Estimating Federal Payments and Eligibility for Basic Health Programs: An Illustrative Example
In some states, policymakers and stakeholders are considering adoption of the Basic Health Program (BHP) option permitted under the Patient Protection and Affordable Care Act (ACA). Federal regulations allow BHP implementation beginning in 2015. Through BHP, consumers with incomes at or below 200 percent of the federal poverty level (FPL) who would otherwise qualify for subsidized qualified health plans (QHPs) offered in health insurance marketplaces instead are offered state-contracting standard health plans that provide coverage no less generous and affordable than what have been provided in the marketplace. To operate BHPs, states receive federal funding equal to 95 percent of the premium tax credits (PTCs) and cost-sharing reductions (CSRs) that BHP enrollees would have received if they had been covered through QHPs. The rules governing BHP as well as its potential advantages and disadvantages are discussed elsewhere.1
This paper has a narrow, technical goal: to inform state-level analysts about the characteristics of BHP-eligible people in their state and how to use that information to estimate the approximate federal BHP payment amount per average BHP-eligible resident. The paper first describes how federal BHP payments are determined, under the final federal payment methodology for 2015. The next section explains how state officials can use information about the characteristics of BHP-eligible consumers to estimate average federal payment amounts, illustrating that explanation with an example from one state. The final section places such federal payment estimates in context, showing what they can and cannot contribute to a state’s analysis of BHP’s overall fiscal effects.
To assist policymakers and others with calculating average federal payments for BHP-eligible consumers, we provide detailed estimates of the characteristics of BHP-eligible people in each state in the Appendix and as a link to a downloadable Excel file. These estimates were developed using the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM).
These estimates differ from many past state-level estimates of BHP-eligible consumers, in two ways. First, they avoid underestimating average federal BHP payments, because the estimates in the appendix take into account unaccepted offers of employer-sponsored insurance (ESI) that preclude BHP eligibility. The estimates here are based on data from the American Community Survey (ACS), and unaccepted ESI offers are imputed through statistical matches with non-ACS sources of data. Many past efforts to analyze the characteristics of BHP-eligible consumers did not go beyond Census data. They simply assumed that uninsured consumers and those with nongroup coverage are not offered ESI. In fact, a significant minority have access to ESI, with offers that grow increasingly common as incomes rise. Failing to exclude those consumers from counts of BHP-eligible consumers overestimates average income levels among those who qualify for BHP. Since QHP subsidies and federal BHP payments decline as incomes rise, this underestimates average federal BHP payments.
Second, the numbers in appendix table A4 were developed with the aid of small-area estimation techniques that allowed an estimate of multiple characteristics for BHP-eligible consumers. For example, they show the number of such consumers in a state who are age 35-44, in 2-person households, with incomes between 150 and 175 percent FPL, with 1 BHP-eligible member in each household. Estimates with such multi-characteristic population sets greatly improve policymakers’ ability to project federal payment amounts, because federal payments are based on the number of BHP enrollees with such multiple characteristics.
State-level observers interested in federal payments for BHP enrollees could add take-up assumptions or simulations to the eligibility estimates in appendix table A4 to project the number and characteristics of consumers who will sign up for BHP. Such an enrollment projection could be translated into a total federal funding estimate through the method described below, which develops federal payment amounts for BHP enrollees with each set of characteristics shown in appendix table A4. However, the main goal of this paper is more modest—namely, helping state analysts develop reasonable estimates of average federal payments per BHP-eligible consumer, without determining, among eligible consumers, those who will likely enroll.