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Basic Health Program; Federal Funding Methodology for Program Year 2023 and Changes to the Basic Health Program Payment Notice Process rule (2023)

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The Basic Health Program; Federal Funding Methodology for Program Year 2023 and Changes to the Basic Health Program Payment Notice Process rule is a significant rule issued by the Centers for Medicare and Medicaid Services (CMS) and the U.S. Department of Health and Human Services (HHS), effective January 1, 2023, that finalizes the methodology and data sources necessary to determine Federal payment amounts for the Basic Health Program (BHP) to be made for the program year 2023, pursuant to the Patient Protection and Affordable Care Act.[1]

HIGHLIGHTS
  • Name: Basic Health Program; Federal Funding Methodology for Program Year 2023 and Changes to the Basic Health Program Payment Notice Process
  • Action: Final rule
  • Type of significant rule: Economically significant rule

    • Timeline

    The following timeline details key rulemaking activity:

    Background

    The Basic Health Program (BHP), established under the Affordable Care Act (ACA), is an option for states to offer affordable health benefits coverage to include individuals who are not eligible for Medicaid, CHIP, or employer-sponsored coverage. The funding method for BHP has evolved over the years and includes adjustments related to cost-sharing reductions, metal tier selection, and state innovation waivers.

    Summary of the rule

    The following is a summary of the rule from the rule's entry in the Federal Register:

    “ This rule finalizes the methodology and data sources necessary to determine Federal payment amounts to be made for program year 2023 to States that elect to establish a Basic Health Program under the Patient Protection and Affordable Care Act to offer health benefits coverage to low-income individuals otherwise eligible to purchase coverage through Health Insurance Exchanges.[2] ”

    Summary of provisions

    The following is a summary of the provisions from the rule's entry in the Federal Register:[1]

    “ A. Background

    In the 2023 BHP proposed rule, we proposed the methodology for how the Federal BHP payments would be calculated for program year 2023 and subsequent years until a new payment methodology is proposed and finalized, in accordance with the policy finalized in section IV of this final rule.

    We received the following comments on the background information included in the 2023 BHP proposed rule.

    Comment:

    Several commenters were supportive of the 2023 BHP payment methodology described in the 2023 BHP proposed rule.

    Response:

    We appreciate the support from these commenters. As described further in this final rule, we are finalizing the 2023 methodology as proposed in the 2023 BHP proposed rule.

    Comment:

    One commenter suggested caution regarding the adoption of BHP in new States, as the establishment of a BHP could impact affordability for individuals who remain in Marketplace coverage. Specifically, the commenter noted that adoption of a BHP could result in a loss in overall enrollment in the individual market, higher premiums for consumers with incomes above 200 percent FPL who remain in the individual market, and a potential reduction in plan choices.

    Response:

    We appreciate the comment. We believe that States should consider how a BHP would impact coverage and affordability for State residents as part of its decision to start a BHP.

    B. Overview of the Funding Methodology and Calculation of the Payment Amount

    In the 2023 BHP proposed rule, we proposed in the overview of the funding methodology to calculate the PTC and CSR as consistently as possible and in general alignment with the methodology used by Exchanges to calculate the advance payments of the PTC (APTC) and CSR, and by the Internal Revenue Service (IRS) to calculate the allowable PTC. We proposed four equations that would, if finalized, compose the overall BHP payment methodology. For specific discussions of these proposals, please refer to the 2023 BHP proposed rule (87 FR 31817 through 31819).

    We received no comments on the overview of the funding methodology included in the 2023 BHP proposed rule. Therefore, we are finalizing these policies as proposed.

    C. Federal BHP Payment Rate Cells

    In the 2023 BHP proposed rule, we proposed to continue to require that a State implementing BHP provide us 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. For each State, we proposed using rate cells that separate the BHP population into separate cells based on the following factors: age, geographic rating area, coverage status, household size, and income. For specific discussions of these proposals, please refer to the 2023 BHP proposed rule (87 FR 31819 through 31820).

    We received no comments on this aspect of the proposed methodology. Therefore, we are finalizing these policies as proposed.

    D. Sources and State Data Considerations

    In the 2023 BHP proposed rule, we proposed to continue to use, to the extent possible, data submitted to the Federal Government by QHP issuers seeking to offer coverage through an Exchange that uses HealthCare.gov to determine the Federal BHP payment cell rates. However, for States operating a State-based Exchange (SBE), which do not use HealthCare.gov, we proposed to continue to require such States to submit required data for CMS to calculate the Federal BHP payment rates in those States. For specific discussions, please refer to the 2023 BHP proposed rule (87 FR 31820 through 31821).

    We received no comments on this aspect of the proposed methodology. Therefore, we are finalizing these policies as proposed.

    E. Discussion of Specific Variables Used in Payment Equations

    In the 2023 BHP proposed rule, we proposed to use eight specific variables in the payment equations that compose the overall BHP funding methodology:

    • Reference Premium (RP)
    • Premium Adjustment Factor (PAF)
    • Population Health Factor (PHF)
    • Household Income (I)
    • Premium Tax Credit Formula (PTCF)
    • Income Reconciliation Factor (IRF)
    • Premium Trend Factor (PTF)
    • Section 1332 Waiver Factor (WF)

    For each proposed variable, we included a discussion on the assumptions and data sources used in developing the variables. We proposed to include a new factor, the WF, to account for a State operating a BHP and implementing an approved section 1332 waiver. For specific discussions, please refer to 2023 BHP proposed rule (87 FR 31821 through 31826).

    Below is a summary of the public comments we received regarding specific factors and our response.

    Comment: Several commenters were supportive of the inclusion of the WF in the payment methodology. Specifically, commenters noted this factor will result in more equitable funding for States that have chosen to operate a BHP as well as a reinsurance program under section 1332 of the ACA.

    Response: We appreciate the support from these commenters. After consideration of comments, we are finalizing the inclusion of the WF in the payment methodology as proposed.

    F. State Option To Use Prior Program Year QHP Premiums for BHP Payments

    In the 2023 BHP proposed rule, we proposed to continue to provide States operating a BHP with the option to use the 2022 QHP premiums multiplied by a premium trend factor to calculate the Federal BHP payment rates instead of using the 2023 QHP premiums. We proposed to require States to make their election for the 2023 program year within 60 days of publication of the final payment methodology. For specific discussions, please refer to the 2023 BHP proposed rule (87 FR 31827).

    We received no comments on this aspect of the proposed methodology. Therefore, we are finalizing these policies as proposed.

    G. State Option To Include Retrospective State-Specific Health Risk Adjustment in Certified Methodology

    In the 2023 BHP proposed rule, we proposed to provide States implementing BHP 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. We proposed that States would submit their optional protocol to CMS by the later of August 1, 2022, or 60 days after the publication of the final rule. We proposed that CMS would approve the protocol by December 31, 2022. For specific discussions, please refer to the 2023 BHP proposed rule (87 FR 31827 through 31828).

    We received no comments on this aspect of the methodology. Therefore, we are finalizing this policy as proposed, with one modification to the date by which CMS will approve the protocol. Because we are finalizing the 2023 payment methodology after August 1, 2022, a State electing this option must submit its operational protocol to CMS within 60 days of publication of this final rule. Because December 31, 2022, falls within 60 days of publication of this final rule, we are finalizing that CMS will review and approve the State's protocol within 60 days of receipt of the proposed protocol.

    H. Revisions to Basic Health Program Regulations

    In the 2023 BHP proposed rule, we proposed two changes related to the timing of publication of the BHP payment methodologies and correcting payment errors in § 600.610 (87 FR 31828 through 31829). Specifically, we proposed to revise § 600.610(a)(1) to provide for issuance of payment methodology that may be effective for only 1 or multiple program years, as determined by and subject to the discretion of the Secretary, beginning with the 2023 BHP payment methodology and then going forward. In addition, we proposed at § 600.610(a)(1) and (b)(1) to change the schedule of publication dates for the proposed and final BHP payment methodologies. We also proposed changes to § 600.610(c)(2)(ii) to allow retroactive adjustments to a State's payment if the payment was a result of an error in the application of the payment methodology, which would allow CMS to correct payments made to States in 2019 that were based on an incorrect value for the income reconciliation factor.

    Below is a summary of the public comments we received regarding these proposals and our responses.

    Comment: Many commenters expressed support for the regulatory changes. Specifically, one commenter noted that allowing the payment methodology to apply to multiple years will reduce administrative burden when there are no changes to the proposed payment methodology.

    Response: We appreciate the support from these commenters. As described further in this final rule, we are finalizing the regulations as proposed.

    Comment: One commenter requested clarification regarding how CMS will notify States of the annual deadlines for electing to use the current year's Marketplace premiums or the previous year's Marketplace premiums (multiplied by a trend factor) for purposes of calculating BHP payments and submitting an optional risk adjustment protocol.

    Response: To maintain consistency with the deadlines established for making these elections for previous program years, States will have until the later of May 15 of the year preceding the applicable program year or 30 days from the release of the subregulatory guidance to elect to use the current year's Marketplace premiums or the previous year's Marketplace premiums (multiplied by a trend factor) for purposes of calculating Federal BHP payments. States will have until the later of August 1 of the year preceding the applicable program year or 30 days from the release of the subregulatory guidance to submit an optional risk adjustment protocol. These dates will be included in the subregulatory guidance CMS issues.

    Comment: One commenter requested that CMS issue subregulatory guidance updating the values of factors needed to calculate Federal BHP payments by January of the year preceding the applicable benefit year.

    Response: We are unable to carry out the commenter's request because the value of the factors may not be available in time to publish subregulatory guidance annually in January. We anticipate releasing subregulatory guidance in the Spring of the year preceding the applicable benefit year to the extent possible. As discussed previously in this final rule, States will have until the later of May 15 of the year preceding the applicable program year or 30 days from the release of the subregulatory guidance to elect to use the current year's Marketplace premiums or the previous year's Marketplace premiums (multiplied by a trend factor) for purposes of calculating Federal BHP payments.

    Comment: One commenter supported the proposed regulation change that would allow CMS to correct the 2019 payments to States that were calculated based on an incorrect value for the income reconciliation factor.

    Response: We appreciate the support and are finalizing these regulation changes as proposed, with minor formatting edits. Specifically, we are separating revised § 600.610(a)(1) into § 600.610(a)(1)(i) and (ii) for improved clarity.

    After consideration of public comments received, we are finalizing these regulation changes as proposed.[2]

    		”

    [1]

    Significant impact

    See also: Significant regulatory action

    Executive Order 12866, issued by President Bill Clinton (D) in 1993, directed the Office of Management and Budget (OMB) to determine which agency rules qualify as significant rules and thus are subject to OMB review.

    Significant rules have had or might have a large impact on the economy, environment, public health, or state or local governments. These actions may also conflict with other rules or presidential priorities. Executive Order 12866 further defined an economically significant rule as a significant rule with an associated economic impact of $100 million or more. Executive Order 14094, issued by President Joe Biden (D) on April 6, 2023, made changes to Executive Order 12866, including referring to economically significant rules as section 3(f)(1) significant rules and raising the monetary threshold for economic significance to $200 million or more.[1]


    The text of the Basic Health Program; Federal Funding Methodology for Program Year 2023 and Changes to the Basic Health Program Payment Notice Process rule states that OMB deemed this rule economically significant under E.O. 12866:

    “ Based on our estimates, OMB's Office of Information and Regulatory Affairs has determined this rulemaking is “economically significant” as measured by the $100 million threshold.[2] ”

    Text of the rule

    The full text of the rule is available below:[1]

    See also

    External links

    References

    1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 [https://www.federalregister.gov/documents/2022/12/20/2022-27211/basic-health-program-federal-funding-methodology-for-program-year-2023-and-changes-to-the-basic Federal Register, "Basic Health Program; Federal Funding Methodology for Program Year 2023 and Changes to the Basic Health Program Payment Notice Process ," January 1, 2023]
    2. ↑ 2.0 2.1 2.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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