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October 21, 2014
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Basic Health Program Funding Methodology Proposed Notice
The Centers for Medicare & Medicaid Services (CMS) today issued a proposed notice establishing the methodology for determining federal funding for the Basic Health Program in program year 2016. The Basic Health Program provides states with the option to establish a health benefits coverage program for lower-income individuals as an alternative to Health Insurance Marketplace coverage under the Affordable Care Act. This voluntary program enables states to create a health benefits program for residents with incomes that are too high to qualify for Medicaid through Medicaid expansion in the Affordable Care Act, but are in the lower income bracket to be eligible to purchase coverage through the Marketplace. This proposed notice is substantially the same as the final notice for program year 2015.
Section 1331 of the Affordable Care Act provides states with a new coverage option, the Basic Health Program, for individuals who are citizens or lawfully present non-citizens, who do not qualify for Medicaid, the Children’s Health Insurance Program (CHIP) or other minimum essential coverage and generally have income between 133 percent and 200 percent of the federal poverty level.
Benefits will include at least the 10 essential health benefits specified in the Affordable Care Act; states can add benefits at their option. The monthly premium and cost sharing charged to eligible individuals will not exceed what an eligible individual would have paid if he or she were to receive coverage from a qualified health plan through the Marketplace, including cost-sharing reductions and advance premium tax credits; a state can lower premiums and other out of pocket costs at its option. A state that operates a Basic Health Program will receive federal funding equal to 95 percent of the amount of the premium tax credit and the cost sharing reductions that would have otherwise been provided to (or on behalf of) eligible individuals if these individuals enrolled in qualified health plans through the Marketplace.
On March 12, 2014, CMS released the final rule for the Basic Health Program. CMS established standards for state and federal administration of the program, including provisions regarding eligibility and enrollment, benefits, cost-sharing requirements and oversight activities. Where possible, CMS aligned Basic Health Program rules with existing rules governing coverage through the Marketplace, Medicaid, or CHIP to simplify administration for states and promote coordination between the Basic Health Program and other health insurance programs.
The final rule also specifies that CMS will annually publish a proposed and final Basic Health Program Payment Notice.
The proposed notice issued today provides the methodology and data sources necessary to determine federal payment amounts made in program year 2016 to states that elect to use the Basic Health Program to offer health benefits to low-income individuals otherwise eligible to purchase coverage through the Marketplace. The proposed notice uses the same methodology as the final 2015 payment notice.
CMS plans to issue a final notice by February 2015, as announced in the Basic Health Program regulations. The February timeframe gives states time to make necessary program adjustments to participate or to begin implementation.
Key Provisions in the Proposed Notice
CMS proposes to use the same payment methodology for program year 2016 as established for 2015, along with updated values for several factors.
- The proposed methodology calculates monthly payment rates for each state for various rate cells, which are defined by age, geographic area (county), income, household size, and the number of persons in a household enrolled in the program. The proposal also makes adjustments for American Indians and Alaska Natives enrolled in the program.
- The proposed methodology calculates payment rates based on the premium tax credit amount and the cost-sharing reductions. The premium tax credit is calculated by estimating the average premium tax credit that persons would have received for each rate cell, which is the difference between the second lowest cost silver plan premium available and the amount of income that a household would be required to pay if the members of the household were enrolled in the second lowest cost silver plan in the Marketplace. Cost-sharing reductions are calculated by estimating the average advance cost-sharing reductions payment that would have been provided to persons for each rate cell.
- The proposed methodology gives states the option to use either the 2016 Marketplace premiums or the 2015 premiums projected forward by an estimated trend rate to calculate theBasic Health Program payment rates. States would also have the option to propose a methodology to calculate the difference in health status between the Basic Health Programpopulation and persons enrolled in the individual Marketplace.
- The proposed methodology calculates payments quarterly. Payments will be based on the last quarter of enrollment (or estimated enrollment for states that implement a new Basic Health Program) and reconciled once enrollment data is submitted for each quarter.