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The ACA’s Basic Health Program Option: Federal Requirements and State Trade-Offs

Requirements for a State BHP

Eligibility

As envisioned by states considering BHP, this option would provide more affordable coverage for low-income consumers than what they would obtain in the marketplaces. BHP is available to consumers with incomes at or below 200% FPL who would otherwise qualify for marketplace subsidies. Eligible consumers include those who:

  • Are state residents;
  • Are age 64 or younger;
  • Are U.S. citizens or legally residing immigrants;
  • Either have income between 133 and 200% FPL or have income below 133% FPL but are not eligible for federally-matched Medicaid because of their immigration status;
  • Are not eligible for other forms of minimum essential coverage, including CHIP and Medicaid (other than for pregnant women’s coverage or a form of Medicaid that offers less than full scope benefits, such as coverage limited to family planning services); and
  • Are not offered affordable coverage from an employer.

A state must cover all eligible consumers, statewide. A BHP cannot cap enrollment, use a waiting period for those with prior coverage, set an upper income limit on eligibility below 200% FPL, or otherwise fail to enroll eligible applicants. However, to promote the smoother transition of individuals from marketplace coverage to BHP, a state can implement alternative initial enrollment strategies on a transitional basis during 2015 with CMS approval.1

Covered services and consumer costs

A standard health plan provided through BHP must cover all ten Essential Health Benefits (EHBs) that are required for QHPs nationally. States adopting BHP have the flexibility to use a combination of more than one base benefit option. A BHP may cover additional services, but not fewer services, than those required for QHPs. Several specific benefit requirements for QHPs also govern BHP, including the following:

  • Each plan must provide the state with its list of covered prescription drugs and meet prescription drug coverage requirements applicable to QHPs;
  • Benefit design may not be discriminatory; and
  • Federal funds may not be used for abortion services, except in the case of rape, incest, or danger to the woman’s life.2

BHP premiums3 and out-of-pocket cost-sharing levels4 may not exceed the amounts that would have been charged if BHP beneficiaries had enrolled in the so-called “reference” or “benchmark” plan—that is, the second-lowest cost silver-level QHP. These costs take into account the premium tax credits and cost-sharing reductions for which enrollees would have qualified. Accordingly, BHP premiums cannot exceed the percentages of household income shown in Table 1, which reflect the structure of premium tax credits. The cost-sharing reductions available in the marketplaces raise the actuarial value of plans to lower deductibles, co-payments, and out-of-pocket maximums. To meet these requirements, BHP actuarial values (AV) cannot fall below the levels shown in Table 2. In addition, American Indians and Alaska Natives (AI/AN) cannot be charged any cost-sharing—put differently, their standard health plans must have an actuarial value of 100%.5 While BHP consumers may not be charged more than they would have been charged in the marketplace, states can set lower premium payments and cost-sharing requirements.

As an additional protection, any BHP variations of premiums and out-of-pocket cost-sharing based on income cannot favor higher-income beneficiaries.6 Other QHP safeguards also apply, such as the prohibition against cost-sharing for preventive services.7 As with QHPs, BHP plans must accept premium and cost-sharing payments made by Ryan White programs, AI/AN organizations, and state and federal government programs.8

Table 1. Maximum Permitted Premium Charges to BHP Consumers in 2015
Income (FPL) Maximum permitted premium
<133% 2% of household income
133-149% 3% to 4% of household income (on a linear sliding scale)
150-200% 4% to 6.3% of household income (on a linear sliding scale
Source: CMS 2014. Note: These income contribution amounts do not reflect the slight increases recently announced by the IRS, which are described below.9
Table 2. Minimum Required Actuarial Value for BHP Consumers
Consumer Characteristics Actuarial Value
Up to 150% FPL 94%
151-200% FPL 87%
American Indian/Alaska Native(up to 200% FPL) 100% (no cost-sharing is permitted)
Source: CMS 2014

In one important respect, BHP consumers are exempt from a cost that can apply in marketplaces. QHP enrollees who claim advance payment of premium tax credits (APTCs) must reconcile those payments on their federal income tax returns. APTC claims, which are based on projected income for the year, are compared to PTCs based on the taxpayer’s final annual income. If the APTCs turn out to have been too high, consumers must repay some or all of the excess, through taxes owed or a reduced refund. If APTCs were too low, taxpayers can claim an additional credit on their return. Since BHP enrollees do not receive APTCs, they are not subject to tax reconciliation.

Health plans

In states adopting BHP, BHP-eligible consumers cannot receive subsidized coverage through the marketplace, and are instead covered through a “standard health plan.”10 States may contract with the following types of entities to offer standard health plans:

  • Licensed health maintenance organizations (HMO);
  • Licensed health insurers, in which case the plan’s medical loss ratio must be at least 85%;11
  • Non-licensed HMOs participating in Medicaid or CHIP; or
  • Networks of health care providers demonstrating the capacity to meet the state’s minimum required negotiating criteria for its competitive contracting process. Such networks must be “capable of meeting the provision and administration of standard health plan coverage, including but not limited to, the provision of benefits, administration of premiums and applicable cost sharing and execution of innovative features, such as care coordination and care management” and “may include but [are] not limited to: Accountable Care Organizations, Independent Physician Associations, or a large health system [sic].”12 This provider network category could allow BHP plans to include innovative health care delivery systems with alternative financing methods that seek to improve population health and quality while slowing cost growth.

As a general rule, states must assure CMS that each BHP enrollee will have a choice of standard health plans from at least two offerors. However, a state may request an exception by demonstrating that it has reviewed (1) whether it is insisting on contractual requirements beyond those needed under federal law; (2) whether additional negotiating flexibility would be consistent with statutory requirements and available funding for the BHP; and (3) whether potential bidders have received enough information to participate in the BHP.13

BHP programs must meet competitive contracting requirements, except in 2015 for states that show they are unable to do so. 14 Those requirements include standard state procurement procedures for federal grants.15 They also entail negotiation of premiums, cost-sharing, and benefits and include innovative features, such as:

  • Care coordination and care management for enrollees (especially those with chronic conditions);
  • Incentives for using preventive care; and
  • Strategies to maximize patient involvement in health care decision-making, including through incentives for appropriate utilization and provider choices.

In clarifying the meaning of “negotiation,” CMS explained that “nothing precludes a state from establishing standards that will serve as the starting point for negotiations with standard health plans offerors.” That approach would leave room for negotiation around such elements as “price [paid by the state], the provision of benefits in addition to those specified in the state’s solicitation, lower premium and cost-sharing amounts than those specified in the state’s solicitation, or any other aspects of the state’s program…”

In its plan procurement process, the state must also consider additional criteria that ensure:

  • Consideration of enrollees’ health care needs;
  • Provider networks that meet applicable standards (discussed below);
  • Managed care or similar processes to improve quality, accessibility, appropriate utilization, and efficiency of service provision;
  • Performance measures and standards related to quality and improved outcomes;
  • Coordination with other insurance affordability programs to ensure continuity of care; and
  • Fraud prevention while ensuring consumer protection.

Much like marketplace contracts with qualified health plans, state contracts with standard health plan offerors must address “network adequacy, service provision and authorization, quality and performance, enrollment procedures, disenrollment procedures, noticing and appeals, [and] provisions protecting the privacy and security of personally identifiable information.” Such contracts also need to address other requirements specified by HHS, including those involving “service delivery model[s that] further… the objectives of the program.”16

States have the option to enter into multi-state compacts to jointly contract with standard health plan offerors that serve BHP beneficiaries in more than one state. Such contracts may cover either statewide areas or specific areas within states.17

State interactions with consumers

In promulgating BHP rules, CMS gave states the option to use existing administrative structures whenever possible, to promote continuity of coverage for consumers and to simplify program administration. Accordingly, for most aspects of BHP, a state can choose between its Medicaid rules and the rules that apply in the marketplace. This flexibility applies to:

  • Criteria for health plan network adequacy, mentioned above;
  • Rules and procedures for verifying eligibility;18
  • Rules and procedures for redetermining eligibility (except as described below);19
  • Standards for authorized representatives (if the state permits their use for BHP);20
  • Standards and procedures for certified application counselors (if the state permits their use for BHP);21
  • Effective dates of eligibility;22
  • Appeals rules and procedures;23
  • Enrollment opportunities (that is, either continuous enrollment, as under Medicaid, or open and special enrollment periods no more restrictive than those used in the marketplace);24 and
  • Grace periods for late payment of premiums and coverage lock-out periods for non-payment of premiums that either (1) meet marketplace requirements, if the state uses marketplace enrollment procedures for BHP, or (2) provide grace periods lasting at least 30 days and meet CHIP lock-out requirements, if the state uses Medicaid enrollment procedures for BHP.25

Other specific consumer provisions apply to all BHPs. For example:

  • Eligibility must be redetermined every 12 months, unless it is redetermined earlier based on information received from beneficiaries or third-party data sources. Although enrollees must report changes in circumstances as if they were receiving marketplace subsidies, states have the option to provide BHP eligibility continuously based on circumstances at the time of initial application. Such continuous eligibility remains in effect regardless of changed household conditions, so long as the beneficiary remains under age 65, a state resident, and not enrolled in another form of minimum essential coverage.26 As explained below, federal BHP allotments are based on the assumption that all BHPs provide continuous eligibility.
  • States must inform potential applicants and enrollees about the BHP, including benefits, any coverage tiers used by the state, and eligibility criteria. States must require health plans to provide clear information about premiums, cost-sharing, covered services (including amount, duration, and scope limits); to make available and update at least quarterly information about currently participating providers; and to meet other consumer information requirements that apply to QHPs.27
  • States may not “discriminate based on race, color, national origin, disability, age, sex, gender identity or sexual orientation.”28
  • BHPs must use the same streamlined application form and meet the same eligibility coordination requirements that apply to other insurance affordability programs.29
  • Consumers must receive the same opportunity to apply and to receive assistance with their application that extends to Medicaid applicants.30 As with Medicaid, BHP eligibility must be determined by the state or another governmental entity to which the state delegates the authority to determine eligibility,31 and takes place within the single eligibility service that is used for all insurance affordability programs.
  • American Indian and Alaska Native consumers must receive the benefit of specified safeguards that apply to marketplaces.32
BHP Blueprint

States interested in establishing BHP must furnish CMS with a comprehensive Blueprint describing the structure and administration of the program. The BHP Blueprint provides the roadmap for how the program will operate and documents compliance with federal legal requirements. In addition to specifying the BHP’s components, the Blueprint must also include a description of how the state will ensure program integrity, an operational assessment documenting agency readiness, a transition plan if the state is proposing an alternative enrollment strategy for 2015, and a description of the qualifications and responsibilities of the BHP Trust Fund trustees and the method of their appointment. In concert with the Blueprint, states must submit a funding plan that includes enrollment and cost projections for the first year, along with any sources of funding beyond the BHP Trust Fund.33

States must seek public comment on the initial Blueprint and any significant revisions to the Blueprint prior to submission to CMS. Public comment is required for revisions that alter core program functions or make changes to the benefit package or enrollment/disenrollment policies. States are required to provide federally recognized tribes with an opportunity to provide input.34 To further promote transparency and allow public input, HHS will post the submitted Blueprint online.35

States have the option, as an initial step before submitting a complete Blueprint, to provide a more limited Blueprint that describes the BHP’s basic elements. CMS can grant interim certification of this more limited document to provide states with some certainty as they continue program development and procurement.36

States may not begin enrolling consumers into the BHP or receive federal payment until CMS provides full certification. This requires the Blueprint to provide a complete description of the program and its operations, document compliance with federal requirements, and demonstrate the integration of BHP with other insurance affordability programs to ensure seamless and coordinated coverage.37

Federal review

States operating BHPs must submit annual reports to HHS that discuss any evidence of fraud and demonstrate compliance with requirements related to:

  • Eligibility verification;
  • Limitations on the use of federal funds; and
  • Collection of quality and performance measures from all standard health plans.

The report must also address requirements specified by the Secretary and list any recommendations identified through an HHS audit or evaluation that the state has not yet implemented.38

HHS may conduct annual reviews or audits of state BHPs to identify if states have violated any BHP requirements, including those that may lead to withdrawal of the Blueprint certification. Such oversight will also assess whether any BHP trust fund monies were improperly spent.39

BHP Trust Fund

A BHP state must establish a BHP trust fund as an independent entity or as a segregated account within the state’s General Fund. All federal BHP payments must be deposited into the BHP trust fund, along with non-federal funds. The trust fund must be overseen by a Board of Trustees and only allowable expenditures—payments to standard health plans that reduce premiums or cost-sharing or provide essential or additional benefits for BHP enrollees—are permitted. 40

Sound fiscal policies must ensure accountability in the receipt and expenditures of trust fund monies, including:

  • Maintaining accounting records, including retaining records for at least three years;
  • Obtaining annual certification that BHP trust funds are being used in accordance with federal requirements;
  • Conducting an independent audit of expenditures; and
  • Publishing annual reports of BHP trust fund expenditures.41

The BHP trustees and the state must also develop policies and procedures to ensure restitution, within two years, of any BHP trust funds that may not have been properly spent. If no provision is made to restore improperly spent funds, states may be required to return those funds to HHS.42

Withdrawal and termination of BHP

A BHP may be terminated by a state or HHS. A state deciding to end BHP must submit written notice to HHS no later than 120 days before termination and include a proposed plan for transitioning consumers to other insurance affordability programs. Once a state receives approval, it is required to inform consumers and standard health plan offerors of its intention at least 90 days before the termination date. To ensure continuity of coverage, the state must transfer eligibility and verification information electronically to the marketplace or the Medicaid agency and inform consumers of their assessed eligibility for other insurance affordability programs.43

HHS may withdraw certification of a BHP Blueprint if it determines the Blueprint no longer meets applicable requirements. A state must develop a transition plan for consumers within 30 days of the withdrawal of certification by HHS.44

Introduction Federal Funding of State BHPs

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.