the second lowest cost silver-
level QHP used as the RP, or the lowest cost silver-level QHP, changes
(that is, terminates or closes enrollment during the year).
We will include the applicable second lowest cost silver-level QHP
premium in the BHP payment methodology by age range, geographic area,
and self-only or applicable category of family coverage obtained
through the BHP.
We note that the choice of the second lowest cost silver-level QHP
for calculating BHP payments relies on several simplifying assumptions
in its selection. For the purposes of determining the second lowest
cost silver-level QHP for calculating PTC for a person enrolled in a
QHP through an Exchange, the applicable plan may differ for various
reasons. For example, a different second lowest cost silver-level QHP
may apply to a family consisting of 2 adults, their child, and their
niece than to a family with 2 adults and their children, because 1 or
more QHPs in the family's geographic area might not offer family
coverage that includes the niece. We believe that it would not be
possible to replicate such variations for calculating the BHP payment
and believe that in the aggregate, they would not result in a
significant difference in the payment. Thus, we will use the second
lowest cost silver-level QHP available to any enrollee for a given age,
geographic area, and coverage category.
This choice of RP relies on an assumption about enrollment in the
Exchanges. In previous methodologies, we had assumed that all persons
enrolled in the BHP would have elected to enroll in a silver-level QHP
if they had instead enrolled in a QHP through an Exchange (and that the
QHP premium would not be lower than the value of the PTC). We will
continue to use the second-lowest cost silver-level QHP premium as the
RP, but in this methodology, beginning with program year 2020, we will
change the assumption about which metal tier plans enrollees would have
chosen (see section III.D.6. in this final notice).
We do not believe it is appropriate to adjust the payment for an
assumption that some BHP enrollees would not have enrolled in QHPs for
purposes of calculating the BHP payment rates, since section
1331(d)(3)(A)(ii) of the Affordable Care Act requires the calculation
of such rates as if the enrollee had enrolled in a QHP through an
Exchange.
The applicable age bracket will be one dimension of each rate cell.
We will assume a uniform distribution of ages and estimate the average
premium amount within each rate cell. We believe that assuming a
uniform distribution of ages within these ranges is a reasonable
approach and will produce a reliable determination of the total monthly
payment for BHP enrollees. We also believe this approach will avoid
potential inaccuracies that could otherwise occur in relatively small
payment cells if age distribution were measured by the number of
persons eligible or enrolled.
We will use geographic areas based on the rating areas used in the
Exchanges. We will define each geographic area so that the RP is the
same throughout the geographic area. When the RP varies within a rating
area, we will define geographic areas as aggregations of counties with
the same RP. Although plans are allowed to serve geographic areas
smaller than counties after obtaining our approval, no geographic area,
for purposes of defining BHP payment rate cells, will be smaller than a
county. We do not believe that this assumption will have a significant
impact on federal payment levels and it will likely simplify both the
calculation of BHP payment rates and the operation of the BHP.
Finally, in terms of the coverage category, the federal payment
rates will only recognize self-only and two-adult coverage, with
exceptions that account for children who are potentially eligible for
the BHP. First, in states that set the upper income threshold for
children's Medicaid and CHIP eligibility below 200 percent of FPL
(based on modified adjusted gross income (MAGI)), children in
households with incomes between that threshold and 200 percent of FPL
would be potentially eligible for the BHP. Currently, the only states
in this category are Idaho and North Dakota.\17\ Second, the BHP would
include lawfully present immigrant children with household incomes at
or below 200 percent of FPL in states that have not exercised the
option under the sections 1903(v)(4)(A)(ii) and 2107(e)(1)(E) of the
Act to qualify all otherwise eligible, lawfully present immigrant
children for Medicaid and CHIP. States that fall within these
exceptions would be identified based on their Medicaid and CHIP State
Plans, and the rate cells would include appropriate categories of BHP
family coverage for children. For example, Idaho's Medicaid and CHIP
eligibility is limited to families with MAGI at or below 185 percent of
FPL. If Idaho implemented a BHP, Idaho children with household incomes
between 185 and 200 percent could qualify. In other states, BHP
eligibility will generally be restricted to adults, since children who
are citizens or lawfully present immigrants and live in households with
incomes at or below 200 percent of FPL will qualify for Medicaid or
CHIP, and thus be ineligible for a BHP under section 1331(e)(1)(C) of
the Affordable Care Act, which limits a BHP to individuals who are
ineligible for minimum essential coverage (as defined in section
5000A(f) of the Internal Revenue Code of 1986).
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\17\ CMCS. ``State Medicaid, CHIP and BHP Income Eligibility
Standards Effective April 1, 2019.''
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2. Premium Adjustment Factor (PAF)
The PAF considers the premium increases in other states that took
effect after we discontinued payments to issuers for CSRs provided to
enrollees in QHPs offered through Exchanges. Despite the discontinuance
of federal payments for CSRs, QHPs are required to provide CSRs to
eligible enrollees. As a result, QHPs frequently increased the silver-
level QHP premiums to account for those additional costs; adjustments
and how those were applied (for example, to only silver-level QHPs or
to all metal-tier plans) varied across states. For the states operating
BHPs in 2018, the increases in premiums were relatively minor, because
the majority of enrollees eligible for CSRs (and all who were eligible
for the largest CSRs) were enrolled in the BHP and not in QHPs on the
Exchanges, and therefore issuers in BHP states did not significantly
raise premiums to cover unpaid CSR costs.
In the Final Administrative Order, we incorporated the PAF into the
BHP payment methodology for 2018 to reflect how other states responded
to us ceasing to pay CSRs. We are including this factor in the 2019 and
2020 payment methodologies and will use the same value for the factor
as in the Final Administrative Order.
Under the Final Administrative Order, we calculated the PAF for
each BHP state by using information requested from QHP issuers in each
state and the District of Columbia, and determined the premium
adjustment that the responding QHP issuers made to each silver-level
QHP in 2018 to account for the discontinuation of CSR payments to QHP
issuers. Based on the
[[Page 59541]]
data collected, we estimated the median adjustment for silver-level
QHPs nationwide (excluding those in the two BHP states). To the extent
that QHP issuers made no adjustment (or the adjustment was 0), this
would be counted as 0 in determining the median adjustment made to all
silver-level QHPs nationwide. If the amount of the adjustment was
unknown--or we determined that it should be excluded for methodological
reasons (for example, the adjustment was negative, an outlier, or
unreasonable)--then we did not count the adjustment toward determining
the median adjustment.\18\
---------------------------------------------------------------------------
\18\ Some examples of outliers or unreasonable adjustments
include (but are not limited to) values over 100 percent (implying
the premiums doubled or more as a result of the adjustment), values
more than double the otherwise highest adjustment, or non-numerical
entries.
---------------------------------------------------------------------------
For each of the two BHP states, we determined the median premium
adjustment for all silver-level QHPs in that state. The PAF for each
BHP state equaled 1 plus the nationwide median adjustment divided by 1
plus the state median adjustment for the BHP state. In other words,
PAF = (1 + Nationwide Median Adjustment) / (1 + State Median
Adjustment)
To determine the PAF described above, we requested information from
QHP issuers in each state serviced by a Federally-facilitated Exchange
(FFE) to determine the premium adjustment those issuers made to each
silver-level QHP offered through the Exchange in 2018 to account for
the end of CSR payments. Specifically, we requested information showing
the percentage change that QHP issuers made to the premium for each of
their silver-level QHPs to cover benefit expenditures associated with
the CSRs, given the lack of CSR payments in 2018. This percentage
change was a portion of the overall premium increase from 2017 to 2018.
According to our records, there were 1,233 silver-level QHPs
operating on Exchanges in 2018. Of these 1,233 QHPs, 318 QHPs (25.8
percent) responded to our request for the percentage adjustment applied
to silver-level QHP premiums in 2018 to account for the discontinuance
of the CSRs. These 318 QHPs operated in 26 different states, with 10 of
those states running SBEs (while we requested information only from QHP
issuers in states serviced by an FFE, many of those issuers also had
QHPs in states operating SBEs and submitted information for those
states as well). Thirteen of these 318 QHPs were in New York (and none
were in Minnesota). Excluding these 13 QHPs from the analysis, the
nationwide median adjustment was 20.0 percent. Of the 13 QHPs in New
York that responded, the state median adjustment was 1.0 percent. We
believe that this is an appropriate adjustment for QHPs in Minnesota as
well, based on the observed changes in New York's QHP premiums in
response to the CSR adjustment (and the operation of the BHP in that
state) and our analysis of expected QHP premium adjustments for states
with BHPs. We calculated the PAF as (1 + 20%) / (1 + 1%) (or 1.20/
1.01), which results in a value of 1.188.
The PAF will continue to be set to 1.188 for 2019 and 2020. We
believe that this value for the PAF continues to reasonably account for
the increase in silver-level QHP premiums experienced in non-BHP states
that is associated with the discontinuance of the CSR payments. The
impact can reasonably be expected to be similar to that in 2018,
because the unavailability of CSR payments has not changed.
3. Population Health Factor (PHF)
We will include the PHF in the methodology to account for the
potential differences in the average health status between BHP
enrollees and persons enrolled through the Exchanges. To the extent
that BHP enrollees would have been enrolled through an Exchange in the
absence of a BHP in a state, the exclusion of those BHP enrollees in
the Exchange may affect the average health status of the overall
population and the expected QHP premiums. The use and determination of
the PHF as described below is consistent with the current methodology.
We currently do not believe that there is evidence that the BHP
population would have better or poorer health status than the Exchange
population. At this time, there is a lack of experience available in
the Exchanges that limits the ability to analyze the health differences
between these groups of enrollees. Exchanges have been in operation
since 2014, and two states have operated BHPs since 2015, but we do not
have the data available to do the analysis necessary to make this
adjustment at this time. In addition, differences in population health
may vary across states. Thus, at this time, we believe that it is not
feasible to develop a methodology to make a prospective adjustment to
the PHF that is reliably accurate, consistent with the methodology
described in previous notices. We will consider updating the
methodology in future years when information becomes available.
Given these analytic challenges and the limited data about Exchange
coverage and the characteristics of BHP-eligible consumers that will be
available by the time we establish federal payment rates, we believe
that the most appropriate adjustment for 2019 and 2020 is 1.00.
In the previous BHP payment methodologies, we included an option
for states to include a retrospective population health status
adjustment. The states will be provided with the same option for 2019
and 2020 to include a retrospective population health status adjustment
in the certified methodology, which is subject to our review and
approval. This option is described further in section III.F. of this
final notice. Regardless of whether a state elects to include a
retrospective population health status adjustment, we anticipate that,
in future years, when additional data becomes available about Exchange
coverage and the characteristics of BHP enrollees, we may estimate the
PHF differently.
While the statute requires consideration of risk adjustment
payments and reinsurance payments insofar as they would have affected
the PTC that would have been provided to BHP-eligible individuals had
they enrolled in QHPs, BHP standard health plans do not participate in
the risk adjustment program operated by HHS on behalf of states.
Further, standard health plans did not qualify for payments from the
transitional reinsurance program established under section 1341 of the
Affordable Care Act.\19\ To the extent that a state operating a BHP
determines that, because of the distinctive risk profile of BHP-
eligible consumers, BHP standard health plans should be included in
mechanisms that share risk with other plans in the state's individual
market, the state would need to employ methods other than the HHS-
operated risk adjustment program to achieve this goal.
---------------------------------------------------------------------------
\19\ See 45 CFR 153.400(a)(2)(iv) (BHP standard health plans are
not required to submit reinsurance contributions), 153.20
(definition of ``Reinsurance-eligible plan'' as not including
``health insurance coverage not required to submit reinsurance
contributions''), 153.230(a) (reinsurance payments under the
national reinsurance parameters are available only for
``Reinsurance-eligible plans'').
---------------------------------------------------------------------------
4. Household Income (I)
Household income is a significant determinant of the amount of the
PTC provided for persons enrolled in a QHP through an Exchange.
Accordingly, the BHP payment methodology incorporates household income
into the calculations of the payment rates through the use of income-
based rate cells. We define
[[Page 59542]]
household income in accordance with the definition of modified adjusted
gross income in 26 U.S.C. 36B(d)(2)(B) and consistent with the
definition in 45 CFR 155.300. Income would be measured relative to the
FPL, which is updated periodically in the Federal Register by the
Secretary under the authority of 42 U.S.C. 9902(2). In this
methodology, household size and income as a percentage of FPL would be
used as factors in developing the rate cells. We will use the following
income ranges measured as a percentage of FPL: \20\
---------------------------------------------------------------------------
\20\ These income ranges and this analysis of income apply to
the calculation of the PTC.
---------------------------------------------------------------------------
0-50 percent.
51-100 percent.
101-138 percent.
139-150 percent.
151-175 percent.
176-200 percent.
We will assume a uniform income distribution for each federal BHP
payment cell. We believe that assuming a uniform income distribution
for the income ranges proposed will be reasonably accurate for the
purposes of calculating the BHP payment and will avoid potential errors
that could result if other sources of data were used to estimate the
specific income distribution of persons who are eligible for or
enrolled in the BHP within rate cells that may be relatively small.
Thus, when calculating the mean, or average, PTC for a rate cell,
we will calculate the value of the PTC at each 1 percentage point
interval of the income range for each federal BHP payment cell and then
calculate the average of the PTC across all intervals. This calculation
will rely on the PTC formula described in section III.D.5. of this
final notice.
As the advance payment of PTC (APTC) for persons enrolled in QHPs
would be calculated based on their household income during the open
enrollment period, and that income would be measured against the FPL at
that time, we will adjust the FPL by multiplying the FPL by a projected
increase in the CPI-U between the time that the BHP payment rates are
calculated and the QHP open enrollment period, if the FPL is expected
to be updated during that time. The projected increase in the CPI-U
would be based on the intermediate inflation forecasts from the most
recent OASDI and Medicare Trustees Reports.\21\
---------------------------------------------------------------------------
\21\ See Table IV A1 from the 2018 Annual Report of the Boards
of Trustees of the Federal Hospital Insurance and Federal
supplementary Medical Insurance Trust Funds, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2019.pdf.https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2018.pdf.
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5. Premium Tax Credit Formula (PTCF)
In Equations (1a) and (1b) described in section III.A.1. of this
final notice, we will use the formula described in 26 U.S.C. 36B(b) to
calculate the estimated PTC that would be paid on behalf of a person
enrolled in a QHP on an Exchange as part of the BHP payment
methodology. This formula is used to determine the contribution amount
(the amount of premium that an individual or household theoretically
would be required to pay for coverage in a QHP on an Exchange), which
is based on (A) the household income; (B) the household income as a
percentage of FPL for the family size; and (C) the schedule specified
in 26 U.S.C. 36B(b)(3)(A) and shown below.
The difference between the contribution amount and the adjusted
monthly premium (that is, the monthly premium adjusted for the age of
the enrollee) for the applicable second lowest cost silver-level QHP is
the estimated amount of the PTC that would be provided for the
enrollee.
The PTC amount provided for a person enrolled in a QHP through an
Exchange is calculated in accordance with the methodology described in
26 U.S.C. 36B(b)(2). The amount is equal to the lesser of the adjusted
monthly premium for the plan in which the person or household enrolls,
or the adjusted monthly premium for the applicable second lowest cost
silver-level QHP minus the contribution amount.
The applicable percentage is the percentage of income that a
household would pay if the household enrolled in the applicable second-
lowest cost silver-level plan on the Exchange, and is used to calculate
the household's PTC. The applicable percentage is defined in 26 U.S.C.
36B(b)(3)(A) and 26 CFR 1.36B-3(g) as the percentage that applies to a
taxpayer's household income that is within an income tier specified in
Tables 1 and 2, increasing on a sliding scale in a linear manner from
an initial premium percentage to a final premium percentage specified
in Tables 1 and 2. The applicable percentages of income in Table 1 for
calendar year (CY) 2018 will be effective for BHP program year 2019,
and the applicable percentages of income in Table 2 for CY 2019 will be
effective for BHP program year 2020. The applicable percentages of
income will be updated in future years in accordance with 26 U.S.C.
36B(b)(3)(A)(ii).
Table 1--Applicable Percentage Table for CY 2018 a
------------------------------------------------------------------------
In the case of household
income (expressed as a
percent of poverty line) The initial premium The final premium
within the following income percentage is-- percentage is--
tier:
------------------------------------------------------------------------
Up to 133%.................. 2.01 2.01
133% but less than 150%..... 3.02 4.03
150% but less than 200%..... 4.03 6.34
200% but less than 250%..... 6.34 8.10
250% but less than 300%..... 8.10 9.56
300% but not more than 400%. 9.56 9.56
------------------------------------------------------------------------
a IRS Revenue Procedure 2017-36. https://www.irs.gov/pub/irs-drop/rp-17-36.pdf.
Table 2--Applicable Percentage Table for CY 2019 b
------------------------------------------------------------------------
In the case of household
income (expressed as a
percent of poverty line) The initial premium The final premium
within the following income percentage is-- percentage is--
tier:
------------------------------------------------------------------------
Up to 133%.................. 2.08 2.08
133% but less than 150%..... 3.11 4.15
[[Page 59543]]
150% but less than 200%..... 4.15 6.54
200% but less than 250%..... 6.54 8.36
250% but less than 300%..... 8.36 9.86
300% but not more than 400%. 9.86 9.86
------------------------------------------------------------------------
b IRS Revenue Procedure 2018-34. https://www.irs.gov/pub/irs-drop/rp-18-34.pdf.
6. Metal-Tier Selection Factor (MTSF)
As we discuss in section II.B. of this final notice, we are
finalizing an adjustment in the methodology for program year 2020 to
account for the impact of individuals selecting different metal-tier
level plans in the Exchange, which we refer to as the Metal Tier
Selection Factor (MTSF). Here, we explain how the MTSF is calculated.
We have calculated the MTSF for program year 2020 using the
following approach. First, we calculate the percentage of enrollees
with incomes below 200 percent of FPL (those who would be potentially
eligible for the BHP) in non-BHP states who enrolled in bronze-level
QHPs in 2018. Second, we calculate the ratio of the average PTC paid
for enrollees in this income range who selected bronze-level QHPs
compared to the average PTC paid for enrollees in the same income range
who selected silver-level QHPs. Both of these calculations are done
using CMS data on Exchange enrollment and payments.
The MTSF equals the value of 1 minus the product of the percentage
of enrollees who chose bronze-level QHPs and 1 minus the ratio of the
average PTC paid for enrollees in bronze-level QHPs to the average PTC
paid for enrollees in silver-level QHPs:
MTSF = 1 - (percentage of enrollees in bronze-level QHPs x (1 - average
PTC paid for bronze-level QHP enrollees/average PTC paid for silver-
level QHP enrollees))
We have calculated that 12.68 percent of enrollees in households
with incomes below 200 percent of FPL selected bronze-level QHPs in
2018. We also have calculated that the ratio of the average PTC paid
for those enrollees in bronze-level QHPs to the average PTCs paid for
enrollees in silver-level QHPs was 76.66 percent after adjusting for
the average age of bronze-level and silver-level QHP enrollees. The
MTSF is equal to 1 minus the product of the percentage of enrollees in
bronze-level QHPs (12.68 percent) and 1 minus the ratio of the average
PTC paid for bronze-level QHP enrollees to the average PTC paid for
silver-level QHP enrollees (76.66 percent). Thus, the MTSF would be
calculated as:
MTSF = 1 - (12.68% x (1 - 76.66%))
Therefore, we have set the value of the MTSF for 2020 to be 97.04
percent.
In addition, we proposed in the April 2019 proposed payment notice
to update the value of the MTSF for 2020 with 2019 data. However, as we
discuss in section II.B. of this final notice, as since the 2019 data
on enrollment and PTCs necessary to update the factor are not available
at this time, we apply the MTSF at the value of 97.04 percent for
program year 2020.
7. Income Reconciliation Factor (IRF)
For persons enrolled in a QHP through an Exchange who receive APTC,
there will be an annual reconciliation following the end of the year to
compare the advance payments to the correct amount of PTC based on
household circumstances shown on the federal income tax return. Any
difference between the latter amounts and the advance payments made
during the year would either be paid to the taxpayer (if too little
APTC was paid) or charged to the taxpayer as additional tax (if too
much APTC was made, subject to any limitations in statute or
regulation), as provided in 26 U.S.C. 36B(f).
Section 1331(e)(2) of the Affordable Care Act specifies that an
individual eligible for the BHP may not be treated as a qualified
individual under section 1312 who is eligible for enrollment in a QHP
offered through an Exchange. We are defining ``eligible'' to mean
anyone for whom the state agency or the Exchange assesses or
determines, based on the single streamlined application or renewal
form, as eligible for enrollment in the BHP. Because enrollment in a
QHP is a requirement for individuals to receive PTC, individuals
determined or assessed as eligible for a BHP are not eligible to
receive APTC assistance for coverage in the Exchange. Because they do
not receive APTC assistance, BHP enrollees, on whom the BHP payment
methodology is based, are not subject to the same income reconciliation
as Exchange consumers. Nonetheless, there may still be differences
between a BHP enrollee's household income reported at the beginning of
the year and the actual household income over the year. These
differences may include small changes (reflecting changes in hourly
wage rates, hours worked per week, and other fluctuations in income
during the year) and large changes (reflecting significant changes in
employment status, hourly wage rates, or substantial fluctuations in
income). There may also be changes in household composition. Thus, we
believe that using unadjusted income as reported prior to the BHP
program year may result in calculations of estimated PTC that are
inconsistent with the actual household incomes of BHP enrollees during
the year. Even if the BHP adjusts household income determinations and
corresponding claims of federal payment amounts based on household
reports during the year or data from third-party sources, such
adjustments may not fully capture the effects of tax reconciliation
that BHP enrollees would have experienced had they been enrolled in a
QHP through an Exchange and received APTC assistance.
Therefore, in accordance with current practice, we are including in
Equations (1a) and (1b) an income adjustment factor that would account
for the difference between calculating estimated PTC using: (a)
Household income relative to FPL as determined at initial application
and potentially revised mid-year under Sec. 600.320, for purposes of
determining BHP eligibility and claiming federal BHP payments; and (b)
actual household income relative to FPL received during the plan year,
as it would be reflected on individual federal income tax returns. This
adjustment will seek prospectively to capture the average effect of
income reconciliation aggregated across the BHP population had those
BHP enrollees been subject to tax reconciliation after receiving APTC
assistance for coverage provided through QHPs. Consistent with the
methodology used in past years, we will estimate reconciliation effects
based on tax data for 2 years, reflecting income and tax unit
[[Page 59544]]
composition changes over time among BHP-eligible individuals.
The OTA maintains a model that combines detailed tax and other
data, including Exchange enrollment and PTC claimed, to project
Exchange premiums, enrollment, and tax credits. For each enrollee, this
model compares the APTC based on household income and family size
estimated at the point of enrollment with the PTC based on household
income and family size reported at the end of the tax year. The former
reflects the determination using enrollee information furnished by the
applicant and tax data furnished by the IRS. The latter would reflect
the PTC eligibility based on information on the tax return, which would
have been determined if the individual had not enrolled in the BHP. We
will use the ratio of the reconciled PTC to the initial estimation of
PTC as the IRF in Equations (1a) and (1b) for estimating the PTC
portion of the BHP payment rate.
For 2019 and 2020, OTA estimated that the IRF for states that have
implemented the Medicaid eligibility expansion to cover adults up to
133 percent of FPL will be 98.37 percent and 98.91 percent,
respectively; for states that have not implemented the Medicaid
eligibility expansion and do not have to cover adults up to 133 percent
of FPL, OTA estimated that the IRF would be 97.70 percent and 98.09
percent, respectively. In the 2019 and 2020 payment methodology, the
IRF will be 98.03 percent in 2019 and 98.50 percent in 2020, which is
the average of the values for expansion and non-expansion states in
each year.
E. State Option To Use Prior Program Year QHP Premiums for BHP Payments
In the interest of allowing states greater certainty in the total
BHP federal payments for a given plan year, we have given states the
option to have their final federal BHP payment rates calculated using a
projected ARP (that is, using premium data from the prior program year
multiplied by the PTF defined below), as described in Equation (2b).
Under the 2016 BHP payment notice, states were required to make their
election for the 2017 program year by May 15, 2016 and to make their
election for the 2018 program year by May 15, 2017. States will
generally continue to meet the deadline of making their election by May
15 of the year preceding the applicable program year. However, because
we are finalizing the 2019 and 2020 payment methodologies after the May
15, 2018 and May 15, 2019 deadlines, respectively, have passed, we are
finalizing that a state may change its election for the 2019 and 2020
program years, provided that it does so within 30 days of the date of
this final notice. A change in the state's election would be effective
retroactive to January 1, 2019 for the 2019 program year. The 2020
election will be effective January 1, 2020.
For Equation (2b), we will continue to define the Premium Trend
Factor (PTF), with minor changes in calculation sources and methods, as
follows:
PTF: In Equation (2b), we will calculate an ARP based on the
application of certain relevant variables to the RP, including a PTF.
In the case of a state that would elect to use the 2018 premiums as the
basis for determining the 2019 BHP payment, for example, it would be
appropriate to apply a factor that would account for the change in
health care costs between the year of the premium data and the BHP
program year. We define this as the premium trend factor (PTF) in the
BHP payment methodology. This factor will approximate the change in
health care costs per enrollee, which would include, but not be limited
to, changes in the price of health care services and changes in the
utilization of health care services. This will provide an estimate of
the adjusted monthly premium for the applicable second lowest cost
silver-level QHP that would be more accurate and reflective of health
care costs in the BHP program year.
For the PTF, we proposed to use the annual growth rate in private
health insurance expenditures per enrollee from the National Health
Expenditure (NHE) projections, developed by the Office of the Actuary
in CMS (https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html). We are finalizing the PTF as
proposed. For BHP program year 2019, the PTF is 3.9 percent, and for
program year 2020, the PTF is 4.9 percent.
States may want to consider that the increase in premiums for QHPs
from one year to the next may differ from the PTF developed for the BHP
funding methodology for several reasons. In particular, states may want
to consider that the second lowest cost silver-level QHP may be
different from one year to the next. This may lead to the PTF being
greater than or less than the actual change in the premium of the
second lowest cost silver-level QHP.
F. State Option To Include Retrospective State-Specific Health Risk
Adjustment in Certified Methodology
To determine whether the potential difference in health status
between BHP enrollees and consumers in the Exchange would affect the
PTC and risk adjustment payments that would have otherwise been made
had BHP enrollees been enrolled in coverage through an Exchange, we
will continue to provide states implementing the BHP the option to
propose and to implement, as part of the certified methodology, a
retrospective adjustment to the federal BHP payments to reflect the
actual value that would be assigned to the population health factor (or
risk adjustment) based on data accumulated during that program year for
each rate cell.
We acknowledge that there is uncertainty with respect to this
factor due to the lack of experience of QHPs through an Exchange and
other payments related to the Exchange, which is why, absent a state
election, we proposed to use a value for the population health factor
to determine a prospective payment rate which assumes no difference in
the health status of BHP enrollees and QHP enrollees. There is
considerable uncertainty regarding whether the BHP enrollees will pose
a greater risk or a lesser risk compared to the QHP enrollees, how to
best measure such risk, the potential effect such risk would have had
on PTC, and risk adjustment that would have otherwise been made had BHP
enrollees been enrolled in coverage through an Exchange. However, to
the extent that a state would develop an approved protocol to collect
data and effectively measure the relative risk and the effect on
federal payments, we will permit a retrospective adjustment that would
measure the actual difference in risk between the two populations to be
incorporated into the certified BHP payment methodology and used to
adjust payments in the previous year.
For a state electing the option to implement a retrospective
population health status adjustment, we proposed requiring the state to
submit a proposed protocol to CMS, which would be subject to approval
by us and would be required to be certified by the Chief Actuary of
CMS, in consultation with the OTA, as part of the BHP payment
methodology. We describe the protocol for the population health status
adjustment in guidance in Considerations for Health Risk Adjustment in
the Basic Health Program in Program Year 2015 (http://
[[Page 59545]]
www.medicaid.gov/Basic-Health-Program/Downloads/Risk-Adjustment-and-
BHP-White-Paper.pdf). Under the February 2016 BHP payment notice,
states were required to submit a proposed protocol by August 1, 2017
for the 2018 program year. We proposed to require a state to submit its
proposed protocol within 60 days of the publication of the final
payment methodology for our approval for the 2019 program year, and by
August 1, 2019 for the 2020 program year. Given the publication date of
this final notice, we will require a state to submit its proposed
protocol within 60 days of the publication of the final payment
methodology for our approval for both the 2019 and 2020 program years,
which will allow a state adequate time to submit the proposal for
program year 2020. This submission would also include descriptions of
how the state would collect the necessary data to determine the
adjustment, including any contracting contingences that may be in place
with participating standard health plan issuers. We will provide
technical assistance to states as they develop their protocols. To
implement the population health status adjustment, we must approve the
state's protocol no later than 90 days after the submission of the
population health factor methodology for the 2019 program year, and by
December 31, 2019 for the 2020 program year. Finally, the state will be
required to complete the population health status adjustment at the end
of the program year based on the approved protocol. After the end of
the program year, and once data is made available, we will review the
state's findings, consistent with the approved protocol, and make any
necessary adjustments to the state's federal BHP payment amounts. If we
determine that the federal BHP payments were less than they would have
been using the final adjustment factor, we will apply the difference to
the state's next quarterly BHP trust fund deposit. If we determine that
the federal BHP payments were more than they would have been using the
final reconciled factor, we will subtract the difference from the next
quarterly BHP payment to the state.
IV. Collection of Information Requirements
The final methodologies for program years 2019 and 2020 are similar
to the methodology originally published in the February 2016 payment
notice and modified by the Final Administrative Order (see section I.B.
of this final notice for more information). The methodologies for 2019
and 2020 will not revise or impose any additional reporting,
recordkeeping, or third-party disclosure requirements or burden on QHPs
or on states operating SBEs. Although the methodologies' information
collection requirements and burden estimates had at one time been
approved by OMB under control number 0938-1218 (CMS-10510), the
approval was discontinued on August 31, 2017, since we adjusted our
estimated number of respondents below the Paperwork Reduction Act of
1995 (44 U.S.C. 3501 et seq.) threshold of ten or more respondents.
Only New York and Minnesota operate a BHP at this time.
V. Regulatory Impact Analysis
A. Statement of Need
Section 1331 of the Affordable Care Act (42 U.S.C. 18051) requires
the Secretary to establish a BHP, and section 1331(d)(1) of the
Affordable Care Act specifically provides that if the Secretary finds
that a state meets the requirements of the program established under
section 1331(a) of the Affordable Care Act, the Secretary shall
transfer to the State federal BHP payments described in section (d)(3).
This final notice provides for the funding methodologies that we will
use to determine the federal BHP payment amounts required to implement
these statutory provisions for program years 2019 and 2020.
B. Overall Impact
We have examined the impacts of this final notice as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4,
1999), the Congressional Review Act (5 U.S.C. 804(2) and Executive
Order 13771 on Reducing Regulation and Controlling Regulatory Costs
(January 30, 2017).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Section
3(f) of Executive Order 12866 defines a ``significant regulatory
action'' as an action that is likely to result in a rule: (1) Having an
annual effect on the economy of $100 million or more in any 1 year, or
adversely and materially affecting a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or state, local or tribal governments or communities (also
referred to as ``economically significant''); (2) creating a serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially altering the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raising novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.
Agencies must prepare a regulatory impact analysis (RIA) for major
rules with economically significant effects ($100 million or more in
any 1 year). As noted in the BHP final rule, the BHP provides states
the flexibility to establish an alternative coverage program for low-
income individuals who would otherwise be eligible to purchase coverage
on an Exchange. To date, two states have established a BHP, and we
expect state participation to remain static as a result of these
payment methodologies. However, the final payment methodology for
program year 2020 differs from prior years' methodologies due to the
addition of the MTSF, which would reduce BHP payments, compared to the
previous year's methodology. We estimate that this rulemaking is
``economically significant'' as measured by the $100 million threshold,
and hence also a major rule under the Congressional Review Act.
Accordingly, we have prepared a RIA that, to the best of our ability,
presents the costs and benefits of the rulemaking.
The aggregate economic impact of this payment methodology is
estimated to be $0 for CY 2019 and $151 million for CY 2020 (measured
in real 2019 dollars), which would be a reduction in federal payments
to the state BHPs. There is zero incremental cost in 2019 attributable
to policy changes because the methodology is not changing from 2018.
For the purposes of this analysis, we have assumed that two states
would implement BHPs in 2020. This assumption is based on the fact that
two states have established a BHP to date, and we do not have any
indication that additional states may implement the program. We also
assumed there would be approximately 806,000 BHP enrollees in 2020. The
size of the BHP depends on several factors, including the number
[[Page 59546]]
of and which particular states choose to implement or continue a BHP,
the level of QHP premiums, and the other coverage options for persons
who would be eligible for the BHP. In particular, while we generally
expect that many enrollees would have otherwise been enrolled in a QHP
on the Exchange, some persons may have been eligible for Medicaid under
a waiver or a state health coverage program. For those who would have
enrolled in a QHP and thus would have received PTCs, the federal
expenditures for the BHP would be expected to be more than offset by a
reduction in federal expenditures for PTCs. For those who would have
been enrolled in Medicaid, there would likely be a smaller offset in
federal expenditures (to account for the federal share of Medicaid
expenditures), and for those who would have been covered in non-federal
programs or would have been uninsured, there likely would be an
increase in federal expenditures.
Projected BHP enrollment and expenditures under the previous
payment methodology were calculated using the most recent 2018 QHP
premiums and state estimates for BHP enrollment. We projected
enrollment for 2020 using the projected increase in the number of
adults in the U.S. from 2018 to 2020 (about 0.5 percent per year), and
we projected premiums using the NHE projection of premiums for private
health insurance. Expenditures are in real 2019 dollars and are
deflated using the projected change in the medical component of the
consumer price index (CPI-M). Expenditures are projected to be $5.094
billion in 2020.
For the change in the methodology to incorporate the MTSF for
benefit year 2020, the MTSF was calculated as having a value of 97.04
percent (as described previously). This reduced projected expenditures
by approximately $151 million in 2020, compared to projected
expenditures using the methodology in the 2018 Final Administrative
Order.
TABLE 3--Estimated Federal Impacts for the Basic Health Program 2020
Payment Methodology
[Millions of 2020 dollars]
------------------------------------------------------------------------
2019 2020
------------------------------------------------------------------------
Projected Federal BHP payments $5,040 $5,094
under 2018 Final Administrative
Order............................
Projected Federal BHP payments 5,040 4,944
under finalized methodologies....
Federal savings under methodology. 0 151
------------------------------------------------------------------------
Totals may not add due to rounding.
C. Anticipated Effects
Currently, states pay a portion of the BHP costs each year. We
expect the proposed change in the BHP methodology for benefit year 2020
to shift a portion of BHP costs from the federal government to the
states operating a BHP. This increase in costs may lead the states to
consider a combination of the following changes: Increasing state
payments to the BHP; increasing beneficiary premiums and cost-sharing
to the BHP; and reducing payment rates to standard health plans.
Beneficiary premiums and cost-sharing are limited under the BHP, so it
is unlikely states could make up much of the difference through
increased beneficiary contributions. We expect that most of the
difference in federal payments would be made up through increases in
state funding.
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA)
requires agencies to prepare an initial regulatory flexibility analysis
to describe the impact of the proposed rule on small entities, unless
the head of the agency can certify that the rule will not have a
significant economic impact on a substantial number of small entities.
The RFA generally defines a ``small entity'' as (1) a proprietary firm
meeting the size standards of the Small Business Administration (SBA);
(2) a not-for-profit organization that is not dominant in its field; or
(3) a small government jurisdiction with a population of less than
50,000. Individuals and states are not included in the definition of a
small entity.
Because these methodologies are focused solely on federal BHP
payment rates to states, it does not contain provisions that would have
a direct impact on hospitals, physicians, and other health care
providers that are designated as small entities under the RFA.
Accordingly, we have determined that these methodologies, like the
current methodology and the final rule that established the BHP, will
not have a significant economic impact on a substantial number of small
entities.
In addition, section 1102(b) of the RFA requires us to prepare a
RIA if a rule may have a significant impact on the operations of a
substantial number of small rural hospitals. For purposes of section
1102(b) of the RFA, we define a small rural hospital as a hospital that
is located outside of a metropolitan statistical area and has fewer
than 100 beds. For the preceding reasons, the Secretary has determined
that these methodologies will not have a significant impact on the
operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2019, that
threshold is approximately $154 million. States have the option, but
are not required, to establish a BHP. Further, the methodologies would
establish federal payment rates without requiring states to provide the
Secretary with any data not already required by other provisions of the
Affordable Care Act or its implementing regulations. Thus, neither the
current nor the finalized payment methodologies mandate expenditures by
state governments, local governments, or tribal governments.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. The BHP is entirely optional for states, and if
implemented in a state, provides access to a pool of funding that would
not otherwise be available to the state.
D. Alternative Approaches
Given the absence of an appropriation for federal CSR payments, we
considered several alternatives of how to consider these amounts in the
BHP payment methodology for 2019 and 2020, following the Final
Administrative Order. In most states without BHPs, there were increases
in the silver-level QHP premiums due to the lack of federal funding for
CSRs in 2018, and those increases are expected
[[Page 59547]]
to also be reflected in the 2019 and 2020 premiums (absent federal
funding for CSRs). QHP issuers are still responsible for CSRs on behalf
of eligible enrollees, regardless of federal funding; therefore, in
many states QHP issuers have increased premiums significantly to
account for the costs of the CSRs in 2018 and are expected to continue
to do so in subsequent years. In states operating BHPs, the majority of
the individuals eligible for CSRs (and the vast majority eligible for
the largest CSRs) are enrolled in the BHP and not in the Exchange. As a
result, in those states, QHP issuers made much smaller adjustments to
premiums to account for CSR costs in 2018. As part of the Final
Administrative Order, we considered whether or not to make an
adjustment in the BHP payment methodology for how much QHP premiums
would have increased if BHP enrollees had been enrolled through the
Exchange instead. We also considered other methodologies for
calculating the PAF, including using program data to estimate the
expected adjustment and to request information from QHPs and/or states
for 2019 and 2020 QHP premiums. We decided to use the same methodology,
data, and adjustment to the premiums as was used in the 2018 payment
methodology described in the Final Administrative Order (see section
III.D.2. of this final notice for more information).
We also considered whether or not to make an adjustment to account
for the number of enrollees who would select other metal tier plans on
the Exchange (if not for the existence of the BHP) and the impact that
this would have on the average PTC paid. In previous methodologies, we
have not made such an adjustment; however, there are two results from
the discontinuance of CSR payments that we considered in adding this
adjustment for the 2019 and 2020 payment methodologies. First, there
are a significant percentage of enrollees with incomes below 200
percent of FPL in states without BHPs that have chosen to enroll in
bronze-level QHPs, despite the availability of CSRs if they had chosen
to enroll in a silver-level QHP (about 13 percent in 2018). Second, the
discontinuance of the CSR payments and the subsequent increases to
silver-level QHP premiums in 2018 led to a larger difference between
the bronze-level and silver-level QHP premiums in many states (from a
difference of about 17 percent in 2017 to about 33 percent in 2018). As
a result, the likelihood that enrollees eligible for CSRs who enrolled
in bronze-level QHPs would pay $0 in premium increased (and thus the
government would not pay the full value of the PTCs enrollees were
eligible for), and the average difference between the bronze-level QHP
premium and the full value of the PTC likely increased. In addition,
the percentage of enrollees eligible for CSRs enrolled in bronze-level
QHPs also increased from 2017 to 2018 (from 11 percent to 13 percent),
and we believe this is likely due to the availability of QHPs that
effectively had $0 in premium due to the PTC for which individuals
qualified. Therefore, we are making an adjustment for enrollees
selecting bronze-level QHPs in the methodology for the 2020 program
year. As noted previously, we are not including the MTSF in the 2019
payment methodology.
In addition, we considered whether or not to continue to provide
states the option to develop a protocol for a retrospective adjustment
to the population health factor as we did in previous payment
methodologies. We believe that continuing to provide this option is
appropriate and likely to improve the accuracy of the final payments.
We also considered whether or not to require the use of the program
year premiums to develop the federal BHP payment rates, rather than
allow the choice between the program year premiums and the prior year
premiums trended forward. We believe that the payment rates can still
be developed accurately using either the prior year QHP premiums or the
current program year premiums and that it is appropriate to continue to
provide the states the option.
Many of the factors in this final notice are specified in statute;
therefore, we are limited in the alternative approaches we could
consider. One area in which we previously had and still have a choice
is in selecting the data sources used to determine the factors included
in the methodology. Except for state-specific RPs and enrollment data,
we have used national rather than state-specific data. This decision is
due to the lack of currently available state-specific data needed to
develop the majority of the factors included in the methodology. We
believe the national data produce sufficiently accurate determinations
of payment rates. In addition, we believe that this approach is less
burdensome on states. In many cases, using state-specific data would
necessitate additional requirements on the states to collect, validate,
and report data to CMS. By using national data, we are able to collect
data from other sources and limit the burden placed on the states. For
RPs and enrollment data, we have used state-specific data rather than
national data as we believe state-specific data will produce more
accurate determinations than national averages.
E. Accounting Statement and Table
In accordance with OMB Circular A- 4, Table 4 depicts an accounting
statement summarizing the assessment of the benefits, costs, and
transfers associated with these payment methodologies.
Table 4--Accounting Statement Changes to Federal Payments for the Basic Health Program for 2019 and 2020
----------------------------------------------------------------------------------------------------------------
Units
-----------------------------------------------
Category Estimates Discount rate
Year dollar (%) Period covered
----------------------------------------------------------------------------------------------------------------
Transfers: Annualized/Monetized ($million/year). $73 2019 7 2019-2020
74 2019 3 2019-2020
---------------------------------------------------------------
From Whom to Whom............................... From the States Operating BHPs to the Federal Government.
----------------------------------------------------------------------------------------------------------------
F. Reducing Regulation and Controlling Regulatory Costs
Executive Order 13771, titled ``Reducing Regulation and Controlling
Regulatory Costs,'' was issued on January 30, 2017 (82 FR 9339,
February 3, 2017). It has been determined that this final notice is a
transfer notice that does not impose more than de minimis costs, and
thus is not a regulatory action for the purposes of E.O. 13771.
[[Page 59548]]
G. Conclusion
Overall, federal BHP payments are expected to decrease by $151
million from 2019 through 2020 as a result of the changes to the
methodologies. The decrease in federal BHP payments is expected to be
made up in increased state BHP expenditures, with a potential increase
in beneficiary contributions and potential decreases in provider
payment rates (including rates to standard health plans in the BHP) as
a result of these changes. The analysis above, together with the
remainder of this preamble, provides an RIA.
In accordance with the provisions of Executive Order 12866, this
document was reviewed by the Office of Management and Budget.
Dated: October 28, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: October 28, 2019.
Alex M. Azar,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-24064 Filed 11-1-19; 11:15 am]
BILLING CODE 4120-01-P
