Health Law Daily 2021 Federal funding methodology for basic health programs finalized
Thursday, August 13, 2020

2021 Federal funding methodology for basic health programs finalized

By Rebecca Mayo, J.D.

CMS has finalized the methodology for funding payment amounts for states offering basic health plans for program year 2021.

After receiving comments on proposed provisions of the funding methodology for basic health plans (BHPs) for the 2021 program year, CMS has finalized payment methodology. In an advance release of the notice, which will be published in the Federal Register on August 13, 2020, CMS provided the equations and specific variables that will be used in the payment equations that compose the overall BHP payment methodology. CMS also finalized provisions relating to what information states will be required to submit for the calculation and what information CMS will obtain from other sources (Final methodology, 85 FR 49264, August 13, 2020.).

Basic Health Plans. The Patient Protection and Affordable Care Act provides states with an option to establish a Basic Health Program (BHP). A BHP makes 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 those levels but are lawfully present non-citizens ineligible for Medicaid.

Federal funding for a BHP 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. The overall statutory requirements and basic procedural framework for the funding methodology were established in a final rule that implemented the section of the ACA establishing BHPs. However, the development and publication of the funding methodology was left to be addressed in an annual BHP Payment Notice.

Methodology. Several factors must be considered when determining the federal BHP payment amount, which must equal 95 percent of the value of the PTC and CSRs that BHP enrollees would have been provided had they enrolled in a QHP through an exchange. Thus, the funding methodology was designed to calculate the PTC and CSRs as consistently as possible an in general alignment with the methodology used by Exchanges to calculate the APTC and CSRs, and by the IRS to calculate final PTCs. Four equations and eight specific variables to use in the payment equations were proposed, to compose the overall BHP payment methodology.

CMS included a summary of the public comments submitted and CMS’s response, and many sections were finalized without modification. Each state implementing BHP will be required to provide CMS with an estimate of the number of BHP enrollees it will enroll in the upcoming BHP program quarter, by applicable rate cell, to determine the federal BHP payment amounts. CMS will use data submitted to the federal government by QHP issuers seeking to offer coverage through an Exchange that uses to determine the federal BHP payment cell rate and for states operating State-based Exchanges (SBEs) states will submit required data for CMS to calculate the federal BHP payment rates. States will be provided the option to use the 2020 QHP premiums multiplied by a premium trend factor to calculate the federal BHP payment rates instead of using the 2021 QHP premiums. Additionally, states will be provided 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.

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