The ACA’s Basic Health Program Option: Federal Requirements and State Trade-Offs
Technically, a state contracts with a “standard health plan offeror” that sponsors a “standard health plan.”
See, e.g., Stan Dorn, Matthew Buettgens, Caitlin Carroll. Using the Basic Health Program to Make Coverage More Affordable to Low-Income Households: A Promising Approach for Many States. Washington, DC: Urban Institute, Sept. 2011, http://www.urban.org/UploadedPDF/412412-Using-the-Basic-Health-Program-to-Make-Coverage-More-Affordable-to-Low-Income-Households.pdf.
CMS. “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.” Federal Register. Vol. 79, No. 48 (March 12, 2014): 14112-14151, http://www.gpo.gov/fdsys/pkg/FR-2014-03-12/pdf/2014-05299.pdf.
CMS: “Basic Health Program; Federal Funding Methodology for Program Year 2015.” Federal Register. Vol. 79, No. 48 (March 12, 2014): 13887 -13906, http://www.gpo.gov/fdsys/pkg/FR-2014-03-12/pdf/2014-05257.pdf.
Requirements for a State BHP
42 CFR 600.305.
42 CFR 600.405.
42 CFR 600.505.
42 CFR 600.520(c).
42 CFR 600.520(b).
42 CFR 600.520(a).
42 CFR 600.510(b).
42 CFR 600.520(d). In addition, the state must provide consumers with access to information about premiums and cost-sharing at different income levels as well as the consequences if premiums are not paid. Such information must be made available upon request or through an Internet web site and at various key junctures, such as at enrollment and redetermination. 42 CFR 600.515.
IRS. Revenue Procedure 2014-37. http://www.irs.gov/pub/irs-drop/rp-14-37.pdf.
42 CFR 600.415(a).
42 CFR 600.415(b)(3).
42 CFR 600.5
42 CFR 600.420(a).
42 CFR 600.410.
See 45 CFR 92.36 (b) through (i).
42 CFR 600.415(b)(1). These contracts must also include the provisions required for all state contracts that use federal grant funds, under 45 CFR 92.36(i).
42 CFR 600.420(b).
42 CFR 600.345.
42 CFR 600.340(c) and (d).
42 CFR 600.310(c).
42 CFR 600.315.
42 CFR 600.320(c).
42 CFR 600.335.
42 CFR 600.320(d).
42 CFR 600.525.
42 CFR 600.340.
42 CFR 600.150.
45 CFR 155.120(c)(2), cited in 42 CFR 600.165
42 CFR 600.310(a), 42 CFR 600.330.
42 CFR 600.310(b).
42 CFR 600.320(a).
42 CFR 600.160.
42 CFR 600.110.
42 CFR 600.115 (c).
42 CRF 600.110 (c).
42 CFR 600.110; 42 CFR 600.120 (a).
42 CFR 600.120.
42 CFR 600.170.
42 CFR 600.200.
42 CFR 600.705.
42 CFR 600.710.
42 CFR 600.715.
42 CFR 600.140.
42 CFR 600.142.
Federal Funding of State BHPs
These calculations assume that, in each case, premiums are rounded off to the nearest dollar. If instead calculations did not use rounding, the 2014 average premium would be $344.70, and the 2015 reference premium would be $372.79.
One other comment is appropriate. Illinois might seek to apply a retrospective adjustment to premiums based on the state’s Medicaid coverage of pregnant women, outside the marketplace, to 200 percent FPL (and slightly higher). After the end of the 2015 BHP program year, actuaries could estimate the impact on Illinois’s individual market risk pool if pregnant women covered through BHP in 2015 had instead received coverage in the individual market. The result could be a slight increase in reference premiums, hence federal BHP funding for 2015. We could not estimate the amount of that increase here, however, and assume that Illinois opts not to make this retroactive adjustment.
FPL levels are based on the thresholds for calendar year 2014, since those will be in effect at the November 2014 start of 2015 open enrollment.
IRS. Revenue Procedure 2014-37. http://www.irs.gov/pub/irs-drop/rp-14-37.pdf.
As before, these numbers round off each product to the nearest dollar. Without such rounding, the PTC amount, before application of the IRF, would be $321.06; the IRF would reduce that amount to $304.75; and the final PTC component would 95 percent of the latter figure, or $289.51.
For an example of state-specific 2012 smoking rates by age, see Illinois’s rates as reported by CDC: http://apps.nccd.cdc.gov/brfss/age.asp?cat=TU&yr=2012&qkey=8161&state=IL.
To be more precise, the ratio between premiums charged to tobacco users and non-users shows the effect of tobacco use in raising claims costs above those that were covered by the premiums charged to non-tobacco users.
Key State Policy Questions
Dorn, Buettgens, Carroll, op cit.
Adele Shartzer, Genevieve M. Kenney, Sharon K. Long, Katherine Hempstead, and Douglas Wissoker. Who Are the Remaining Uninsured as of June 2014? July 29, 2014. Washington, DC: Urban Institute, http://hrms.urban.org/briefs/who-are-the-remaining-uninsured-as-of-june-2014.pdf.
Matthew Buettgens, Austin Nichols, and Stan Dorn. Churning Under the ACA and State Policy Options for Mitigation. Washington, DC: Urban Institute (prepared for the Robert Wood Johnson Foundation), June 2012, http://www.urban.org/UploadedPDF/412587-Churning-Under-the-ACA-and-State-Policy-Options-for-Mitigation.pdf. Other studies, which did not consider the impact of unaccepted offers of employer coverage, reached mixed results. Graves, John, Rick Curtis, and Jonathan Gruber, "Balancing Coverage Affordability and Continuity under a Basic Health Program Option," New England Journal of Medicine. Vol. 365, no. 24 (2011): e44. Hwang, Ann, Sara Rosenbaum, and Benjamin D. Sommers, "Creation of State Basic Health Programs Would Lead to 4 Percent Fewer People Churning between Medicaid and Exchanges," Health Affairs. Vol. 31, no. 6 (2012): 1314-20.
This is a key methodological issue. In effect, BHP can raise the threshold of transition between Medicaid plans and marketplace plans from 138 percent FPL to 200 percent FPL. The impact of BHP on churning is thus greatly affected by the number of subsidy-eligible households near those two thresholds. Studies that fail to fully consider offers of employer coverage, which are more frequent at higher income levels, understate the potential impact of BHP in reducing churning.
A state might adjust BHP eligibility mid-year, based on new information from enrollees or reliable third-party data sources. Such adjustments do not increase the PTC component of federal BHP payments on the theory that mid-year adjustments of APTC claims would reduce tax-reconciliation offsets, thus increasing the PTC amounts received by BHP consumers had they enrolled in QHPs in the marketplace. Instead, as noted earlier, the tax reconciliation reduction to the PTC component is calculated based on the assumption that BHP eligibility is continuous so, in effect, APTCs would not have been modified mid-year.
As a result, a state that chooses to implement 12-month continuous eligibility for BHP will not suffer any adverse effects in its receipt of federal funding. Costs would rise for a state that pays part of BHP expenses, however. Such a state would experience increased enrollment, hence increased expenditures, as a result of continuous eligibility. By the same token, increased enrollment would bring such a state a corresponding increase in federal BHP payments.
Among consumers with incomes between 139 and 400 percent FPL who are offered ESI, between 97 percent and 99.8 percent of such offers meet the ACA’s definition of affordability. Even among consumers in this income range who do not accept ESI offers, between 87 percent and 99 percent of the rejected offers are affordable. See the U.S. panel in table 1 in Matthew Buettgens, Stan Dorn, Habib Moody. Access to Employer-Sponsored Insurance and Subsidy Eligibility in Health Benefits Exchanges: Two Data-Based Approaches. Washington, DC: Urban Institute (prepared for the California HealthCare Foundation), Dec. 2012, http://www.urban.org/UploadedPDF/412721-Access-to-Employer-Sponsored-Insurance.pdf.
See Buettgens, Dorn and Moody, 2012.
An alternative approach would begin with QHP costs. For example, a recent BHP analysis for the state of Oregon took that approach. In extrapolating to the cost of using a Medicaid-based infrastructure, this analysis discounted QHP costs based on the estimated average difference between QHP and Medicaid provider reimbursements. Tim Courtney, Julia Lerche, Patrick Holland, Karan Rustagi, Matthew Buettgens, Stan Dorn, Jay Dev, and Hannah Recht. Oregon Basic Health Program Study, prepared for the Oregon Health Authority, Oregon Health Policy Research. October 2014, Clearwater, FL: Wakely Consulting Group and the Urban Institute.
For an example of how varying the details of BHP coverage can affect likely costs, see Matthew Buettgens, Stan Dorn, Jeremy Roth, Caitlin Carroll. The Basic Health Program in Utah. Washington, DC: Urban Institute, Nov. 2012, http://www.urban.org/UploadedPDF/412695-The-Basic-Health-Program-in-Utah.pdf.
Such premium increases could deter participation by healthier consumers, increasing average risk levels and the costs of those who do enroll. However, so long as BHP premiums remain significantly below those charged in the marketplace, this effect is likely to be much less significant than the fiscal contributions resulting from consumer premium payments.
If states believe that they can likely increase plan payments (and ultimately the associated provider reimbursements) above Medicaid levels but there is some uncertainty as to the amount that federal funding will support, some of the increase could be held back and paid as a bonus after the end of the year. The total statewide payment amount would be based on how the relevant uncertainties were resolved, and the amount received by each plan (and ultimately provider) would be in proportion to the total amount of care furnished to BHP consumers.
79 Federal Register at 14133.
42 CFR 600.705(e).
Dorn, Buettgens, Carroll, op cit.
Authors’ calculations, New York Department of Health. “2014 Open Enrollment Report,” NY State of Health: The Official Health Plan Marketplace, June 2014, Albany, NY.
For an estimate of the state’s non-elderly population, see U.S. Census Bureau, “Massachusetts,” State & County Quick Facts, Last Revised: Thursday, 27-Mar-2014 09:55:43 EDT, http://quickfacts.census.gov/qfd/states/25000.html.
A smaller marketplace also has less leverage to change health care delivery and financing to improve population health and quality while slowing cost growth. However, those important goals need not be compromised if the state acting as purchaser uses BHP among other state programs to accomplish those same objectives. In fact, if the marketplace is federally facilitated, BHP could enhance a state’s ability to implement delivery system and payment reforms, as noted in the text.
Massachusetts Commonwealth Connector (Connector). Commonwealth Choice Progress Report. December 13, 2007.
Connector. Connector Summary Report. December 11, 2008. https://www.mahealthconnector.info/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet.
By July 2010, enrollment was approximately 36,000-37,000, of which 75 percent was in the non-group portion of the program. Connector. Report to the Massachusetts Legislature: Implementation of Health Care Reform, Fiscal Year 2010. November 2010. Total enrollment, in both small group and non-group portions of the program combined, has now levelled off at slightly higher than 40,000. Connector. Report to the Massachusetts Legislature: Implementation of Health Care Reform, Fiscal Year 2012. December 2012.
Matthew Buettgens, Stan Dorn, Jeremy Roth, Caitlin Carroll. “The Basic Health Program in Utah.” Washington, DC: Urban Institute, November 2012, http://www.urban.org/UploadedPDF/412695-The-Basic-Health-Program-in-Utah.pdf; Matthew Buettgens, Caitlin Carroll. “The ACA Basic Health Program in Washington State.” Washington, DC: Urban Institute, April 2012, updated August 2012, http://www.urban.org/UploadedPDF/412572-The-ACA-Basic-Health-Program-in-Washington-State.pdf.
Depending on the details of Medicaid coverage, it can either preclude BHP eligibility or, as a practical matter, make BHP enrollment less likely. As noted earlier, one can simultaneously qualify for (1) pregnancy-related Medicaid or categories of Medicaid eligibility that provide less than minimum essential coverage and (2) BHP or marketplace subsidies. However, enrollment in BHP or marketplace coverage is much less likely to take place, as a practical matter, with someone who is receiving Medicaid than with someone who is uninsured or previously paid for individual insurance.
States may also have the authority, in their role as regulators of insurance markets, to require carriers that serve the individual market and BHP to pool both sets of enrollees.
MNsure. MNsure Metrics Dashboard: Prepared for Board of Directors Meeting, April 16, 2014, https://www.mnsure.org/images/bd-2014-04-16-dashboard.pdf.
MNsure. MNsure Metrics Dashboard: Prepared for Board of Directors Meeting, July 16, 2014, https://www.mnsure.org/images/bd-2014-04-16-dashboard.pdf.
Authors’ calculations, MNSure. Provider Networks. (undated) https://www.mnsure.org/images/Individual-ServiceAreas-ProviderLook-up.xls.
Amy Burke, Arpit Misra, and Steven Sheingold. “Premium Affordability, Competition, and Choice in the Health Insurance Marketplace, 2014.” ASPE Research Brief, June 18, 2014, Washington, DC: Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services (ASPE/HHS).
MNSure. “Health Care Coverage and Plan Rates for 2015.” October 1, 2015, https://www.mnsure.org/images/2015-10-1-MNsure-healthcare-coverage-plan-rates.pdf.
According to HHS estimates of weighted average premiums by state, Minnesota’s premiums for the lowest-cost silver plan, second-lowest cost silver plan, and lowest-cost bronze plan were $192, $192, and $144 a month, respectively, well below those in any other state among the 48 (including the District of Columbia) for which data were reported. The state with next lowest such premiums for silver plans was Tennessee, with $235 and $245 weighted average premiums for the lowest and second-lowest-cost silver plans, respectively, 18 percent and 22 percent above Minnesota’s corresponding averages. The state with the second-least-expensive weighted-average lowest-cost bronze plan was Oklahoma, with $174 monthly premiums that exceeded Minnesota’s levels by 17 percent. Authors’ calculations. ASPE Office of Health Policy. “Table 4: Weighted Average Premiums, 48 States,” Health Insurance Marketplace Premiums for 2014. September 25, 2013, http://aspe.hhs.gov/health/reports/2013/marketplacepremiums/ib_premiumslandscape.pdf.
James Nord. “MNsure claims success in first year sign-ups.” Politics in Minnesota. April 4, 2014. http://politicsinminnesota.com/2014/04/mnsure-claims-success-in-first-year-sign-ups/.
Christopher Snowbeck. “MNsure: Twin Cities' rates still look cheaper, but gap is shrinking in Minnesota,” Star Tribune, October 4, 2014, http://www.startribune.com/business/278072961.html.
Minnesota State Department of Commerce. “Commerce Announces Minnesota Health Insurance Rates – Lowest Rates in Nation for Second Year,” October 1, 2014, http://mn.gov/commerce/insurance/media/newsdetail.jsp?id=209-143493.
The other major source of funding is $5 million in unspent federal exchange grant funds from 2013. MNsure. “Preliminary MNsure Budget for Calendar Year 15,” March 12, 2014, http://www.lcc.leg.mn/mnsure/meetings/04092014/Bd-2014-03-12-Prelim2015Budget.pdf; Christopher Snowbeck, “MNsure board OKs 3.5 percent premium withholding,” TwinCities Pioneer Press. May 14, 2014, http://www.twincities.com/politics/ci_25762410/mnsure-board-oks-3-5-percent-premium-withholding; James Nord. “MNsure enrolls 170,000 Minnesotans as insurance deadline passes.” Politics in Minnesota. April 1, 2014, http://politicsinminnesota.com/2014/04/mnsure-enrolls-170000-minnesotans-as-insurance-deadline-passes/.
ACA Section 1332 permits state innovation waivers that allow major changes to ACA’s architecture, including marketplaces, PTCs, and CSRs. Such changes must be cost-neutral and may not increase consumer costs or reduce benefits, compared to the ACA without a waiver. These waivers may not be into effect until 2017.
In this context, they might allow a state to use 100 percent, rather than 95 percent, of PTCs and CSRs to serve consumers through state-sponsored coverage that makes coverage more affordable for low-income consumers who include and potentially go beyond those who qualify for BHP. For the final regulation concerning the process for obtaining such waivers, see CMS, Department of the Treasury. “Application, Review, and Reporting Process for Waivers for State Innovation.” Federal Register. Vol. 77, No. 38, 11700- 11721, Monday, February 27, 2012, http://www.gpo.gov/fdsys/pkg/FR-2012-02-27/pdf/2012-4395.pdf, promulgating 31 CFR 33.100 et seq., 45 CFR 155.1300, et seq.
Massachusetts Executive Office of Health and Human Services (EOHHS). MassHealth: Roadmap to 2014. Revised May 2013, http://www.mass.gov/eohhs/docs/eohhs/cms-waiver/aca-transition-plan-draft.pdf; Letter from CMS Administrator Marilyn Tavenner to EOHHS Secretary John Polanowicz, October 1, 2013, http://www.mass.gov/eohhs/docs/eohhs/cms-waiver/ma-1115-amendment-approval-oct-1-2013.pdf. For Vermont’s premium costs, see Vermont Health Connect Subsidy Calculator, http://info.healthconnect.vermont.gov/tax_credit_calculator.
Brian Rosman, Health Care for All Massachusetts, personal communication, 2013.
Results from Kaiser Family Foundation Subsidy Calculator, https://www.kff.org/interactive/subsidy-calculator/.