Basic Health Program; Federal Funding Methodology for Program Year 2015, 13887-13906 [2014-05257]
Download as PDF
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
Sitewide: Because the remedial
actions at all OUs are protective, the
Site is protective of human health and
the environment.
The 2012 Five-Year Review did not
identify any issues in any of the
operable units. The Final Remedial
Action Report for OU–1 was signed in
1998 and the Final Remedial Action
Report for OU–3 was signed in 2007.
EPA signed the Superfund Property
Reuse Evaluation Checklist for
Reporting the Sitewide Ready for
Anticipated Use Government
Performance and Results Act Measure in
2009.
The next Five-Year Review is
scheduled to be completed in
September 2017.
tkelley on DSK3SPTVN1PROD with RULES
Community Involvement
Leading up to the 1989 ROD, EPA
kept the community and other
interested parties apprised of the Site
activities through informational
meetings, fact sheets, press releases and
public meetings. On July 19, 1989, EPA
held a public informational meeting to
discuss the results of the Remedial
Investigation and the cleanup
alternatives presented in the Feasibility
Study, and to present the Agency’s
Proposed Plan. On August 10, 1989, the
Agency held a public hearing to accept
any oral comments about the Site.
Since the 1989 ROD, community
involvement has been low. In June 2002
EPA published a Proposed Plan to
amend the 1989 ROD. EPA held a public
information meeting on June 24, 2002,
and a formal public hearing on July 9,
2002. Only a few community members
attended the informational meeting and
none attended the public hearing. No
comments from the community were
received on the June 2002 Proposed
Plan.
EPA issued a press release on May 8,
2002, that was published in the
Kennebec Journal announcing EPA’s
first five-year review of the O’Connor
Site cleanup. The press release
encouraged public participation.
Similarly, EPA issued public notices
announcing EPA’s second and third
five-year reviews that were published in
the Kennebec Journal on May 24, 2007,
and May 25, 2012, respectively. These
notices encouraged public participation
and provided EPA contact information.
EPA will follow the procedures for
community involvement activities
associated with deletion described in
the 2011 guidance document ‘‘Close Out
Procedures for National Priorities List
Sites.’’ These include preparing a public
notice for publication in the local paper
and notification to the Natural Resource
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
Trustees of EPA’s plan to delete the Site
from the NPL.
Determination That the Site Meets the
Criteria for Deletion in the NCP
EPA Region 1 has followed the
deletion procedures required by 40 CFR
300.425(e). The implemented remedy
has achieved the degree of cleanup or
protection specified in the 1989 ROD,
1994 ESD, and 2002 ROD Amendment
for all pathways of exposure. The
activities for OU–1 remedy were
successfully completed in 1997 and the
activities for OU–3 remedy were
successfully completed in 2006. With
the 2002 Technical Impracticability
waiver, groundwater (OU–2) beyond the
TI Zone has met all cleanup standards
since 2006. Therefore, EPA has
determined, in consultation with
MEDEP, all appropriate response
actions have been implemented, and
thus a criterion for deletion has been
met.
V. Deletion Action
The EPA, with concurrence of the
State of Maine through the Maine
Department of Environmental
Protection, has determined that all
appropriate response actions under
CERCLA, other than operation,
maintenance, monitoring and five-year
reviews have been completed.
Therefore, EPA is deleting the Site from
the NPL.
Because EPA considers this action to
be noncontroversial and routine, EPA is
taking it without prior publication. This
action will be effective May 12, 2014
unless EPA receives adverse comments
by April 11, 2014. If adverse comments
are received within the 30-day public
comment period, EPA will publish a
timely withdrawal of this direct final
notice of deletion before the effective
date of the deletion, and it will not take
effect. EPA will prepare a response to
comments and continue with the
deletion process on the basis of the
notice of intent to delete and the
comments already received. There will
be no additional opportunity to
comment.
List of Subjects in 40 CFR Part 300
Environmental protection, Air
pollution control, Chemicals, Hazardous
waste, Hazardous substances,
Intergovernmental relations, Penalties,
Reporting and recordkeeping
requirements, Superfund, Water
pollution control, Water supply.
PO 00000
Frm 00015
Fmt 4700
Sfmt 4700
13887
Dated: February 27, 2014.
H. Curtis Spalding,
Regional Administrator, Region 1.
For the reasons set out in this
document, 40 CFR part 300 is amended
as follows:
PART 300—NATIONAL OIL AND
HAZARDOUS SUBSTANCES
POLLUTION CONTINGENCY PLAN
1. The authority citation for part 300
continues to read as follows:
■
Authority: 33 U.S.C. 1321(c)(2); 42 U.S.C.
9601–9657; E.O. 12777, 56 FR 54757, 3 CFR,
1991 Comp., p. 351; E.O. 12580, 52 FR 2923;
3 CFR, 1987 Comp., p. 193.
Appendix B to Part 300 [Amended]
2. Table 1 of Appendix B to part 300
is amended by removing the entry for
‘‘ME,’’ ‘‘O’Connor Co’’, ‘‘Augusta’’.
■
[FR Doc. 2014–05224 Filed 3–11–14; 8:45 am]
BILLING CODE 6560–50–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Part 600
[CMS–2380–FN]
RIN 0938–ZB12
Basic Health Program; Federal
Funding Methodology for Program
Year 2015
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final methodology.
AGENCY:
This document provides the
methodology and data sources to
determine the federal payment amounts
made to states in program year 2015 that
elect to establish a Basic Health Program
certified by the Secretary under section
1331 of the Patient Protection and
Affordable Care Act to offer health
benefits coverage to low-income
individuals otherwise eligible to
purchase coverage through Affordable
Insurance Exchanges.
DATES: Effective Date: January 1, 2015.
FOR FURTHER INFORMATION CONTACT:
Christopher Truffer, (410) 786–1264; or
Jessica Schubel, (410) 786–3032.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Table of Contents
I. Background
II. Summary of Proposed Provisions and
Analysis of and Responses to Public
Comments on the Proposed Methodology
E:\FR\FM\12MRR1.SGM
12MRR1
13888
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
tkelley on DSK3SPTVN1PROD with RULES
A. Background
B. Overview of the Funding Methodology
and Calculation of the Payment Amount
C. Required Rate Cells
D. Sources and State Data Considerations
E. Discussion of Specific Variables Used in
Payment Equations
F. Adjustments for American Indians and
Alaska Natives
G. Example Application of the BHP
Funding Methodology
H. General/Miscellaneous Comments
III. Provisions of the Final Methodology
A. Overview of the Funding Methodology
and Calculation of the Payment Amount
B. Federal BHP Payment Rate Cells
C. Sources and State Data Considerations
D. Discussion of Specific Variables Used in
Payment Equations
E. Adjustments for American Indians and
Alaska Natives
F. State Option to Use 2014 QHP Premiums
for BHP Payments
G. State Option to Include Retrospective
State-specific Health Risk Adjustment in
Certified Methodology
IV. Collection of Information Requirements
V. Regulatory Impact Statement
A. Overall Impact
B. Unfunded Mandates Reform Act
C. Regulatory Flexibility Act
D. Federalism
I. Background
The Patient Protection and Affordable
Care Act (Pub. L. 111–148, enacted on
March 23, 2010), together with the
Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152), enacted on March 30, 2010 are
collectively referred as the Affordable
Care Act. The Affordable Care Act
provides for the establishment of state
Affordable Insurance Exchanges
(Exchanges, also called the Health
Insurance Marketplace) that provide
access to affordable health insurance
coverage offered by qualified health
plans (QHPs) for most individuals under
age 65 who are not eligible for health
coverage under other federally
supported health benefits programs or
through affordable employer-sponsored
insurance coverage, and who have
incomes above 100 percent of the
federal poverty line (FPL), or whose
income is below that level but are
lawfully present non-citizens ineligible
for Medicaid because of immigration
status. Individuals enrolled through
Exchanges in coverage offered by QHPs
with incomes below 400 percent of the
FPL may qualify for the federal
premium tax credit (PTC) and federallyfunded cost-sharing reductions (CSRs)
based on their household income, to
ensure that such coverage meets certain
standards for affordability.
In the states that elect to operate a
Basic Health Program (BHP), BHP will
make affordable health benefits coverage
available for individuals under age 65
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
with household incomes between 133
percent and 200 percent of the FPL who
are not otherwise eligible for Medicaid,
the Children’s Health Insurance
Program (CHIP), or affordable employer
sponsored coverage. (For those states
that have expanded Medicaid coverage
under section 1902(a)(10)(A)(i)(VIII) of
the Act, the lower income threshold for
BHP eligibility is effectively 138 percent
due to the application of a required 5
percent income disregard in
determining the upper limits of
Medicaid income eligibility.) Federal
funding will be available for BHP based
on the amount of PTC and CSRs that
BHP enrollees would have received had
they been enrolled in QHPs through
Exchanges.
We are publishing, concurrently with
this final methodology, a final rule
entitled the ‘‘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’’ (hereinafter referred
to as the BHP final rule) implementing
section 1331 of the Affordable Care Act,
which requires the establishment of
BHP. The BHP final rule establishes the
requirements for state and federal
administration of BHP, including
provisions regarding eligibility and
enrollment, benefits, cost-sharing
requirements and oversight activities.
While the BHP final rule codifies the
overall statutory requirements and basic
procedural framework for the funding
methodology, it does not contain the
specific information necessary to
determine federal payments. We
anticipated that the methodology would
be based on data and assumptions that
would reflect ongoing operations and
experience of BHP programs as well as
the operation of the Exchanges. For this
reason, the BHP final rule specifies that
the development and publication of the
funding methodology, including any
data sources, will be addressed in a
separate annual Payment Notice
process. The BHP final rule also
specifies that the BHP Payment Notice
process will include the annual
publication of both a proposed and final
BHP Payment Notice.
II. Summary of Proposed Provisions
and Analysis of and Responses to
Public Comments on the Proposed
Methodology
The following sections, arranged by
subject area, include a summary of the
public comments that we received, and
PO 00000
Frm 00016
Fmt 4700
Sfmt 4700
our responses. For a complete and full
description of the BHP proposed
funding methodology, see the ‘‘Basic
Health Program; Proposed Federal
Funding Methodology for Program Year
2015’’ proposed document published in
the December 23, 2013 Federal Register
(78 FR 77399).
We received a total of 32 timely
comments from state agencies, groups
advocating on behalf of consumers,
health care providers, health insurers,
health care associations, Tribes, and
tribal organizations. The public
comments received ranged from general
support or opposition to the proposed
methodology to very specific questions
or comments regarding the proposed
methodological factors. In addition, we
held a consultation session on
December 19, 2013 that was open to all
interested parties, to provide an
overview of the BHP proposed funding
methodology where interested parties
were afforded an opportunity to ask
questions and make comments. At the
consultation session, participating
parties were reminded to submit written
comments before the close of the public
comment period that was specified in
the BHP proposed methodology.
A. Background
In the December 23, 2013 (78 FR
77399) proposed methodology, as
background and for contextual
purposes, we discussed the proposed
provisions from the September 25, 2013
BHP proposed rule (78 FR 77401). The
proposed document also specified the
methodology of how the federal BHP
payments would be calculated. For
specific discussions, please refer to the
December 23, 2013 proposed
methodology (78 FR 77401).
We received the following comments
on the background information included
in the proposed methodology:
Comment: One commenter expressed
support for publishing the final
Payment Notice annually in February.
Response: We thank the commenter
for their support.
Comment: Several commenters
requested that CMS provide an option
for states to have BHP payments
retrospectively reconciled for the factors
specified in statute. Specifically,
commenters requested that such a
reconciliation process use actual, statespecific data by taking into account the
state’s actual health insurance market
experience for the program year,
measure the data and payment factors in
manner agreed upon by both CMS and
the state, and perform the reconciliation
using a methodology that is generally
consistent with the methodology of the
proposed payment document.
E:\FR\FM\12MRR1.SGM
12MRR1
tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
Response: We understand the
commenters’ concern regarding the
market uncertainties in 2014 and
appreciate the recommendations to
refine the methodology to account for
such uncertainties. However, based on
initial feedback we received from
interested states, we developed the BHP
funding methodology on a prospective
basis to provide states with a level of
fiscal certainty as they consider
implementing BHP in a given program
year. Except for the population health
factor, which is discussed further below
in section III.G in this final
methodology, we have determined not
to retrospectively adjust or reconcile the
various factors that comprise the
methodology because we believe that
states operating a BHP will need to have
budget certainty in order to plan and
operate their programs.
In addition, as also discussed below,
we are revising our methodology to use
actual 2015 premium amounts to
calculate BHP funding for 2015. While
this would be part of the prospective
methodology and not a retrospective
adjustment, it would further address
some of the issues raised in these
comments.
Comment: Many commenters noted
that state-specific market conditions,
such as in Minnesota where the state’s
high-risk pool will continue to operate
in 2014, will not be reflected in the 2014
Exchange premiums but will affect the
premium rates in 2015. As such,
commenters recommended that CMS
use actual 2015 Exchange premiums to
improve the accuracy of the federal BHP
payment rates for program year 2015.
Response: In response to these
comments, and in particular because of
the various issues in the first year of
BHP implementation, we have adopted
the commenters’ recommendation and
will use actual 2015 Exchange
premiums to determine the final 2015
federal BHP payment rates in states.
Given the fact that the Exchanges are
new in 2014 and the potential for
changes in 2015, we believe that it is
appropriate to make this adjustment in
the methodology for the first year of
BHP implementation as it will improve
the accuracy of the rates. For additional
information on the process we will use
to determine the final 2015 federal BHP
payment rates, please see the additional
discussion included in section III.D.1
(reference premium) of this final
methodology.
While using actual 2015 Exchange
premiums will improve the accuracy of
the federal BHP payment rates by taking
into account certain market conditions,
we understand that, for decision making
purposes, some states may need to
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
establish budgets based on final 2015
federal BHP payment rates before actual
2015 premium information becomes
available. In such an event, we will
provide the state with the option to have
us use 2014 premium data (projected
forward to 2015) to calculate its final
2015 federal BHP payment rates. As
specified in this payment notice, a state
must notify CMS by May 15, 2014 that
it is electing this option. Upon
completing the calculation process, we
will publish the final rates for such
states in a subsequent Federal Register
notice, and use these final rates to
determine the state’s aggregate 2015
BHP federal payments, which will be
deposited into the state’s BHP trust fund
on a quarterly basis. We have amended
this final methodology by adding
section III.F to discuss this process in
further detail. If a state does not elect
this option to use 2014 Exchange
premiums for calculating final 2015
BHP federal payments, we will calculate
the payments using the 2015 premiums
and also publish those rates in the
Federal Register. Before publication, we
are available to provide technical
assistance to help the state better
estimate the potential range of 2015
BHP federal payments. Finally, as we
gain more experience in the Exchanges,
and as data becomes more readily
available, we will continue to review
the methodology, including the data
elements and other factors to further
refine future BHP funding
methodologies and improve the
accuracy of the overall result.
Comment: Several commenters
requested that CMS consider adjusting
the funding methodology during the
annual program year to ensure the
accuracy of the methodology in the
event new data becomes available. The
commenters also requested that CMS
consider adjusting the methodology and
recalculate the federal BHP payment
rates in the event that the payment rates
are determined to be inadequate and
negatively affect the participation of
standard health plan offerors.
Response: We appreciate the
commenters’ concern with respect to the
accuracy of the funding methodology as
well as their interest in ensuring robust
standard health plan offeror
participation. While the statute directs
the Secretary to adjust the payment for
any fiscal year to reflect any error in the
determination of the payment amount in
the preceding fiscal year, the statute
generally does not contemplate
retrospective adjustment to amounts
properly calculated under the certified
methodology. Instead, the statute
provides that adjustments are only made
prospectively, and only to reflect errors.
PO 00000
Frm 00017
Fmt 4700
Sfmt 4700
13889
We read that term ‘‘errors’’ to mean
mathematical errors or erroneous
enrollment numbers (which are
multiplied by the per enrollee amount
determined by the certified
methodology). While the statute does
not expressly provide for retrospective
adjustments to a certified methodology,
as discussed below we are providing an
optional process for states to propose to
include in the certified methodology a
state-specific retrospective adjustment
to reflect any disparity in BHP
population health status (a risk
adjustment) in each rate cell in
comparison to the Exchange population
that would affect the federal payment
for that population. Permitting
retrospective adjustment on this one
factor (the population health factor)
given the difficulty in arriving at a
national approach to accurately
determine this factor prospectively, in
particular due to the lack of data and
experience from the exchanges available
at the beginning of 2014.
With respect to other commenters’
concern that the federal BHP payment
rates could be so low that they would
negatively affect standard health plan
offeror participation, the federal BHP
payment is not necessarily
determinative of the contract costs for
standard health plans. The statute
provides states that elect to operate a
BHP with considerable flexibility to
control costs through a competitive
contracting process and other measures,
and to supplement federal funding with
additional state or local funding. The
state may negotiate with its standard
health plan offerors on the amount of
capitation payments, the benefits in
excess of the required essential health
benefits, and the premiums consistent
with the BHP enrollee protections. A
state does not need to structure its
standard health plan offeror payments
to align with the federal BHP payment
rate cells. A state has the flexibility to
use the same rate cell structure, mimic
the same structure that is used in other
insurance affordability programs, or
develop a new structure specifically for
BHP.
Comment: We received one comment
requesting that CMS develop statespecific BHP funding methodologies to
more accurately account for the health
status of a state’s BHP population
relative to consumers in the state’s
Exchange.
Response: We appreciate the
commenter’s interest in ensuring the
development of the most accurate
population health factor, and as such,
are revising our methodology from what
was proposed to include in the certified
methodology a temporary state-specific
E:\FR\FM\12MRR1.SGM
12MRR1
13890
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
adjustment to retrospectively adjust this
factor for 2015. This retrospective
adjustment, which would be subject to
CMS review and approval, would be
conducted to determine whether the
difference in health status between the
state’s BHP population and consumers
in the Exchange in 2015 would affect
PTC, CSRs, risk adjustment and
reinsurance payments that would have
been made had BHP enrollees been
enrolled in coverage through the
Exchange. For additional information on
this option, please refer to section III.G.
Comment: One commenter requested
that CMS clarify when the actual
reconciliation of BHP payment amounts
will occur, including the timeframes in
each quarter.
Response: We appreciate the
commenter’s interest in the payment
reconciliation process, and anticipate
providing future guidance on BHP
payment operations.
Comment: We received one comment
requesting clarification on when a state
must submit both projected and actual
enrollment data in order for CMS to
determine the prospective quarterly
federal BHP payment.
Response: For a state to receive a
prospective federal BHP payment, the
state must submit its projected BHP
enrollment 60 days before the start of
the fiscal quarter. Actual enrollment is
required no later than 60 days after a
fiscal quarter has ended. Once a state’s
BHP has been in operation for a few
fiscal quarters, we anticipate using the
state’s actual enrollment in the previous
quarter to determine the upcoming
quarter’s federal BHP payment thereby
eliminating the need for the state to
submit projected enrollment data.
tkelley on DSK3SPTVN1PROD with RULES
B. Overview of the Funding
Methodology and Calculation of the
Payment Amount
We proposed in the overview of the
funding methodology to calculate the
PTC and CSRs as consistently as
possible and in general alignment with
the methodology used by Exchanges to
calculate the advance payments of the
PTC and CSRs, and by the Internal
Revenue Service (IRS) to calculate the
final PTC. We proposed in this section
four equations that comprise the overall
BHP funding methodology. For specific
discussions, please refer to the
December 23, 2013 proposed
methodology (78 FR 77401).
We received the following comments
regarding the equations proposed to
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
calculate the PTC and CSR components
of the BHP funding methodology:
Comment: While we received support
for the two-step process to calculate the
federal BHP payment rate, one
commenter requested that CMS release
the data requirements states need to
provide information related to the BHP
risk profile so that rates are properly set
to account for risk. The commenter also
requested that CMS provide data
alternatives in the event that states
encounter difficulties in collecting the
data needed to risk adjust.
Response: We appreciate the support
for the two-step process and are
finalizing this approach as proposed in
this final methodology. As explained
further in section III.D.2 of this final
methodology, we are not requiring any
data from the states on the risk of these
populations unless a state elects to
notify CMS that it will conduct a
retrospective risk adjustment analysis in
accordance with the process set forth in
section III.G of this methodology. If the
state decides to conduct such an
analysis, it has discretion when
determining the data requirements and
any necessary alternatives; however, the
state must submit to CMS such
information as well as the proposed
methodology it intends to use during
the reconciliation process for approval
and certification. Regardless of whether
or not states elect this option, we will
continue to review this factor as we gain
more experience in the Exchanges, and
as data becomes more readily available,
to refine future BHP funding
methodologies.
Comment: One commenter requested
clarification on Equation 1. Specifically,
the commenter asked whether the
average expected PTC that all persons in
the rate cell would receive is an average
for people within a certain region, or if
this is a statewide average.
Response: The average expected PTC
that all persons in the rate cell would
receive is an average for persons within
a state’s geographic rating area, which in
most instances would be a county or
county-equivalent entity. These would
not be statewide rates.
Comment: One commenter requested
that CMS revise Equation 1 to account
for the impact of induced utilization on
the base premiums used to calculate the
advanced payment of the premium tax
credit (APTC). Such an adjustment
would account for a greater APTC value
due to the increase in health care
service utilization. The commenter
PO 00000
Frm 00018
Fmt 4700
Sfmt 4700
proposed such an adjustment to equal
1.12 divided by the average assumed
induced utilization adjustment inherent
in commercial premiums absent BHP.
Response: We do not believe that this
adjustment is appropriate. This
adjustment would be inconsistent with
how the PTC is calculated and with the
statute. In addition, we would note that
only accounting for how the presence of
the CSR may increase the average costs
for enrollees would not be appropriate,
as the CSR may also have an effect of
lowering the average costs as well (for
example, the provision of the CSR may
encourage persons with lower expected
health care costs to enroll).
Comment: Several commenters
expressed support for the PTC
calculation as it takes into account the
CSRs that are particular to American
Indians and Alaska Natives.
Response: We thank the commenters
for their support and are finalizing the
proposed provision.
Comment: Several commenters
requested that CMS reconsider applying
100 percent of the CSR that would have
been available in the Exchange to the
BHP payment methodology, as opposed
to 95 percent. Many commenters stated
that the statute provides for this
interpretation given the placement of
the comma in section 1331(d)(3)(i) of
the Affordable Care Act.
Response: We appreciate the
commenters’ concern regarding this
issue, and we have carefully considered
and reviewed the commenters’
suggestions. We have interpreted the 95
percent specified in statute to refer to
both the PTC and CSR components of
the BHP payment methodology. We
believe that applying the 95 percent to
both components of the methodology
represents the best reading of the statute
and the intent of the drafters, and we are
therefore finalizing the proposed
provision.
Comment: We received one comment
identifying a potential error in Equation
2. Specifically, the commenter believes
that the equation should read ‘‘FRAC ×
AV’’ rather ‘‘FRAC + AV.’’
Response: We appreciate the
identification of a potential error;
however, the equation, as written in the
proposed methodology, is correct. The
symbol in the proposed methodology is
the division symbol, not the addition
symbol. We have revised the display of
the formula for the sake of clarity, as
shown below.
E:\FR\FM\12MRR1.SGM
12MRR1
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
tkelley on DSK3SPTVN1PROD with RULES
C. Required Rate Cells
In this section, we proposed that a
state implementing BHP provide us
with an estimate of the number of BHP
enrollees it will enroll in the upcoming
BHP program, 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 five factors: age;
geographic rating area; coverage status;
household size; and income. For
specific discussions, please refer to the
December 23, 2013 proposed
methodology (78 FR 77403).
We received the following comments
on the proposed rate cells:
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
Comment: One commenter expressed
support in using rate cells organized by
income range to determine the aggregate
federal BHP payment. The commenter
believes that the variation in available
PTC is minimal between the high and
low points in each of the rates cells, and
the proposed approach provides for an
administratively simple way to calculate
the federal BHP payment amount. The
commenter believes that it was unclear
in the proposed methodology how the
averages in each rate cell will be
calculated, and recommended that CMS
provide states with the flexibility to
determine the average PTC within each
rate cell depending on the distribution
of its BHP population.
Response: We thank the commenter
for their support; however, we believe
that applying a uniform distribution
across income ranges within each rate
cell to determine the average PTC is the
most appropriate approach. This
approach will allow for timely
calculation of the rates, will eliminate
the risk that rate cells with a small
number of persons projected to enroll
would see the BHP payment rates
skewed, and will not require any
estimation of BHP enrollment for each
rate cell prospectively. Furthermore, we
do not believe that determining the
average PTC based on the distribution of
the BHP population would materially
change the final BHP payment.
Comment: Several commenters
expressed concern that the age bands
included in the proposed methodology
were too broad, and recommended that
CMS consider narrowing the age bands,
particularly the 21–44 age band.
Response: We appreciate these
comments, and the final BHP payment
methodology will split the proposed age
band into two separate age bands: 21–
34 and 35–44.
Comment: One commenter requested
that CMS offer as an option to states a
smaller number of rate categories,
actuarially rolled up from the
population cells, to better align with the
rate categories states already have
established in their Medicaid
information systems. The commenter
believes that such an approach would
reduce administrative burden on states
implementing BHP.
Response: We appreciate and share
the commenter’s interest in reducing the
administrative burden on states
implementing BHP. The use of distinct
rate cells is necessary to accurately
reflect the different costs of the PTCs
PO 00000
Frm 00019
Fmt 4700
Sfmt 4700
and CSRs for subcomponent population
groups that would be paid if the
individuals had been enrolled in
coverage through the Exchange. This
approach is necessary to ensure an
accurate and precise determination of
available federal funding in the absence
of reliable data on the composition of
the BHP population. At some future
point in time, when reliable data is
available about the BHP population, it
might be possible to reduce the number
of rate cells based on actuarial
projections.
These rate cells will likely differ from
the rate cells that the state uses to pay
standard health plans (to the extent that
a state uses rate cells at all), because
they are based on a different underlying
purpose. The BHP federal payment rate
cells are to determine the PTCs and
CSRs that would be paid in the absence
of a BHP, while rate cells that a state
may use for purpose of payment to
standard health plans need to reflect the
relative overall covered health care costs
of each segment of the population.
States have considerable flexibility in
determining how to pay standard health
plan offerors, and are not required to
use rate cells at all. A state may elect to
use the BHP federal payment rate cells,
may use a payment structure borrowed
from other insurance affordability
programs, or may use a payment
structure specifically designed for BHP.
D. Sources and State Data
Considerations
We proposed in this section to use, to
the extent possible, data submitted to
the federal government by QHP issuers
seeking to offer coverage through an
Exchange to determine the federal BHP
payment cell rates. However, in states
operating a State Based Exchange (SBE),
we proposed that such states submit
required data for CMS to calculate the
federal BHP payment rates in those
states. For specific discussions, please
refer to the December 23, 2013 proposed
methodology (78 FR 77404).
We received the following comments
on the data needed from SBEs to
determine the federal BHP payment
rates:
Comment: One commenter requested
that CMS permit states operating SBEs
to submit data after the January 20, 2014
deadline on a technical assistance basis.
Response: We will review 2014
premium data that is submitted on a
technical assistance basis after the
January 20, 2014 deadline to help
E:\FR\FM\12MRR1.SGM
12MRR1
ER12MR14.004
Comment: We received a comment
with respect to the premium trend factor
included in the equations. Specifically,
the commenter expressed concern that it
will not capture changes in premiums
due to non-claim issues such as
increases in premium taxes, assessment,
and Exchange user fees. The commenter
recommended that non-claim issues be
included in the equations, and that the
equations should be calculated using
only individual membership and vary
by state.
Response: The methodology does take
into account non-claim issues, as the
National Health Expenditure projections
include all plan expenses (including
administrative costs and plan taxes and
fees). We recognize that the
methodology does not use a factor
specific to individual private health
insurance premiums, but we believe this
is a reasonable estimate of future growth
of all private health insurance
premiums. We believe that the equation
reflects a consistent approach for
calculating this portion of the federal
BHP payment for all states, and note
that it incorporates state-specific values
for the adjusted reference premium and
the tobacco rating factor adjustment.
We also note that the federal 2015
BHP payment will be calculated using
the actual 2015 Exchange premiums
instead of the projected 2015 Exchange
premiums (unless a state elects to use its
2014 premium as the basis for the 2015
calculation). We believe that this
addresses the concerns raised by the
commenters that there may be
differences in the premium growth rates
across states because the calculation
will use actual Exchange premiums in
effect for the year.
13891
13892
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
provide interested states determine
preliminary 2015 federal BHP payment
rates. Because final 2015 federal BHP
payment rates will be determined using
actual 2015 premium data, states do not
need to submit 2014 premium data
unless they are interested in working
with CMS to develop preliminary
estimates of the federal BHP payments
using the 2014 data. Finally, we are also
available to provide technical assistance
to states as they collect the information
needed to complete the premium
collection tool.
tkelley on DSK3SPTVN1PROD with RULES
E. Discussion of Specific Variables Used
in Payment Equations
In this section, we proposed 11
specific variables to use in the payment
equations that comprise the overall BHP
funding methodology. For each
proposed variable, we include a
discussion on the assumptions and data
sources used in developing the
variables. For specific discussions,
please refer to the December 23, 2013
proposed methodology (78 FR 77404).
We received the following comments
on the specific variables used in the
payment equations:
1. Variable 1—Reference Premium
Comment: Several commenters
supported the assumptions used in
developing the funding methodology,
including the use of the second lowest
cost silver plan premium and lowest
cost bronze premium.
Response: We thank the commenters
for their support and are finalizing the
proposed assumptions.
Comment: While one commenter
expressed support for using the second
lowest cost silver plan as the
methodology’s reference premium, the
commenter recommended that CMS
permit the value of the second lowest
cost silver plan change in the event that
the QHP leaves the Exchange, or
enrollment in the QHP closes.
Response: While we appreciate the
commenter’s interest in ensuring that
the reference premium is reflective of
the actual second lowest cost silver plan
at a given point, we are not revising the
final methodology to incorporate the
commenter’s recommendation. We
believe that such a recommendation
would prove inconsistent with the
policy set forth in 26 CFR 1.36B–3(f)(6)
to update the payment methodology,
and subsequently the federal BHP
payment rates, in the event that the
second lowest cost silver plan used as
the reference premium changes (that is
terminates or closes enrollment during
the year).
Comment: Several commenters
requested that CMS consider using a
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
national average premium as the
reference premium in the methodology
in the event that CMS does not adjust
the methodology to use actual
premiums rather than use a reference
premium trended forward by the
premium trend factor.
Response: While we appreciate the
commenters’ recommendation, we are
not adopting the use of a national
average premium as the methodology’s
reference premium as we believe this
would be inconsistent with the
requirements in statute. Unless
otherwise notified by a state, we intend
to use the actual 2015 second lowest
cost silver plan premiums to determine
the final 2015 federal BHP payment
rates, which we believe addresses the
commenters’ concerns.
Comment: Several commenters
requested that, when calculating the
CSR component of the federal BHP
payment, CMS account for the
likelihood that American Indians and
Alaska Natives will elect to enroll in a
bronze-level QHP that would utilize the
entire PTC that would have otherwise
been available to the enrollees rather
than assuming the enrollees will select
the lowest cost bronze level QHP. The
commenter noted that while American
Indians and Alaska Natives purchasing
coverage in the Exchange will likely
select a bronze level QHP, they may not
always select the lowest cost bronze
plan.
Response: We appreciate the
commenters’ concerns about the level of
funding related to American Indians
and Alaska Natives enrolled in BHP.
With regard to comments that the
methodology assume that American
Indians and Alaska Natives who enroll
through the Exchange would choose a
QHP with a premium that is at least
equal to the value of the PTC, the
payment methodology is consistent with
this assumption.
With regard to the comments that
American Indians and Alaska Natives
who would enroll through the Exchange
may select other bronze level QHPs than
the lowest cost plan, we acknowledge
the likelihood of the selection of
different bronze level QHPs, but we
believe it is not possible to project how
these enrollees would select different
plans for 2015 (similar to the limitations
regarding the assumption of how
enrollees would select plans other than
the second lowest cost silver plan). In
addition, while there may be instances
where the value of PTC would exceed
the value of some bronze QHP
premiums, this may vary by age,
household size, household income, and
other factors; we believe this further
limits the ability to project how
PO 00000
Frm 00020
Fmt 4700
Sfmt 4700
enrollees would select different plans.
Thus, we have selected what we believe
to be an assumption that is reasonable
and results in the correct level of
funding for BHP.
2. Variable 2—Premium Trend Factor
Comment: Several commenters
requested that CMS reconsider
removing the premium trend factor from
the methodology and simply reconcile
the BHP federal payment rates using
actual 2015 second lowest cost silver
premiums. In the event that CMS will
not use actual premiums, the
commenters recommended, as an
alternative, that CMS not use the
proposed premium trend factor, but
rather develop a factor that sufficiently
offsets the artificially low 2014
Exchange premiums, or provide the
state with the option to submit a statespecific trend factor that is based on
other reliable cost and experience data.
Commenters also expressed interest in
using actual Exchange premium data to
develop the premium trend factor in
future program years.
Response: As noted in an earlier
response, and discussed further in
section III.D.1 of this final methodology,
we will determine final 2015 federal
BHP payment rates using actual 2015
premiums unless notified by a state to
calculate its payment rates with 2014
premium data. We believe that this
approach is appropriate in the first year
of BHP implementation given the
uncertainties in market conditions in
the Exchanges.
Given that we are using actual 2015
premiums, we are not adopting the
commenters’ recommendation to apply
a different premium trend factor other
than the National Health Expenditure
projection with an adjustment for the
impact of the reinsurance pool on QHP
premiums between 2014 and 2015. With
respect to commenters’ interest in the
premium trend factor that will be used
in future BHP program years, we will
use actual Exchange and BHP
experience to develop this factor for
future funding methodologies, which
will follow the Payment document
process specified in the BHP final
regulation. Publishing an annual
proposed and final Payment document
will help refine the BHP funding
methodology as we gain more
experience from the Exchanges as well
as better data that is based on actual
market conditions.
Comment: One commenter requested
that CMS provide additional
clarification on the transitional
reinsurance adjustment. The commenter
believes that the adjustment would
include a component that would be
E:\FR\FM\12MRR1.SGM
12MRR1
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
tkelley on DSK3SPTVN1PROD with RULES
equal to the percentage of costs not
covered by reinsurance recoveries in
2015 over the percentage of costs not
covered by reinsurance recoveries in
2014.
Response: We provide additional
clarification on the reinsurance
adjustment in section III.F of this final
methodology.
3. Variable 3—Population Health Factor
Comment: Several commenters
disagreed with our proposed value for
the population health factor.
Specifically, commenters believe that
the 1.00 value did not accurately reflect
the health status of potential BHP
eligible individuals in certain states. As
such, commenters requested that CMS
retrospectively adjust this factor using
either a state-specific methodology, or
the same methodology that is used to
risk adjust in the individual market.
Response: We understand the
commenters’ interest in ensuring that
the population health factor accurately
reflects the health status of BHP
individuals relative to consumers in the
Exchange. In light of the comments we
received on this issue, and, in
particular, because of the lack of
currently available data, we are
providing states with an option to
propose a methodology, as discussed
further in section III.G of this final
methodology, for CMS approval that
would retrospectively adjust for risk.
We understand that such an assessment
may be necessary to determine whether
the difference in health status between
the state’s BHP population and
consumers in the Exchange would affect
PTC, CSRs, risk adjustment and
reinsurance payments that would have
been made had BHP enrollees been
enrolled in coverage through the
Exchange.
While we are finalizing the proposed
value of the population health factor, we
would note that as additional
experience is gained in the Exchange
and more data becomes available, we
believe that this factor will be reviewed
to ensure it accurately reflects the health
status of BHP enrollees relative to
consumers in the Exchange.
Comment: While we received several
comments in support of the proposed
provision to exclude BHP from the
individual market’s risk pool, other
commenters requested that CMS
consider providing states with the
option to include BHP in its individual
market’s risk pool. Commenters also
requested that CMS permit states to
have the ability to apply aspects of the
reinsurance, risk adjustment, and risk
corridor program to BHP. Several
commenters noted that the existence of
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
the reinsurance program has likely
reduced individual market premiums,
and further emphasized the importance
of making a reinsurance payment in
BHP using the same mechanism and
conditions in the individual market.
Response: We have carefully
considered this issue and have
determined that BHP should be
excluded from the individual market
because the market reform rules under
the Public Health Service Act that were
added by Title I, Subtitles A and B of
the Affordable Care Act, such as the
requirements for guaranteed issue, and
premium rating do not apply to
standard health plans participating in
BHP. Moreover, in accordance with 45
CFR 153.234 and 45 CFR 153.20,
standard health plans operating under a
BHP are not eligible to participate in the
reinsurance program and the federallyoperated risk adjustment program. With
respect to the risk corridor program, the
statute, under section 1342 of the
Affordable Care Act, precludes standard
health plans from participation. To the
extent that a state operating a BHP
determines that, because of the riskprofile of its BHP population, standard
health plans should be included in
mechanisms that share risk, the state
would need to use other methods for
achieving this goal, such as electing to
submit a proposed methodology to
retrospectively risk adjust.
Comment: One commenter requested
that CMS consider, when developing
risk formulas, to adequately capture risk
associated with chronic and behavioral
health conditions.
Response: We appreciate the
comment, but as we are not developing
a risk adjustment between the BHP and
individual market populations for 2015,
the issue of risk associated with chronic
and behavioral health conditions does
not affect the federal BHP payment. In
the event that a state elects to propose
a risk adjustment reconciliation
methodology, we encourage the
commenter to engage with the state as
it develops such a methodology.
Comment: One commenter requested
clarification on whether the population
health factor will be based on a certain
region, or if it will be a statewide
adjustment.
Response: The population health
factor will be a state-wide adjustment
unless a state utilizes a different
approach approved by CMS in its risk
adjustment reconciliation methodology.
4. Variable 6—Income Reconciliation
Factor
Comment: Several commenters
recommended that CMS explicitly state
that the PTC repayment caps specified
PO 00000
Frm 00021
Fmt 4700
Sfmt 4700
13893
in the Affordable Care Act will be
applied to income reconciliation
process in BHP.
Response: We appreciate the
commenters’ interest in ensuring that
BHP enrollees are not subject to PTC
repayments in excess of what would
have otherwise occurred had they
enrolled in the Exchange, but want to
assure the commenters that BHP
enrollees are not subject to PTC
repayments. Repayments were
considered as we developed the income
reconciliation factor. While the
repayment caps were included in the
development of this factor, they do not
apply to BHP enrollees as there is no
individual income reconciliation
process in BHP. BHP enrollees are not
eligible to receive an advance payment
of the PTC (APTC), and as such, they are
not subject to the same income
reconciliation process as Exchange
consumers.
Comment: One commenter requested
that CMS consider the differences in the
income distribution of state BHP
populations in estimating the
reconciliation effect.
Response: We appreciate the
comment, but we believe that a national
factor is appropriate and we are
maintaining it for this year’s payment
notice. We note that there is a relatively
narrow range of incomes for BHPeligible consumers, and thus statespecific income distributions are
unlikely to have a significant impact on
the BHP payment.
Comment: Several commenters
recommended that CMS adjust the
income reconciliation factor to account
for certain eligibility and enrollment
processes. For example, the commenters
noted that if a state reviews databases
and/or requires reporting of changes in
enrollees’ income and household
composition, it would be unfair to apply
a full reconciliation factor to this state
since the income reconciliation factor
assumes no income changes in the
course of the payment year will affect
eligibility. Commenters did note that a
full reconciliation factor could be
applied if a state elected to implement
a 12-month continuous eligibility
policy.
Response: The income reconciliation
factor has been developed consistent
with the assumption that states will
adopt a continuous eligibility policy.
We do not have a basis to develop a
prospective factor if a state does not do
so, because state review and
redetermination processes will vary. We
will consider revisiting this assumption
in future years for such states, based on
available data on the effectiveness of
E:\FR\FM\12MRR1.SGM
12MRR1
13894
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
state review and redetermination
processes.
tkelley on DSK3SPTVN1PROD with RULES
5. Variable 7—Tobacco Rating
Adjustment Factor
Comment: Based on available state
data, one commenter expressed concern
that the BHP population may have
higher rates of smoking relative to the
state average. As such, the commenter
requested that CMS apply an adjustment
based on state average smoking rates.
Response: We appreciate the
comment, and intend to use statespecific tobacco usage rates by age,
based on data available from the Center
for Disease Control and Prevention,
which is described in more detail in
section III.D.6 of this final methodology.
We do not intend to make an adjustment
based on different rates of tobacco usage
by income level.
Comment: One commenter requested
that CMS provide additional detail on
how it will calculate the estimated
adjustment when calculating the CSR
and whether the tobacco adjustment
factor will be the same factor statewide,
or vary by region.
Response: The tobacco usage rates
that are a component of the tobacco
rating adjustment factor are statewide.
To the extent that the difference
between the non-tobacco and tobacco
premiums varies by geographic rating
area within the state, the tobacco rating
adjustment factor may also vary as well.
6. Variable 8—Factor to Remove
Administrative Costs
Comment: Several commenters
requested that CMS either provide states
the option to provide a state-specific
factor, or to retrospectively reconcile
using the actual medical loss ratio in the
Exchange in a given BHP program year.
Response: We appreciate the
comments, but we believe that using the
factor that we proposed to remove
administrative costs is the most
appropriate and consistent methodology
to calculate the federal BHP payment.
We would clarify that the factor to
remove administrative costs is not
precisely the same as the medical loss
ratio; the factor to remove
administrative costs also excludes
certain plan costs (such as taxes, fees,
and quality improvement activities) that
are not counted towards the total plan
revenue when calculating the medical
loss ratio. Thus, the factor to remove
administrative costs would likely be less
than the actual or target medical loss
ratios.
Comment: Several commenters
expressed concern that because states
cannot expend BHP trust funds to cover
administrative costs associated with
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
BHP operations, including this factor in
the methodology would only further
reduce the state resources needed to
support the operation of BHP.
Response: While we understand the
commenters’ concerns regarding the
availability of funding for
administrative costs, the statute does
not permit states to use BHP trust funds
for any activity beyond the expenditures
related to the provision of the standard
health plan except for lowering
premiums and cost sharing and/or
providing additional benefits. We
believe that it is appropriate to include
this factor in the funding methodology
as it is necessary to remove costs such
as taxes, fees and administrative
expenses from the reference premium in
order to determine the costs associated
with allowed health benefits.
F. Adjustments for American Indians
and Alaska Natives
Comment: Several commenters
requested that CMS provide a state with
the option to use a different induced
utilization factor if it can demonstrate
that utilization is more or less than 12
percent as a result of the CSRs.
Response: While we appreciate the
commenters’ interest in ensuring that
the methodology is developed using the
most accurate data available, we are not
adopting the commenters’
recommendation to permit such an
option to states as we believe that using
the factors developed for the 2015 HHS
Payment Notice is the most appropriate
methodology for calculating the federal
BHP payment until more experience in
BHP and the Exchange is gained and
more data become available.
We proposed to make several
adjustments for American Indians and
Alaska Natives when calculating the
CSR portion of the federal BHP payment
rate to be consistent with the Exchange
rules. For specific discussions, please
refer to the December 23, 2013 proposed
methodology (78 FR 77409).
We received the following comments
on the proposed adjustments when
calculating the CSR component for
American Indians and Alaska Natives:
Comment: Several commenters
supported our proposal to make several
adjustments for American Indians and
Alaska Natives when calculating the
CSR portion of the federal BHP payment
rate.
Response: We thank the commenters
for their support and are finalizing the
proposed provision.
Comment: Consistent with their
comments regarding the reference
premium, many commenters requested
that CMS provide states with the option
to retrospectively reconcile their federal
BHP payments using actual premiums
for the lowest cost bronze plans in the
CSR calculation for American Indians
and Alaska Natives.
Response: As discussed further in
section III.D.1 of this final methodology,
and elsewhere, we believe that it is
appropriate for the first year of BHP
implementation to determine final 2015
federal BHP payments using actual 2015
premiums, unless otherwise notified by
the state, given the market uncertainties
and the infancy of the Exchanges. Given
this, we will also use actual 2015 lowest
cost bronze plan premiums to calculate
the CSR component for American
Indians and Alaska Natives.
8. Variable 11—Changes in Actuarial
Value
G. Example Application of the BHP
Funding Methodology
Comment: One commenter requested
that CMS allow states to adjust for the
actuarial value difference based on
empirical evidence of the utilization for
a typical BHP eligible population in that
state.
Response: While we appreciate the
commenter’s interest in ensuring that
the methodology is developed using the
most accurate data available that is
based on market experience, we are not
adopting the commenter’s
recommendation to permit such an
option to states as it is not consistent
with statute. The change in actuarial
value, which determines the value of
the CSR, is specified in statute. As such,
there is no basis to make such an
adjustment based on state experience.
In this section, we included an
example of the proposed approach
described in the proposed methodology.
For specific discussions, please refer to
the December 23, 2013 proposed
methodology (78 FR 77410).
We received the following comment
on the example application of the BHP
funding methodology:
Comment: One commenter requested
clarification with respect to column 2 in
Table 2 of the proposed methodology
(78 FR 77411). Specifically, the
commenter believes that the percentages
included in the column were incorrect
and requested that the correct values be
included in the final methodology.
Response: We thank the commenter
for identifying the incorrect percentages
in Table 2 of the proposed methodology.
7. Variable 10—Induced Utilization
Factor
PO 00000
Frm 00022
Fmt 4700
Sfmt 4700
E:\FR\FM\12MRR1.SGM
12MRR1
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
tkelley on DSK3SPTVN1PROD with RULES
Because the table was simply
illustrative, we are not republishing the
table in this final methodology. The
incorrect percentages did not affect the
illustrative purpose of the Table, but the
correct values should have ranged from
3.29 to 4.00 percent, instead of 2.29 to
3.00 percent.
H. General/Miscellaneous Comments
We received the following general
comments on the proposed federal BHP
funding methodology, as well as
comments related to the BHP proposed
rule:
Comment: One commenter expressed
support for the proposed methodology
stating that CMS had struck the right
balance without making the
methodology unduly complex.
Response: We thank the commenter
for their support.
Comment: Several commenters
expressed concern that the proposed
BHP funding methodology will not
provide sufficient funding to sustain
existing state coverage programs that
provide affordable coverage to
individuals enrolled in such programs.
Response: We appreciate the
commenters’ concerns with respect to
ensuring the availability of affordable
coverage and continuing existing
programs to prevent disruptions in care;
however, the statute specifies that the
Secretary will determine the BHP
funding amount such that it equals 95
percent of the PTC and CSRs that would
have otherwise been available had BHP
enrollees received QHP coverage in an
Exchange.
Comment: Several commenters
requested that CMS consider offering
states the option of implementing risk
corridors as a means of sharing risk.
Response: We appreciate the
commenters’ interest in the
implementation of risk corridors in
BHP; to the extent that a state operating
a BHP determines that, because of the
risk-profile of its BHP population,
standard health plans should be
included in mechanisms that share risk,
the state would need to establish statespecific methods for achieving this goal,
such as proposing a risk adjustment
reconciliation methodology. Because
section 1342 of the Affordable Care Act
specifically limits the risk corridor
program to QHPs, standard health plans
operating under BHP are not eligible to
participate. As such, we are not revising
the final methodology to adopt the
commenters’ recommendation as the
document provides state flexibility in
using other methods to implement
mechanisms that share risk.
Comment: Several commenters urged
CMS to permit states to use BHP trust
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
funds to cover the administrative costs
associated with implementing BHP.
Response: This comment is outside
the scope of this final methodology;
however, we received an identical
comment on the BHP proposed rule.
The statute only permits the
expenditure of BHP trust funds to
further reduce premiums and cost
sharing and provide additional benefits
to individuals eligible for BHP; more
detail is provided in the BHP final rule.
Comment: One commenter requested
that CMS clarify whether BHP trust
funds can be used to provide benefits
beyond Essential Health Benefits (EHBs)
and to make supplemental payments to
FQHCs if such payments are not equal
to the PPS rate. The commenter also
recommended that CMS require states to
use excess funds to lower premiums and
cost sharing.
Response: This comment is outside
the scope of this final methodology;
however, we received an identical
comment on the BHP proposed rule.
The statute does provide states with the
flexibility to expend BHP trust funds to
further reduce premiums and cost
sharing and provide additional benefits
to individuals eligible for BHP; more
detail is provided in the BHP final rule.
Comment: One commenter requested
that CMS require states to align their
BHPs with existing Medicaid
regulations and program requirements
to prevent ‘‘churn’’ (that is, the
temporary shifting of low-income
individuals from one insurance
affordability program to another).
Response: This comment is outside
the scope of this final methodology;
however, please refer to specific
discussions in the BHP final rule
regarding the insurance affordability
program coordination requirements.
Comment: One commenter requested
specific guidance on the premiums and
cost sharing imposed on BHP enrollees,
including whether these amounts can
vary by income consistent with the
premiums and cost sharing imposed in
the Exchange.
Response: This comment is outside
the scope of this final methodology;
however, we received an identical
comment on the BHP proposed rule,
which is addressed further in the BHP
final rule.
Comment: One commenter requested
that CMS require states, as a condition
of payment, assure that the BHP costsharing protections applicable to
American Indians and Alaska Natives
are equivalent to those these individuals
would receive through the Exchange.
Response: This comment is outside
the scope of this final methodology;
however, we received an identical
PO 00000
Frm 00023
Fmt 4700
Sfmt 4700
13895
comment on the BHP proposed rule,
which is addressed further in the BHP
final rule.
Comment: One commenter expressed
concern that the federal regulations and
informal guidance implementing the
Exchange’s network adequacy standards
do not sufficiently acknowledge FQHC’s
importance as safety-net providers, and
recommended that CMS require the
availability of FQHC services to each
enrollee.
Response: This comment is outside
the scope of this final methodology;
however, we received an identical
comment on the BHP proposed rule,
which is addressed further in the BHP
final rule.
Comment: Several commenters
recommended that CMS require states to
include FQHCs in their standard health
plan contracts and ensure that FQHCs
receive the PPS rate for services
rendered.
Response: This comment is outside
the scope of this final methodology;
however, we received an identical
comment on the BHP proposed rule,
which is addressed further in the BHP
final rule.
III. Provisions of the Final Methodology
A. Overview of the Funding
Methodology and Calculation of the
Payment Amount
Section 1331(d)(3) of the Affordable
Care Act directs the Secretary to
consider several factors when
determining the federal BHP payment
amount, which, as specified in the
statute, must equal 95 percent of the
value of the PTC and CSRs that BHP
enrollees would have been provided
had they enrolled in a QHP through an
Exchange. Thus, the BHP funding
methodology is designed to calculate
the PTC and CSRs as consistently as
possible and in general alignment with
the methodology used by Exchanges to
calculate the advance payments of the
PTC and CSRs, and by the IRS to
calculate final PTCs. In general, we rely
on values for factors in the payment
methodology specified in statute or
other regulations as available, and we
have developed values for other factors
not otherwise specified in statute, or
previously calculated in other
regulations, to simulate the values of the
PTC and CSRs that BHP enrollees would
have received if they had enrolled in
QHPs offered through an Exchange. In
accordance with section
1331(d)(3)(A)(iii) of the Affordable Care
Act, the final funding methodology
must be certified by the Chief Actuary
of CMS, in consultation with the Office
of Tax Analysis of the Department of the
E:\FR\FM\12MRR1.SGM
12MRR1
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
tkelley on DSK3SPTVN1PROD with RULES
Treasury, as having met the
requirements of section 1331(d)(3)(A)(ii)
of the Affordable Care Act.
Section 1331(d)(3)(A)(ii) of the
Affordable Care Act specifies that the
payment determination ‘‘shall take into
account all relevant factors necessary to
determine the value of the premium tax
credits and cost-sharing reductions that
would have been provided to eligible
individuals . . . including the age and
income of the enrollee, whether the
enrollment is for self-only or family
coverage, geographic differences in
average spending for health care across
rating areas, the health status of the
enrollee for purposes of determining
risk adjustment payments and
reinsurance payments that would have
been made if the enrollee had enrolled
in a qualified health plan through an
Exchange, and whether any
reconciliation of the credit or costsharing reductions would have occurred
if the enrollee had been so enrolled.’’
The payment methodology takes each of
these factors into account.
We have developed a methodology
such that the total federal BHP payment
amount will be based on multiple ‘‘rate
cells’’ in each state. Each ‘‘rate cell’’
represents a unique combination of age
range, geographic rating area, coverage
category (for example, self-only or twoadult coverage through BHP), household
size, and income range as a percentage
of FPL. Thus, there are distinct rate cells
for individuals in each coverage
category within a particular age range
who reside in a specific geographic
rating area and are in households of the
same size and income range. We note
that for states that do not use age as a
rating factor in the individual market,
we will develop BHP payment rates to
be consistent with those states’ rating
rules. Thus, in the case of a state that
does not use age as a rating factor, the
BHP payment rates would not vary by
age.
The federal BHP payment rate for
each rate cell will be calculated in two
parts. The first part will equal 95
percent of the estimated PTC that would
have been paid if a BHP enrollee in that
rate cell had instead enrolled in a QHP
in the Exchange. The second part will
equal 95 percent of the estimated CSR
payment that would have been made if
a BHP enrollee in that rate cell had
instead enrolled in a QHP in the
Exchange. These two parts will be
added together and the total rate for that
rate cell will equal the sum of the PTC
and CSR rates.
To calculate the total federal BHP
payment, Equation (1) will be used to
calculate the estimated PTC for
individuals in each rate cell and
Equation (2) will be used to calculate
the estimated CSR payments for
individuals in each rate cell. By
applying the equations separately to rate
cells based on age, income and other
factors, we will have taken those factors
into account in the calculation. In
addition, the equations incorporate the
estimated experience of individuals in
each rate cell if enrolled in coverage
through the Exchange, taking into
account additional relevant variables.
Each of the variables in the equations is
defined in the following sections, and
further detail is provided later in this
section of the payment methodology.
In addition, we describe how we will
calculate the adjusted reference
premium (described later in this section
of the payment methodology) that is
used in Equations (1) and (2). This is
defined in Equation (3a) and Equation
(3b).
PTCa,g,c,h,i = Premium tax credit portion of
BHP payment rate
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable
category of family coverage) obtained
through BHP
h = Household size
i = Income range (as percentage of FPL)
ARPa,g,c = Adjusted reference premium
Ih,i,j = Income (in dollars per month) at each
1 percentage-point increment of FPL
j = jth percentage-point increment FPL
n = Number of income increments used to
calculate the mean PTC
PTCFh,i,j = Premium Tax Credit Formula
percentage
IRF = Income reconciliation factor
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
1. Equation 1: Estimated PTC by Rate
Cell
The estimated PTC, on a per enrollee
basis, will be calculated for each rate
2. Equation 2: Estimated CSR Payment
by Rate Cell
The CSR portion of the rate will be
calculated for each rate cell for each
state based on age range, geographic
rating area, coverage category,
household size, and income range
PO 00000
Frm 00024
Fmt 4700
Sfmt 4700
cell for each state based on age range,
geographic rating area, coverage
category, household size, and income
range. The PTC portion of the rate will
be calculated in a manner consistent
with the methodology used to calculate
the PTC for persons enrolled in a QHP,
with three adjustments. First, the PTC
portion of the rate for each rate cell will
represent the mean, or average, expected
PTC that all persons in the rate cell
would receive, rather than being
calculated for each individual enrollee.
Second, the reference premium used to
calculate the PTC (described in more
detail later in the section) will be
adjusted for BHP population health
status (and, in the case of a state that
elects to use 2014 premiums for the
basis of the BHP federal payment, for
the projected change in the premium
from the current year (that is, the year
of the final payment methodology) to
the following year, to which the rates
announced in the final payment
methodology would apply.) These
adjustments are described in Equation
(3a) and Equation (3b). Third, the PTC
will be adjusted prospectively to reflect
the mean, or average, net expected
impact of income reconciliation on the
combination of all persons enrolled in
BHP; this adjustment, as described
further below, will account for the
estimated impact on the PTC that would
have occurred had such reconciliation
been performed. Finally, the rate will be
multiplied by 95 percent, consistent
with section 1331(d)(3)(A)(i) of the
Affordable Care Act. We note that in the
situation where the average income
contribution of an enrollee would
exceed the adjusted reference premium,
we will calculate the PTC to be equal to
0 and not let the PTC be negative.
Equation (1) is defined as:
defined as a percentage of FPL. The CSR
portion of the rate will be calculated in
a manner consistent with the
methodology used to calculate the CSR
advance payments for persons enrolled
in a QHP, as described in the HHS
Notice of Benefit and Payment
Parameters for 2015 proposed rule, with
three principal adjustments. (We will
make separate calculations that include
different adjustments for American
Indian Alaska Native BHP enrollees, as
described in section III.E of this final
E:\FR\FM\12MRR1.SGM
12MRR1
ER12MR14.005
13896
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
13897
described below. Third, as explained
earlier, this equation uses an adjusted
reference premium that reflects
premiums charged to non-tobacco users,
rather than the actual premium that is
charged to tobacco users to calculate
CSR advance payments for tobacco
users enrolled in a QHP. Accordingly,
the equation includes a tobacco rating
adjustment factor that will account for
BHP enrollees’ estimated tobaccorelated health costs that are outside the
premium charged to non-tobacco-users.
Finally, the rate will be multiplied by 95
percent, as provided in section
1331(d)(3)(A)(i) of the Affordable Care
Act.
Equation (2) is defined as:
CSRa,g,c,h,i = Cost-sharing reduction subsidy
portion of BHP payment rate
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable
category of family coverage) obtained
through BHP
h = Household size
i = Income range (as percentage of FPL)
ARPa,g,c = Adjusted reference premium
TRAF = Tobacco rating adjustment factor
FRAC = Factor removing administrative costs
AV = Actuarial value of plan (as percentage
of allowed benefits covered by the
applicable QHP without a cost-sharing
reduction subsidy)
IUFh,i = Induced utilization factor
DAVh,i = Change in actuarial value (as
percentage of allowed benefits)
described in section III.F of this final
methodology, and in which case
Equation (3b) will be used). The
adjusted reference premium will be
equal to the reference premium, which
will be based on the second lowest cost
silver plan premium in 2015, multiplied
by the BHP population health factor
(described in section III.D of this final
methodology), which will reflect the
projected impact that enrolling BHPeligible individuals in QHPs on an
Exchange would have had on the
average QHP premium.
ARPa,g,c = Adjusted reference premium
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable
category of family coverage) obtained
through BHP
RPa,g,c = Reference premium
PHF = Population health factor
III.F of this final methodology), the
value of the adjusted reference premium
will be calculated using Equation (3b).
The adjusted reference premium will be
equal to the reference premium, which
would be based on the second lowest
cost silver plan premium in 2014,
multiplied by the BHP population
health factor (described in section III.D
of this final methodology), which will
reflect the projected impact that
enrolling BHP-eligible individuals in
QHPs on an Exchange would have had
on the average QHP premium, and by
the premium trend factor, which will
reflect the projected change in the
premium level between 2014 and 2015
(including the estimated impact of
changes resulting from the transitional
reinsurance program established in
section 1341 of the Affordable Care Act).
ARPa,g,c = Adjusted reference premium
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable
category of family coverage) obtained
through BHP
RPa,g,c = Reference premium
PHF = Population health factor
PTF = Premium trend factor
BHP enrollees in that cell (that is, the
number of enrollees that meet the
criteria for each rate cell) to calculate
the total monthly BHP payment. This
calculation is shown in Equation 4.
PMT = Total monthly BHP payment
PTCa,g,c,h,i = Premium tax credit portion of
BHP payment rate
CSRa,g,c,h,i = Cost-sharing reduction subsidy
portion of BHP payment rate
Ea,g,c,h,i = Number of BHP enrollees
a = Age range
g = Geographic rating area
As part of these calculations for both
the PTC and CSR components, the value
of the adjusted reference premium is
described, as specified in Equation (3a)
(except in the case of a state that elects
to use the 2014 premiums as the basis
for the federal BHP payment, as
4. Equation 4: Determination of Total
Monthly Payment for BHP Enrollees in
Each Rate Cell
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
PO 00000
Frm 00025
Fmt 4700
Sfmt 4700
c = Coverage status (self-only or applicable
category of family coverage) obtained
through BHP
h = Household size
i = Income range (as percentage of FPL)
E:\FR\FM\12MRR1.SGM
12MRR1
ER12MR14.007
ER12MR14.008
In general, the rate for each rate cell
will be multiplied by the number of
ER12MR14.006
tkelley on DSK3SPTVN1PROD with RULES
In the case of a state that elects to use
the reference premium based off of the
2014 premiums (as described in section
3. Equation 3a and Equation 3b:
Adjusted Reference Premium Variable
(Used in Equations 1 and 2)
ER12MR14.009
methodology.) For the first adjustment,
the CSR rate, like the PTC rate, will
represent the mean, or average, expected
CSR subsidy that would be paid on
behalf of all persons in the rate cell,
instead of the CSR subsidy being
calculated for each individual enrollee.
Second, this calculation will be based
on the adjusted reference premium, as
13898
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
tkelley on DSK3SPTVN1PROD with RULES
B. Federal BHP Payment Rate Cells
We will require that a state
implementing BHP provide us an
estimate of the number of BHP enrollees
it projects will enroll in the upcoming
BHP program year, by applicable rate
cell, prior to the first quarter of program
operations. Upon our approval of such
estimates as reasonable, the estimates
will be used to calculate the prospective
payment for the first and subsequent
quarters of program operation until the
state has provided us actual enrollment
data. These data will be required to
calculate the final BHP payment
amount, and make any necessary
reconciliation adjustments to the prior
quarters’ prospective payment amounts
due to differences between projected
and actual enrollment. Subsequent
quarterly deposits to the state’s trust
fund will be based on the most recent
actual enrollment data submitted to us.
Procedures will ensure that federal
payments to a state reflect actual BHP
enrollment during a year, within each
applicable category, and prospectively
determined federal payment rates for
each category of BHP enrollment, with
such categories defined in terms of age
range, geographic rating area, coverage
status, household size, and income
range, as explained above.
We will require the use of certain rate
cells as part of the federal BHP payment
methodology. For each state, we will
use rate cells that separate the BHP
population into separate cells based on
the following five factors:
Factor 1—Age: We will separate
enrollees into rate cells by age, using the
following age ranges that capture the
widest variations in premiums under
HHS’s Default Age Curve: 1
• Ages 0–20.
• Ages 21–34.
• Ages 35–44.
• Ages 45–54.
1 This curve is used to implement the Affordable
Care Act’s 3:1 limit on age-rating in states that do
not create an alternative rate structure to comply
with that limit. The curve applies to all individual
market plans, both within and outside the
Exchange. The age bands capture the principal
allowed age-based variations in premiums as
permitted by this curve. More information can be
found at https://www.cms.gov/CCIIO/Resources/
Files/Downloads/market-reforms-guidance-2-252013.pdf. Both children and adults under age 21 are
charged the same premium. For adults age 21–64,
the age bands in this methodology divide the total
age-based premium variation into the three most
equally-sized ranges (defining size by the ratio
between the highest and lowest premiums within
the band) that are consistent with the age-bands
used for risk-adjustment purposes in the HHSDeveloped Risk Adjustment Model. For such age
bands, see Table 5, ‘‘Age-Sex Variables,’’ in HHSDeveloped Risk Adjustment Model Algorithm
Software, May 7, 2013, https://www.cms.gov/CCIIO/
Resources/Regulations-and-Guidance/Downloads/
ra_tables_04_16_2013xlsx.xlsx.
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
• Ages 55–64.
Factor 2—Geographic rating area: For
each state, we will separate enrollees
into rate cells by geographic rating areas
within which a single reference
premium is charged by QHPs offered
through the state’s Exchange. Multiple,
non-contiguous geographic rating areas
may be incorporated within a single
cell, so long as those areas share a
common reference premium.2
Factor 3—Coverage status: We will
separate enrollees into rate cells by
coverage status, reflecting whether an
individual is enrolled in self-only
coverage or persons are enrolled in
family coverage through BHP, as
provided in section 1331(d)(3)(A)(ii) of
the Affordable Care Act. Among
recipients of family coverage through
BHP, separate rate cells, as explained
below, will apply based on whether
such coverage involves two adults alone
or whether it involves children.
Factor 4—Household size: We will
separate enrollees into rate cells by
household size that states use to
determine BHP enrollees’ income as a
percentage of the FPL under proposed
42 CFR 600.320. We will require
separate rate cells for several specific
household sizes. For each additional
member above the largest specified size,
we will publish instructions on how we
will calculate the appropriate payment
rate based on data for the rate cell with
the closest specified household size. We
will publish rates for separate rate cells
for household sizes 1, 2, 3, 4, and 5, as
unpublished analyses of American
Community Survey data conducted by
the Urban Institute (which take into
account unaccepted offers of employersponsored insurance, as well as income,
Medicaid and CHIP eligibility,
citizenship and immigration status, and
current health coverage status) find that
less than 1 percent of all BHP-eligible
persons live in households of size 5 or
greater.
Factor 5—Income: For households of
each applicable size, we will create
separate rate cells by income range, as
a percentage of FPL. The PTC that a
person would receive if enrolled in a
QHP varies by income, both in level and
as a ratio to the FPL, and the CSR varies
by income as a percentage of FPL. Thus,
separate rate cells will be used to
2 For example, a cell within a particular state
might refer to ‘‘County Group 1,’’ ‘‘County Group
2,’’ etc., and a table for the state would list all the
counties included in each such group. These
geographic areas are consistent with the geographic
rating areas established under the 2014 Market
Reform Rules. They also reflect the service area
requirements applicable to qualified health plans,
as described in 45 CFR § 155.1055, except that
service areas smaller than counties are addressed as
explained below.
PO 00000
Frm 00026
Fmt 4700
Sfmt 4700
calculate federal BHP payment rates to
reflect different bands of income
measured as a percentage of FPL. We
will use the following income ranges,
measured as a ratio to the FPL:
• 0 to 50 percent of the FPL.
• 51 to 100 percent of the FPL.
• 101 to 138 percent of the FPL.3
• 139 to 150 percent of the FPL.
• 151 to 175 percent of the FPL.
• 176 to 200 percent of the FPL.
These rate cells will only be used to
calculate the federal BHP payment
amount. A state implementing BHP is
not be required to use these rate cells or
any of the factors in these rate cells as
part of the state payment to the standard
health plans participating in BHP or to
help define BHP enrollees’ covered
benefits, premium costs, or out-ofpocket cost-sharing levels.
We will use the calculated rate for
each rate cell to determine the federal
BHP payment, rather than varying such
rates to correspond to each individual
BHP enrollee’s age and income level.
We believe that the proposed approach
will increase the administrative
feasibility of making federal BHP
payments and provide an accurate and
reasonable methodology for calculating
the total federal BHP payment. We
believe that this approach should not
significantly change federal payment
amounts, as within applicable ranges,
the BHP-eligible population is
distributed relatively evenly.
C. Sources and State Data
Considerations
To the extent possible, we will use
data submitted to the federal
government by QHP issuers seeking to
offer coverage through an Exchange to
perform the calculations that determine
federal BHP payment cell rates.
States operating a State Based
Exchange (SBE) in the individual
market, however, must provide certain
data, including premiums for second
lowest cost silver plans, by geographic
rating area, in order for CMS to calculate
the federal BHP payment rates in those
states. An SBE state interested in
obtaining the applicable federal BHP
payment rates for its state must submit
such data accurately, completely, and as
specified by CMS, by no later than
November 1, 2014, in order for CMS to
calculate the applicable rates for 2015.
If additional state data (that is, in
addition to the second lowest cost silver
plan premium data) are needed to
determine the federal BHP payment
3 The three lowest income ranges would be
limited to lawfully present immigrants who are
ineligible for Medicaid because of immigration
status.
E:\FR\FM\12MRR1.SGM
12MRR1
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
rate, such data must be submitted in a
timely manner, and in a format
specified by CMS to support the
development and timely release of
annual BHP payment notices. The
specifications for data collection to
support the development of BHP
payment rates for 2015 will be
published in a separate CMS notice.
If a state operating a SBE provides the
necessary data accurately, completely,
and as specified by CMS, but after the
date specified above, we anticipate
publishing federal payment rates for
such a state in a subsequent Payment
Notice. As noted in the BHP proposed
rule, a state may elect to implement its
BHP after a program year has begun. In
such an instance, we propose that the
state, if operating a SBE, submit its data
no later than 30 days after the Blueprint
submission for CMS to calculate the
applicable federal payment rates. We
further propose that the BHP Blueprint
itself must be submitted for Secretarial
certification with an effective date of no
sooner than 120 days after submission
of the BHP Blueprint. In addition, the
state must ensure that its Blueprint
include a detailed description of how
the state will coordinate with other
insurance affordability programs to
transition and transfer BHP-eligible
individuals out of their existing QHP
coverage, consistent with the
requirements set forth in proposed in 42
CFR 600.330 and 600.425. We believe
that this 120-day period is necessary to
establish the requisite administrative
structures and ensure that all statutory
and regulatory requirements are
satisfied.
tkelley on DSK3SPTVN1PROD with RULES
D. Discussion of Specific Variables Used
in Payment Equations
1. Reference Premium (RP)
To calculate the estimated PTC that
would be paid if individuals enrolled in
QHPs through the Exchange, we must
calculate a reference premium (RP)
because the PTC is based, in part, on the
premiums for the second lowest cost
silver plan as explained in section II.C.5
of this final methodology regarding the
Premium Tax Credit Formula (PTCF).
Accordingly, for the purposes of
calculating the BHP payment rates, the
reference premium, in accordance with
26 U.S.C. 36B(b)(3)(C), is defined as the
adjusted monthly premium for an
applicable second lowest cost silver
plan. The applicable second lowest cost
silver plan is defined in 26 U.S.C.
36B(b)(3)(B) as the second lowest cost
silver plan of the individual market in
the rating area in which the taxpayer
resides, which is offered through the
same Exchange. We will use the
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
adjusted monthly premium for an
applicable second lowest cost silver
plan in 2015 as the reference premium
(except in the case of a state that elects
to use the 2014 premium as the basis for
the federal BHP payment, as described
in section III.F of this final
methodology).
The reference premium will be the
premium applicable to non-tobacco
users. This is consistent with the
provision in 26 U.S.C. 36B(b)(3)(C) that
bases the PTC on premiums that are
adjusted for age alone, without regard to
tobacco use, even for states that allow
insurers to vary premiums based on
tobacco use pursuant to 42 U.S.C.
300gg(a)(1)(A)(iv).
Consistent with the policy set forth in
26 CFR 1.36B–3(f)(6) to calculate the
PTC for those enrolled in a QHP through
an Exchange, we will not update the
payment methodology, and
subsequently the federal BHP payment
rates, in the event that the second
lowest cost silver plan used as the
reference premium changes (that is,
terminates or closes enrollment during
the year).
The applicable second lowest cost
silver plan premium will be included in
the BHP payment methodology by age
range, geographic area, and self-only or
applicable category of family coverage
obtained through BHP.
American Indians and Alaska Natives
are eligible for a full cost sharing
subsidy regardless of the plan they
select. We assume that American
Indians and Alaska Natives would be
more likely to enroll in bronze plans as
a result; thus, for American Indian/
Alaska Native BHP enrollees, we will
use the lowest cost bronze plan as the
basis for the reference premium for the
purposes of calculating the CSR portion
of the federal BHP payment as described
further in section III.E of this final
methodology.
The applicable age bracket will be one
dimension of each rate cell. We have
assumed a uniform distribution of ages
and will estimate the average premium
amount within each rate cell. We
believe that assuming a uniform
distribution of ages within these ranges
is a reasonable approach and would
produce a reliable determination of the
PTC and CSR components. We also
believe this approach would avoid
potential inaccuracies that could
otherwise occur in relatively small
payment cells if age distribution were
measured by the number of persons
eligible or enrolled. We will also use the
same geographic rating areas as
specified for the Exchanges in each state
within which the same second lowest
cost silver level premium is charged.
PO 00000
Frm 00027
Fmt 4700
Sfmt 4700
13899
Although plans are allowed to serve
geographic rating areas smaller than
counties after obtaining our approval,
for purposes of defining BHP payment
rate cells, no geographic area will be
smaller than a county. We do not
believe that this assumption will have a
significant impact on federal payment
levels and it would likely simplify both
the calculation of BHP payment rates
and the operation of BHP.
Finally, in terms of the coverage
category, federal payment rates will
only recognize self-only and two-adult
coverage, with exceptions that account
for children who are potentially eligible
for BHP. First, in states that set the
upper income threshold for children’s
Medicaid and CHIP eligibility below
200 percent of FPL (based on modified
adjusted gross income), children in
households with incomes between that
threshold and 200 percent of FPL would
be potentially eligible for BHP.
Currently, the only states in this
category are Arizona, Idaho, and North
Dakota.4 Second, BHP would include
lawfully present immigrant children
with incomes at or below 200 percent of
FPL in states that have not exercised the
option under the sections
1903(v)(4)(A)(ii) and 2107(e)(1)(E) of the
Social Security Act (the Act) to qualify
all otherwise eligible, lawfully present
immigrant children for Medicaid and
CHIP. States that fall within these
exceptions would be identified based on
their Medicaid and CHIP State Plans,
and the rate cells would include
appropriate categories of BHP family
coverage for children. In other states,
BHP eligibility will generally be
restricted to adults, since children who
are citizens or lawfully present
immigrants and who live in households
with incomes at or below 200 percent of
FPL will qualify for Medicaid or CHIP
and thus be ineligible for BHP under
section 1331 (e)(1)(C) of the Affordable
Care Act, which limits BHP to
individuals who are ineligible for
minimum essential coverage (as defined
in section 5000A(f) of the Internal
Revenue Code of 1986).
2. Population Health Factor (PHF)
We considered including an explicit
population health factor in each rate cell
that varies based on the characteristics
of BHP enrollees within that cell, but we
are not proposing such a variable, for
several reasons. We believe that because
BHP-eligible consumers’ are eligible to
enroll in QHPs in 2014, the 2014 QHP
premiums already account for the health
status of BHP-eligible consumers, as
4 CMCS. ‘‘State Medicaid and CHIP Income
Eligibility Standards Effective January 1, 2014.’’
E:\FR\FM\12MRR1.SGM
12MRR1
tkelley on DSK3SPTVN1PROD with RULES
13900
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
explained in further detail below. Also,
the function of this factor is to provide
a reference premium amount that
reflects the premiums that QHPs would
have charged without the
implementation of BHP, taking into
account both the risk profile of BHPeligible consumers in the state and the
operation of risk-adjustment and
reinsurance mechanisms in the
Exchanges. Our proposed approach to
the population health factor seeks to
achieve this goal based on the
characteristics of the state’s BHP-eligible
consumers as a whole.
In the BHP proposed rule, we
described in preamble what we believe
to be the most appropriate approach to
account for potential differences in
health status between BHP enrollees
and consumers in the individual
market, including those obtaining
coverage through the Exchange—that is,
including a risk adjustment factor in the
BHP funding methodology. We believe
that it is appropriate to consider
whether or not to develop a population
health adjustment to account for
potential differences in health status
between persons eligible for BHP and
those enrolled in the individual market,
as the two populations may not have the
same average health status.
Accordingly, we have considered
applying a population-wide adjustment
for health status in the BHP payment
calculation to account for the impact on
a state’s Exchange premiums, hence the
PTC and the value of CSRs, of changes
to average risk levels in the state’s
individual market that result from BHP
implementation. Our proposed
approach to the adjustment for
population health status seeks to have
the federal BHP payment reflect the
premium that would have been charged
if BHP-eligible consumers were allowed
to purchase QHPs in their state’s
Exchange, rather than the premium that
is being charged in the Exchange
without the inclusion of BHP
consumers. This factor would be greater
than 1.00 if BHP enrollees in a state are,
on average, in poorer health status than
those covered through the state’s
individual market, and thus Exchange
premiums would have been higher had
the state not implemented BHP. This
factor would be less than 1.00 if BHP
enrollees in a state are, on average, in
better health status than those covered
through the state’s individual market,
and thus Exchange premiums would
have been lower if the state had not
implemented BHP.
We proposed that the population
health adjustment for the 2015 BHP
program year would equal 1.00. Most
BHP-eligible consumers will be able to
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
purchase coverage in the individual
market during 2014, or the
‘‘measurement year’’—that is, the year
that precedes implementation of BHP
and that provides the basis for
estimating unadjusted reference
premiums; thus, making no adjustment
to the premiums for differences in BHPeligible enrollees’ health would be
appropriate. As a result, BHP-eligible
consumers’ health status is already
included in the premiums that would be
used to calculate the federal BHP
payment rates.
In states where significant numbers of
BHP-eligible persons are covered
outside of the individual market in
2014, it may be possible to estimate
differences in expected health status
between persons who are eligible for
BHP and persons otherwise eligible for
coverage in the individual market.
However, we believe that the different
levels of federal subsidies based on
household income for coverage for
persons enrolled in a QHP through an
Exchange may have a substantial
influence on the participation rate of
enrollees. This may result in relatively
healthier persons with higher levels of
subsidies enrolling in coverage, and this
effect may partially or entirely offset
some other differences in the health
status between BHP-eligible persons and
those otherwise covered in the
individual market.
On the Exchanges, premiums in most
states will vary based on age, which
research has shown is directly
correlated to average health cost.
Because the reference premium used to
calculate BHP federal payment rates
will vary by age, some of the difference
in average health costs would be
addressed by this approach to
calculating the BHP payment. However,
this does not further simplify the task of
estimating the remaining adjustment
needed to compensate for any impact of
BHP implementation on average risk
levels in the state’s individual market.
Given these analytic challenges, the
existing role played by age-rated
premiums in compensating for risk, and
the limited data about Exchange
coverage and the characteristics of BHPeligible consumers that will available by
the time we establish federal payment
rates for 2015, we believe that the most
appropriate adjustment for 2015 would
be 1.00, including in states that cover
BHP-eligible persons outside the
individual market in 2014. In the event
that states believe this adjustment is not
reflective of the health status of their
BHP populations, we are providing
states with the option, as described
further in section III.G, to include a
retrospective population health status
PO 00000
Frm 00028
Fmt 4700
Sfmt 4700
adjustment in the certified
methodology, which is subject to CMS
review and approval. Regardless of
whether a state elects to include a
retrospective population health status
adjustment, we anticipate that, in future
years, when additional data become
available about Exchange coverage and
the characteristics of BHP enrollees, we
may estimate this factor differently.
Finally, while the statute requires
consideration of risk adjustment
payments and reinsurance payments
insofar as they would have affected the
PTC and CSRs that would have been
provided to BHP-eligible individuals
had they enrolled in QHPs, this does not
mean that a BHP program’s standard
health plans receive such payments. As
explained in the BHP final rule, BHP
standard health plans are not included
in the risk adjustment program operated
by HHS on behalf of states. Further,
standard health plans do not qualify for
payments from the transitional
reinsurance program established under
section 1341 of the Affordable Care
Act.5 To the extent that a state operating
a BHP determines that, because of the
distinctive risk profile of BHP-eligible
consumers, BHP standard health plans
should be included in mechanisms that
share risk with other plans in the state’s
individual market, the state would need
to use other methods for achieving this
goal.
3. Income (I)
Household income is a significant
determinant of the amount of the PTC
and CSRs that are provided for persons
enrolled in a QHP through the
Exchange. Accordingly, the BHP
payment methodology incorporates
income into the calculations of the
payment rates through the use of
income-based rate cells. We are defining
income in accordance with the
definition of modified adjusted gross
income in 26 U.S.C. 36B(d)(2)(B) and
consistent with the definition in 45 CFR
155.300. Income will be measured
relative to the FPL, which is updated
periodically in the Federal Register by
the Secretary of Health and Human
Services under the authority of 42
U.S.C. 9902(2), based on annual changes
in the consumer price index for all
urban consumers (CPI–U). In this
methodology, household size and
income as a percentage of FPL would be
5 See 45 CFR 153.400(a)(2)(iv) (BHP standard
health plans are not required to submit reinsurance
contributions), 153.20 (definition of ‘‘Reinsuranceeligible plan’’ as not including ‘‘health insurance
coverage not required to submit reinsurance
contributions’’), § 153.230(a) (reinsurance payments
under the national reinsurance parameters are
available only for ‘‘Reinsurance-eligible plans’’).
E:\FR\FM\12MRR1.SGM
12MRR1
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
used as factors in developing the rate
cells. We will use the following income
ranges measured as a percentage of
FPL: 6
• 0–50 percent.
• 51–100 percent.
• 101–138 percent.
• 139–150 percent.
• 151–175 percent.
• 176–200 percent.
We will assume a uniform income
distribution for each federal BHP
payment cell. We believe that assuming
a uniform income distribution for the
income ranges proposed would be
reasonably accurate for the purposes of
calculating the PTC and CSR
components of the BHP payment and
would avoid potential errors that could
result if other sources of data were used
to estimate the specific income
distribution of persons who are eligible
for or enrolled in BHP within rate cells
that may be relatively small. Thus,
when calculating the mean, or average,
PTC for a rate cell, we will calculate the
value of the PTC at each one percentage
point interval of the income range for
each federal BHP payment cell and then
calculate the average of the PTC across
all intervals. This calculation will rely
on the PTC formula described below.
As the PTC for persons enrolled in
QHPs would be calculated based on
their income during the open
enrollment period, and that income
would be measured against the FPL at
that time, we will adjust the FPL by
multiplying the FPL by a projected
increase in the CPI–U between the time
that the BHP payment rates are
published and the QHP open enrollment
period, if the FPL is expected to be
updated during that time. In that case,
the projected increase in the CPI–U
would be based on the intermediate
inflation forecasts from the most recent
OASDI and Medicare Trustees Reports.7
4. Premium Tax Credit Formula (PTCF)
In Equation 1, we will use the formula
described in 26 U.S.C. 36B(b) to
calculate the estimated PTC that would
be paid on behalf of a person enrolled
in a QHP on an Exchange as part of the
BHP payment methodology. This
formula is used to determine the
amount of premium that an individual
or household would be required to pay
if they had enrolled in the SLCSP on an
Exchange, which is based on (A) the
household income; (B) the household
income measured as a percentage of
FPL; and (C) the schedule specified in
26 U.S.C. 36B(b)(3)(A) and shown
below. The difference between the
amount of premium a person or a
household is required to pay and the
adjusted monthly premium for the
13901
applicable second lowest cost silver
plan is the amount of the PTC that
would be allowed to the enrollee.
The PTC amount provided for a
person enrolled in a QHP through an
Exchange is calculated in accordance
with the methodology described in 26
U.S.C. 36B(b)(2) as the amount equal to
the lesser of: (A) The monthly premiums
for such month of one or more QHPs
offered in the individual market within
a state that cover the taxpayer, the
taxpayer’s spouse, or any dependent (as
defined in 26 U.S.C. 152) of the taxpayer
and that the taxpayer and spouse or
dependents were enrolled in through an
Exchange; or (B) the excess (if any) of
(i) the adjusted monthly premium for
such month for the applicable second
lowest cost silver plan for the taxpayer
over (ii) an amount equal to 1⁄12 of the
product of the applicable percentage
(described below) and the taxpayer’s
household income for the taxable year.
The applicable percentage is defined
in 26 U.S.C. 36B(b)(3)(A) and 26 CFR
1.36B–3(g) as the percentage that
applies to a taxpayer’s household
income that is within an income tier
specified in the table, increasing on a
sliding scale in a linear manner from an
initial premium percentage to a final
premium percentage specified in the
table (see Table 1):
TABLE 1—HOUSEHOLD’S CONTRIBUTION TO HEALTH INSURANCE PREMIUM AS A PERCENTAGE OF INCOME
In the case of household income (expressed as a percent of poverty line) within the following income
tier:
The initial
premium
percentage is—
Up to 133% ..................................................................................................................................................
133% but less than 150% ...........................................................................................................................
150% but less than 200% ...........................................................................................................................
200% but less than 250% ...........................................................................................................................
250% but less than 300% ...........................................................................................................................
300% but not more than 400% ...................................................................................................................
tkelley on DSK3SPTVN1PROD with RULES
These are the applicable percentages
for CY 2015. The applicable percentages
will be updated in future years in
accordance with 26 U.S.C.
36B(b)(3)(A)(ii).
5. Income Reconciliation Factor (IRF)
For persons enrolled in a QHP
through an Exchange who receive
APTC, there will be an annual
reconciliation following the end of the
year to compare such payment to the
correct amount of PTC based on
household circumstances shown on the
federal income tax return. Any
difference between the latter amounts
6 These income ranges and this analysis of
income apply to the calculation of the PTC. Many
fewer income ranges and a much simpler analysis
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
2.0
3.0
4.0
6.3
8.05
9.5
The final
premium
percentage is—
2.0
4.0
6.3
8.05
9.5
9.5
and the credit received during the year
would either be paid to the taxpayer (if
the taxpayer received less in APTC than
her or she was entitled to receive) or
charged to the taxpayer as additional tax
(if the taxpayer received more in APTC
than he or she was entitled to receive,
subject to any limitations in statute or
regulation), as provided in 26 U.S.C.
36B(f).
Section 1331(e)(2) of the Affordable
Care Act specifies that individuals
enrolled in BHP may not be treated as
a qualified individual under section
1312 eligible for enrollment in a QHP
offered through an Exchange. Therefore,
BHP enrollees are not eligible to receive
an APTC to purchase coverage in the
Exchange. Because they do not receive
APTC, BHP enrollees are not subject to
the same income reconciliation as
Exchange consumers. Nonetheless, there
may still be differences between a BHP
enrollee’s household income reported at
the beginning of the year and the actual
income over the year. These may
include small changes (reflecting
changes in hourly wage rates, hours
worked per week, and other fluctuations
in income during the year) and large
apply in determining the value of CSRs, as specified
below.
7 See Table IV A1 from the 2013 reports in https://
www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/Reports
TrustFunds/Downloads/TR2013.pdf.
PO 00000
Frm 00029
Fmt 4700
Sfmt 4700
E:\FR\FM\12MRR1.SGM
12MRR1
tkelley on DSK3SPTVN1PROD with RULES
13902
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
changes (reflecting significant changes
in employment status, hourly wage
rates, or substantial fluctuations in
income). There may also be changes in
household composition. Thus, we
believe that using unadjusted income as
reported prior to the BHP program year
may result in calculations of estimated
PTC that are inconsistent with the
actual incomes of BHP enrollees during
the year. Even if the BHP program
adjusts household income
determinations and corresponding
claims of federal payment amounts
based on household reports during the
year or data from third-party sources,
such adjustments may not fully capture
the effects of tax reconciliation that BHP
enrollees would have experienced had
they been enrolled in a QHP through an
Exchange and received APTC.
Therefore, we are including an
income adjustment factor in Equation 1
that would account for the difference
between calculating estimated PTC
using: (a) Income relative to FPL as
determined at initial application and
potentially revised mid-year, under
proposed 42 CFR 600.320, for purposes
of determining BHP eligibility and
claiming federal BHP payments; and (b)
actual income relative to FPL received
during the plan year, as it would be
reflected on individual federal income
tax returns. This adjustment will
prospectively estimate the average effect
of income reconciliation aggregated
across the BHP population had those
BHP enrollees been subject to tax
reconciliation after receiving APTC for
coverage provided through QHPs. For
2015, the reconciliation effects are based
on tax data for 2 years, reflecting income
and tax unit composition changes over
time among BHP-eligible individuals.
This estimate has been developed by the
Office of Tax Analysis (OTA) at the
Department of the Treasury.
The OTA maintains a model that
combines detailed tax and other data,
including Exchange enrollment and PTC
claimed, to project Exchange premiums,
enrollment, and tax credits. For each
enrollee, this model compares the APTC
estimated at the point of enrollment
with the PTC based on household
income and family size reported at the
end of the tax year. The former reflects
the determination using enrollee
information furnished by the applicant.
The latter would reflect the PTC
eligibility based on information on the
tax return, which would have been
determined if the individual had not
enrolled in BHP. The ratio of the
reconciled PTC to the initial
determination of PTC will be used as
the income reconciliation factor in
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
Equation (1) for estimating the PTC
portion of the BHP payment rate.
For 2015, OTA has estimated that the
income reconciliation factor for states
that have implemented the Medicaid
eligibility expansion to cover adults up
to 133 percent of the FPL will be 94.52
percent, and for states that have not
implemented the Medicaid eligibility
expansion and do not cover adults up to
133 percent of the FPL will be 95.32
percent. Given that a state may
implement the Medicaid eligibility
expansion at any time during the year,
and potentially after BHP payment rates
have been developed, we will use the
average of these two factors (94.92
percent) for 2015.
6. Tobacco Rating Adjustment Factor
(TRAF)
As described above, the reference
premium is estimated, for purposes of
determining both the PTC and related
federal BHP payments, based on
premiums charged for non-tobacco
users, including in states that allow
premium variations based on tobacco
use, as provided in 42 U.S.C.
300gg(a)(1)(A)(iv). In contrast, as
proposed in the HHS Notice of Benefit
and Payment Parameters for 2015, the
CSR advance payments are based on the
total premium for a policy, including
any adjustment for tobacco use.
Accordingly, we will incorporate a
tobacco rating adjustment factor into
Equation 2 that reflects the average
percentage increase in health care costs
that results from tobacco use among the
BHP-eligible population and that would
not be reflected in the premium charged
to non-users, subject to the tobacco
rating factor adjustments allowed by
each state. This factor will also take into
account the estimated proportion of
tobacco users among BHP-eligible
consumers.
To estimate the average effect of
tobacco use on health care costs (not
reflected in the premium charged to
non-users), we will calculate the ratio
between premiums that silver level
QHPs charge for tobacco users to the
premiums they charge for non-tobacco
users at selected ages. To calculate
estimated proportions of tobacco users,
we will use data from the Centers for
Disease Control and Prevention (CDC) to
estimate tobacco utilization rates by
state and relevant population
characteristic.8 For BHP program year
2015, we will compare these tobacco
utilization rates to the characteristics of
BHP-eligible consumers, as shown by
8 See https://www.cdc.gov/nchs/nhis/tobacco.htm;
https://apps.nccd.cdc.gov/statesystem/default/
DataSource.aspx.
PO 00000
Frm 00030
Fmt 4700
Sfmt 4700
national and state survey data.
Specifically, for each state, we will
calculate the tobacco usage rate based
on the percentage of persons by age who
use cigarettes and the percentage of
persons by age that use smokeless
tobacco, and calculate the utilization
rate by adding the two rates together.
The data is available for 3 age intervals:
18–24; 25–44; and 45–64. For the BHP
payment rate cell for persons ages 21–
34, we would calculate the factor as (4/
14 * the utilization rate of 18–24 year
olds) plus (10/14 * the utilization rate
of 25–44 year olds), which would be the
weighted average of tobacco usage for
persons 21–34 assuming a uniform
distribution of ages; for all other age
ranges used for the rate cells, we would
use the age range in the CDC data in
which the BHP payment rate cell age
range is contained.
We will provide tobacco rating factors
that may vary by age and by geographic
area within each state. To the extent that
the second lowest cost silver plans have
a different ratio of tobacco user rates to
non tobacco user rates in different
geographic areas, the tobacco rating
adjustment factor may differ across
geographic areas within a state. In
addition, to the extent that the second
lowest cost silver plan has a different
ratio of tobacco user rates to non
tobacco user rates by age, or that there
is a different prevalence of tobacco use
by age, the tobacco rating adjustment
factor may differ by age.
7. Factor for Removing Administrative
Costs (FRAC)
The Factor for Removing
Administrative Costs (FRAC) represents
the average proportion of the total
premium that covers allowed health
benefits, and we include this factor in
our calculation of estimated CSRs in
Equation 2. The product of the reference
premium and the FRAC would
approximate the estimated amount of
EHB claims that would be expected to
be paid by the plan. This step is needed
because the premium also covers such
costs as taxes, fees, and QHP
administrative expenses. We have set
this factor equal to 0.80, which is
proposed for calculating CSR advance
payments for 2015 in the HHS Notice of
Benefit and Payment Parameters for
2015.
8. Actuarial Value (AV)
The actuarial value is defined as the
percentage paid by a health plan of the
total allowed costs of benefits, as
defined under 45 CFR § 156.20. (For
example, if the average health care costs
for enrollees in a health insurance plan
were $1,000 and that plan has an
E:\FR\FM\12MRR1.SGM
12MRR1
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
actuarial value of 70 percent, the plan
would be expected to pay $700 ($1,000
× 0.70) for health care costs per enrollee,
on average.) By dividing such estimated
costs by the actuarial value in the
proposed methodology, we would
calculate the estimated amount of total
EHB-allowed claims, including both the
portion of such claims paid by the plan
and the portion paid by the consumer
for in-network care. (To continue with
that same example, we would divide the
plan’s expected $700 payment of the
person’s EHB-allowed claims by the
plan’s 70 percent actuarial value to
ascertain that the total amount of EHBallowed claims, including amounts paid
by the consumer, is $1,000.)
For the purposes of calculating the
CSR rate in Equation 2, we will use the
standard actuarial value of the silver
level plans in the individual market,
which is equal to 70 percent.
tkelley on DSK3SPTVN1PROD with RULES
9. Induced Utilization Factor (IUF)
The induced utilization factor is
proposed as a factor in calculating
estimated CSRs in Equation 2 to account
for the increase in health care service
utilization associated with a reduction
in the level of cost sharing a QHP
enrollee would have to pay, based on
the cost-sharing reduction subsidies
provided to enrollees.
In the HHS Notice of Benefit and
Payment Parameters for 2015 proposed
rule, we proposed induced utilization
factors for the purposes of calculating
cost-sharing reduction advance
payments for 2015. The induced
utilization factor for all persons who
would enroll in a silver plan and qualify
for BHP based on their household
income as a percentage of FPL is 1.12;
this would include persons with
household income between 100 percent
and 200 percent of FPL, lawfully
present non-citizens below 100 percent
of FPL who are ineligible for Medicaid
because of immigration status, and
persons with household income under
300 percent of FPL, not subject to any
cost-sharing. Thus, we will use the
induced utilization factor equal to 1.12
for the BHP payment methodology.
10. Change in Actuarial Value (DAV)
The increase in actuarial value would
account for the impact of the costsharing reduction subsidies on the
relative amount of EHB claims that
would be covered for or paid by eligible
persons, and we include it as a factor in
calculating estimated CSRs in Equation
2.
The actuarial values of QHPs for
persons eligible for cost-sharing
reduction subsidies are defined in 45
CFR 156.420(a), and eligibility for such
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
subsidies is defined in 45 CFR
155.305(g)(2)(i) through (iii). For QHP
enrollees with household incomes
between 100 percent and 150 percent of
FPL, and those below 100 percent of
FPL who are ineligible for Medicaid
because of their immigration status,
CSRs increase the actuarial value of a
QHP silver plan from 70 percent to 94
percent. For QHP enrollees with
household incomes between 150
percent and 200 percent of FPL, CSRs
increase the actuarial value of a QHP
silver plan from 70 percent to 87
percent.
We will apply this factor by
subtracting the standard AV from the
higher AV allowed by the applicable
cost-sharing reduction. For BHP
enrollees with household incomes at or
below 150 percent of FPL, this factor is
0.24 (94 percent minus 70 percent); for
BHP enrollees with household incomes
more than 150 percent but not more
than 200 percent of FPL, this factor is
0.17 (87 percent minus 70 percent).
E. Adjustments for American Indians
and Alaska Natives
There are several exceptions made for
American Indians and Alaska Natives
enrolled in QHPs through an Exchange
to calculate the PTC and CSRs. Thus, we
will make adjustments to the payment
methodology described above to be
consistent with the Exchange rules.
We will make the following
adjustments:
1. The adjusted reference premium for
use in the CSR portion of the rate will
be the lowest cost bronze plan instead
of the second lowest cost silver plan,
with the same adjustment for the
population health factor (and in the case
of a state that elects to use the 2014
premiums as the basis of the federal
BHP payment, the same adjustment for
the premium trend factor). American
Indians and Alaska Natives are eligible
for CSRs with any metal level plan, and
thus we believe that eligible persons
would be more likely to select a bronze
level plan instead of a silver level plan.
(It is important to note that this would
not change the PTC, as that is the
maximum possible PTC payment, which
is always based on the second lowest
cost silver plan.)
2. The actuarial value for use in the
CSR portion of the rate is 0.60 instead
of 0.70, which is consistent with the
actuarial value of a bronze level plan.
3. The induced utilization factor for
use in the CSR portion of the rate is
1.15, which is consistent with the
proposed HHS Notice of Benefit and
Payment Parameters for 2015 induced
utilization factor for calculating advance
CSR payments for persons enrolled in
PO 00000
Frm 00031
Fmt 4700
Sfmt 4700
13903
bronze level plans and eligible for CSRs
up to 100 percent of actuarial value.
4. The change in the actuarial value
for use in the CSR portion of the rate is
0.40. This reflects the increase from 60
percent actuarial value of the bronze
plan to 100 percent actuarial value, as
American Indians and Alaska Natives
are eligible to receive CSRs up to 100
percent of actuarial value.
F. State Option To Use 2014 QHP
Premiums for BHP Payments
In the interest of allowing states
greater certainty in the total BHP federal
payments for 2015, we will provide
states the option to have their final 2015
federal BHP payment rates to be
calculated using the projected 2015
adjusted reference premium (that is,
using 2014 premium data multiplied by
the premium trend factor defined
below), as described in Equation (3b).
For a state that elects to use the 2014
premium as the basis for the 2015 BHP
federal payment, the state must inform
CMS no later than May 15, 2014.
For Equation (3b), we define the
premium trend factor as follows:
Premium Trend Factor (PTF)
In Equation (3b), we calculate an
adjusted reference premium (ARP)
based on the application of certain
relevant variables to the reference
premium (RP), including a premium
trend factor (PTF). In the case of a state
that elects to use the 2014 premiums as
the basis for determining the BHP
payment, it is appropriate to apply a
factor that would account for the change
in health care costs between the year of
the premium data and the BHP plan
year. We are defining this as the
premium trend factor in the BHP
payment methodology. This factor
approximates the change in health care
costs per enrollee, which would
include, but is not limited to, changes
in the price of health care services and
changes in the utilization of health care
services. This provides an estimate of
the adjusted monthly premium for the
applicable second lowest cost silver
plan that would be more accurate and
reflective of health care costs in the BHP
program year, which will be the year
following issuance of the final federal
payment notice. In addition, we believe
that it is appropriate to adjust the trend
factor for the estimated impact of
changes to the transitional reinsurance
program on the average QHP premium.
We will use the annual growth rate in
private health insurance expenditures
per enrollee from the National Health
Expenditure projections, developed by
the Office of the Actuary in CMS
(citation, https://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-
E:\FR\FM\12MRR1.SGM
12MRR1
13904
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
tkelley on DSK3SPTVN1PROD with RULES
Trends-and-Reports/
NationalHealthExpendData/
Downloads/Proj2012.pdf). For 2015, the
projected increase in private health
insurance premiums per enrollee is 3.55
percent.
The adjustment for changes in the
transitional reinsurance program is
developed from analysis by CMS’ Center
for Consumer Information and
Insurance Oversight (CCIIO). In the 2014
notice (78 FR 15519), CCIIO estimated
that the transitional reinsurance
program reduced QHP premiums on
average by 10 to 15 percent. In
unpublished analysis, CCIIO estimated
that the transitional reinsurance
program would reduce QHP premiums
in 2015 on average by 6 percent, as the
amount of funding in the reinsurance
program decreases. Based on these
analyses, we estimate that the changes
in the transitional reinsurance program
would lead to an increase of 4.44
percent in average QHP premiums
between 2014 and 2015; assuming that
the 2014 QHP premiums are reduced by
10 percent due to the reinsurance
program, we calculate the adjustment as
(1¥0.06)/(1¥0.10)¥1 = 0.0444.
Combining these two factors together,
we calculate that the premium trend
factor for 2015 would be 8.15 percent:
(1+0.0355) * (1+0.0444)¥1 = 0.0815.
G. State Option To Include
Retrospective State-specific Health Risk
Adjustment in Certified Methodology
In order to determine whether the
potential difference in health status
between BHP enrollees and consumers
in the Exchange would affect the PTC,
CSRs, risk adjustment and reinsurance
payments that would have otherwise
been made had BHP enrollees been
enrolled in coverage on the Exchange,
we will provide states implementing the
BHP the option to propose and to
implement, as part of the certified
methodology, a retrospective adjustment
to the federal BHP payments to reflect
the actual value that would be assigned
to the population health factor (or risk
adjustment) based on data accumulated
during program year 2015 for each rate
cell.
We acknowledge that there is notable
uncertainty with respect to this factor
due to the lack of experience of QHPs
on the Exchange and other payments
related to the Exchange, which is why,
absent a state election, we will use a
value for the population health factor to
determine a prospective payment rate
which assumes no difference in the
health status of BHP enrollees and QHP
enrollees. There is considerable
uncertainty regarding whether the BHP
enrollees will pose a greater risk or a
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
lesser risk compared to the QHP
enrollees, how to best measure such
risk, and the potential effect such risk
would have had on PTC, CSRs, risk
adjustment and reinsurance payments
that would have otherwise been made
had BHP enrollees been enrolled in
coverage on the Exchange. To the
extent, however, that a state develops an
approved protocol to collect data and
effectively measure the relative risk and
the effect on federal payments, we
would permit a retrospective adjustment
that measured the actual difference in
risk between the two populations to be
incorporated into the certified BHP
payment methodology and used to
adjust payments in the previous year.
In order for a state electing the option
to implement a retrospective population
health status adjustment, the state
would be required to submit a proposed
protocol to CMS, which would be
subject to approval by CMS and would
be required to be certified by the Chief
Actuary of CMS, in consultation with
the Office of Tax Analysis, as part of the
BHP payment methodology. We
anticipate issuing future guidance
shortly that will provide the basic
framework in which a state must
include in its proposed protocol and
instructions for submission to CMS for
approval; a state must submit its
proposed protocol by August 1, 2014 for
CMS approval. This submission must
also include how the state will collect
the necessary data to determine the
adjustment, including any contracting
contingences that may be in place with
participating standard health plan
offerors. CMS will provide technical
assistance to states as they develop their
protocol. In order to implement the
population health status, CMS must
approve the state’s protocol no later
than December 31, 2014. Finally, the
state must complete the population
health status adjustment at the end of
2015 based on the approved protocol.
After the end of the 2015 program year,
and once data is made available, CMS
will review the state’s findings,
consistent with the approved protocol,
and make any necessary adjustments to
the state’s federal BHP payment amount.
If CMS determines that the federal BHP
payments were less than they would
have been using the final adjustment
factor, CMS would apply the difference
to the state’s quarterly BHP trust fund
deposit. If CMS determines that the
federal BHP payments were more than
they would have been using the final
reconciled factor, CMS would subtract
the difference from the next quarterly
BHP payment to the state.
PO 00000
Frm 00032
Fmt 4700
Sfmt 4700
IV. Collection of Information
Requirements
The information collection
requirements and burden estimates
associated with this final methodology
have been approved by OMB through
July 31, 2014 under OCN 0938–1218
(CMS–10510). CMS will be seeking to
extend OMB’s approval period at a later
time.
This final methodology would not
impose any new or revised reporting or
recordkeeping requirements and,
therefore, does not require additional
OMB review under the authority of the
Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.).
V. Regulatory Impact Statement
A. Overall Impact
We have examined the impacts of this
final methodology as required by
Executive Order 12866 on Regulatory
Planning and Review (September 30,
1993), Executive Order 13563 on
Improving Regulation and Regulatory
Review (January 18, 2011), the
Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96–354),
section 1102(b) of the Social Security
Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (March
22, 1995; Pub. L. 104–4), Executive
Order 13132 on Federalism (August 4,
1999) and the Congressional Review Act
(5 U.S.C. 804(2)).
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Section 3(f) of Executive Order
12866 defines a ‘‘significant regulatory
action’’ as an action that is likely to
result in a rule: (1) Having an annual
effect on the economy of $100 million
or more in any 1 year, or adversely and
materially affecting a sector of the
economy, productivity, competition,
jobs, the environment, public health or
safety, or state, local or tribal
governments or communities (also
referred to as ‘‘economically
significant’’); (2) creating a serious
inconsistency or otherwise interfering
with an action taken or planned by
another agency; (3) materially altering
the budgetary impacts of entitlement
grants, user fees, or loan programs or the
rights and obligations of recipients
thereof; or (4) raising novel legal or
policy issues arising out of legal
mandates, the President’s priorities, or
E:\FR\FM\12MRR1.SGM
12MRR1
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
the principles set forth in the Executive
Order.
A regulatory impact analysis (RIA)
must be prepared for major rules with
economically significant effects ($100
million or more in any 1 year). As noted
in the BHP rule, BHP provides states the
flexibility to establish an alternative
coverage program for low-income
individuals who would otherwise be
eligible to purchase coverage through
the Exchange. We are uncertain, as
described further below, as to whether
the effects of the rulemaking, and
subsequently, this final methodology,
will be ‘‘economically significant’’ as
measured by the $100 million threshold,
and hence a major rule under the
Congressional Review Act. In
accordance with the provisions of
Executive Order 12866, this final
methodology was reviewed by the
Office of Management and Budget.
tkelley on DSK3SPTVN1PROD with RULES
1. Need for the Notice
Section 1331 of the Affordable Care
Act (codified at 42 U.S.C. 18051)
requires the Secretary to establish a
BHP, and subsection (d)(1) specifically
provides that if the Secretary finds that
a state ‘‘meets the requirements of the
program established under subsection
(a) [of section 1331], the Secretary shall
transfer to the State’’ federal BHP
payments described in subsection (d)(3).
This final methodology provides for the
funding methodology to determine the
federal BHP payment amounts required
to implement these provisions.
2. Alternative Approaches
Many of the factors in this final
methodology are specified in statute;
therefore, we are limited in the
alternative approaches we could
consider. One area in which we had a
choice was in selecting the data sources
used to determine the factors included
in the methodology. Except for statespecific reference premiums and
enrollment data, we are using national
rather than state-specific data. This is
due to the lack of currently available
state-specific data needed to develop the
majority of the factors included in the
methodology. We believe the national
data will produce sufficiently accurate
determinations of payment rates. In
addition, we believe that this approach
will be less burdensome on states. With
respect to reference premiums and
enrollment data, using state-specific
data rather than national data will
produce more accurate determinations
than national averages.
3. Transfers
The provisions of this final
methodology are designed to determine
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
the amount of funds that will be
transferred to states offering coverage
through a BHP rather than to
individuals eligible for premium and
cost-sharing reductions for coverage
purchased on the Exchange. We are
uncertain what the total federal BHP
payment amounts to states will be as
these amounts will vary from state to
state due to the varying nature of state
composition. For example, total federal
BHP payment amounts may be greater
in more populous states simply by
virtue of the fact that they have a larger
BHP-eligible population and total
payment amounts are based on actual
enrollment. Alternatively, total federal
BHP payment amounts may be lower in
states with a younger BHP-eligible
population as the reference premium
used to calculate the federal BHP
payment will be lower relative to older
BHP enrollees. While state composition
will cause total federal BHP payment
amounts to vary from state to state, the
methodology accounts for these
variations to ensure accurate BHP
payment transfers are made to each
state.
B. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated
costs and benefits before issuing any
rule whose mandates require spending
in any 1 year of $100 million in 1995
dollars, updated annually for inflation,
by state, local, or tribal governments, in
the aggregate, or by the private sector. In
2014, that threshold is approximately
$141 million. States have the option, but
are not required, to establish a BHP.
Further, the methodology will establish
federal payment rates without requiring
states to provide the Secretary with any
data not already required by other
provisions of the Affordable Care Act or
its implementing regulations. Thus, this
final methodology does not mandate
expenditures by state governments,
local governments, or tribal
governments.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) requires
agencies to prepare an initial regulatory
flexibility analysis to describe the
impact of the final rule on small
entities, unless the head of the agency
can certify that the rule will not have a
significant economic impact on a
substantial number of small entities.
The Act generally defines a ‘‘small
entity’’ as (1) a proprietary firm meeting
the size standards of the Small Business
Administration (SBA); (2) a not-forprofit organization that is not dominant
PO 00000
Frm 00033
Fmt 4700
Sfmt 4700
13905
in its field; or (3) a small government
jurisdiction with a population of less
than 50,000. Individuals and states are
not included in the definition of a small
entity. Few of the entities that meet the
definition of a small entity as that term
is used in the RFA would be impacted
directly by this final methodology.
Because this final document is
focused on the funding methodology
that will be used to determine federal
BHP payment rates, it does not contain
provisions that would have a significant
direct impact on hospitals and other
health care providers that are designated
as small entities under the RFA.
However, the provisions in this final
methodology may have a substantial,
positive indirect effect on hospitals and
other health care providers due to the
substantial increase in the prevalence of
health coverage among populations who
are currently unable to pay for needed
health care, leading to lower rates of
uncompensated care at hospitals. As
such, the Department cannot determine
whether this final methodology would
have a significant economic impact on
a substantial number of small entities.
Section 1102(b) of the Act requires us
to prepare a regulatory impact analysis
if a proposed notice may have a
significant economic impact on the
operations of a substantial number of
small rural hospitals. For purposes of
section 1102(b) of the Act, we define a
small rural hospital as a hospital that is
located outside of a metropolitan
statistical area and has fewer than 100
beds. As indicated in the preceding
discussion, there may be indirect
positive effects from reductions in
uncompensated care. Again, the
Department cannot determine whether
this final methodology would have a
significant economic impact on a
substantial number of small rural
hospitals.
D. Federalism
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that imposes substantial direct
effects on states, preempts state law, or
otherwise has federalism implications.
The BHP is entirely optional for states,
and if implemented in a state, provides
access to a pool of funding that would
not otherwise be available to the state.
We have consulted with states to
receive input on how the Affordable
Care Act provisions codified in this
final methodology would affect states.
We have participated in a number of
conference calls and in person meetings
with state officials.
E:\FR\FM\12MRR1.SGM
12MRR1
13906
Federal Register / Vol. 79, No. 48 / Wednesday, March 12, 2014 / Rules and Regulations
We continue to engage in ongoing
consultations with states that have
expressed interest in implementing a
BHP through the BHP Learning
Collaborative, which serves as a staff
level policy and technical exchange of
information between CMS and the
states. Through consultations with this
Learning Collaborative, we have been
able to get input from states on many of
the specific issues addressed in this
methodology.
Authority: Section 1331(d)(3) of the
Affordable Care Act.
Dated: February 19, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare &
Medicaid Services.
Approved: February 21, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.
[FR Doc. 2014–05257 Filed 3–7–14; 4:15 pm]
BILLING CODE 4120–01–P
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
50 CFR Part 300
[Docket No. 131213999–4208–02]
RIN 0648–BD82
Pacific Halibut Fisheries; Catch
Sharing Plan
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Final rule.
AGENCY:
The Assistant Administrator
(AA) for Fisheries, National Oceanic
and Atmospheric Administration
(NOAA), on behalf of the International
Pacific Halibut Commission (IPHC),
publishes annual management measures
adopted as regulations by the IPHC and
accepted by the Secretary of State
governing the Pacific halibut fishery.
These actions are intended to enhance
the conservation of Pacific halibut and
further the goals and objectives of the
North Pacific Fishery Management
Council (NPFMC).
DATES: The IPHC’s 2014 annual
management measures are effective
March 7, 2014. The 2014 management
measures are effective until superseded.
ADDRESSES: Additional requests for
information regarding this action may
be obtained by contacting the
International Pacific Halibut
Commission, 2320 W. Commodore Way,
tkelley on DSK3SPTVN1PROD with RULES
SUMMARY:
VerDate Mar<15>2010
16:15 Mar 11, 2014
Jkt 232001
Suite 300, Seattle, WA 98199–1287; or
Sustainable Fisheries Division, NMFS
Alaska Region, P.O. Box 21668, Juneau,
AK 99802, Attn: Ellen Sebastian,
Records Officer; or Sustainable Fisheries
Division, NMFS West Coast Region,
7600 Sand Point Way NE., Seattle, WA
98115. This final rule also is accessible
via the Internet at the Federal
eRulemaking portal at https://
www.regulations.gov.
For
waters off Alaska, Glenn Merrill or Julie
Scheurer, 907–586–7228; or, for waters
off the U.S. West Coast, Sarah Williams,
206–526–4646.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:
Background
The IPHC has adopted regulations
governing the Pacific halibut fishery in
2014, pursuant to the Convention
between Canada and the United States
for the Preservation of the Halibut
Fishery of the North Pacific Ocean and
Bering Sea (Convention), signed at
Ottawa, Ontario, on March 2, 1953, as
amended by a Protocol Amending the
Convention (signed at Washington, DC,
on March 29, 1979).
As provided by the Northern Pacific
Halibut Act of 1982 (Halibut Act) at 16
U.S.C. 773b, the Secretary of State, with
the concurrence of the Secretary of
Commerce, may accept or reject, on
behalf of the United States, regulations
adopted by the IPHC in accordance with
the Convention (Halibut Act, Sections
773–773k). The Secretary of State of the
United States, with the concurrence of
the Secretary of Commerce, accepted the
2014 IPHC regulations as provided by
the Halibut Act at 16 U.S.C. 773–773k.
The Halibut Act provides the
Secretary of Commerce with the
authority and general responsibility to
carry out the requirements of the
Convention and the Halibut Act. The
Regional Fishery Management Councils
may develop, and the Secretary of
Commerce may implement, regulations
governing harvesting privileges among
U.S. fishermen in U.S. waters that are in
addition to, and not in conflict with,
approved IPHC regulations. The NPFMC
has exercised this authority most
notably in developing halibut
management programs for three
fisheries that harvest halibut in Alaska:
the subsistence, sport, and commercial
fisheries.
Subsistence and sport halibut fishery
regulations are codified at 50 CFR part
300. Commercial halibut fisheries in
Alaska are subject to the Individual
Fishing Quota (IFQ) Program and
Community Development Quota (CDQ)
PO 00000
Frm 00034
Fmt 4700
Sfmt 4700
Program (50 CFR part 679), and the areaspecific catch sharing plans.
The NPFMC implemented a CSP
among commercial IFQ and CDQ
halibut fisheries in IPHC Areas 4C, 4D
and 4E (Area 4, Western Alaska)
through rulemaking, and the Secretary
approved the plan on March 20, 1996
(61 FR 11337). The Area 4 CSP
regulations were codified at 50 CFR
300.65, and were amended on March 17,
1998 (63 FR 13000). New annual
regulations pertaining to the Area 4 CSP
also may be implemented through IPHC
action, subject to acceptance by the
Secretary of State. The NPFMC
recommended and NMFS implemented
through rulemaking a CSP among
guided sport (charter) and commercial
IFQ halibut fisheries in IPHC Area 2C
(Southeast Alaska) and Area 3A
(Southcentral Alaska) on January 13,
2014 (78 FR 75844, December 12, 2013).
The CSP replaces the guideline harvest
level (GHL) program that had been in
place in these regulatory areas since
2004. The Area 2C and 3A CSP
regulations are codified at 50 CFR
300.65. The CSP defines an annual
process for allocating halibut between
the commercial and charter fisheries so
that each sector’s allocation varies in
proportion to halibut abundance;
specifies a public process for setting
annual management measures; and
authorizes limited annual leases of
commercial IFQ for use in the charter
fishery. The CSP also authorizes
supplemental individual transfers of
commercial halibut IFQ as guided
angler fish (GAF) to qualified charter
halibut permit holders for harvest by
charter vessel anglers in Areas 2C and
3A. Through the GAF program,
qualified charter halibut permit holders
may offer charter vessel anglers the
opportunity to retain halibut up to the
limit for unguided anglers when the
charter management measure in place
would limit charter vessel anglers to a
more restrictive harvest limit. In other
words, a charter vessel angler may
retain a halibut as GAF that exceeds the
daily bag limit and length restrictions in
place for charter anglers only to the
extent that the angler’s halibut retained
under the charter halibut management
measure plus halibut retained as GAF
do not exceed daily bag limit and length
restrictions imposed on unguided
anglers. Federal regulations for the GAF
program are at 50 CFR 300.65.
The IPHC held its annual meeting in
Seattle, Washington, January 13–17,
2014, and adopted a number of changes
to the previous IPHC regulations (78 FR
16423, March 15, 2013). The Secretary
of State accepted the annual
management measures, including the
E:\FR\FM\12MRR1.SGM
12MRR1
Agencies
[Federal Register Volume 79, Number 48 (Wednesday, March 12, 2014)]
[Rules and Regulations]
[Pages 13887-13906]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05257]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 600
[CMS-2380-FN]
RIN 0938-ZB12
Basic Health Program; Federal Funding Methodology for Program
Year 2015
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final methodology.
-----------------------------------------------------------------------
SUMMARY: This document provides the methodology and data sources to
determine the federal payment amounts made to states in program year
2015 that elect to establish a Basic Health Program certified by the
Secretary under section 1331 of the Patient Protection and Affordable
Care Act to offer health benefits coverage to low-income individuals
otherwise eligible to purchase coverage through Affordable Insurance
Exchanges.
DATES: Effective Date: January 1, 2015.
FOR FURTHER INFORMATION CONTACT: Christopher Truffer, (410) 786-1264;
or Jessica Schubel, (410) 786-3032.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Summary of Proposed Provisions and Analysis of and Responses to
Public Comments on the Proposed Methodology
[[Page 13888]]
A. Background
B. Overview of the Funding Methodology and Calculation of the
Payment Amount
C. Required Rate Cells
D. Sources and State Data Considerations
E. Discussion of Specific Variables Used in Payment Equations
F. Adjustments for American Indians and Alaska Natives
G. Example Application of the BHP Funding Methodology
H. General/Miscellaneous Comments
III. Provisions of the Final Methodology
A. Overview of the Funding Methodology and Calculation of the
Payment Amount
B. Federal BHP Payment Rate Cells
C. Sources and State Data Considerations
D. Discussion of Specific Variables Used in Payment Equations
E. Adjustments for American Indians and Alaska Natives
F. State Option to Use 2014 QHP Premiums for BHP Payments
G. State Option to Include Retrospective State-specific Health
Risk Adjustment in Certified Methodology
IV. Collection of Information Requirements
V. Regulatory Impact Statement
A. Overall Impact
B. Unfunded Mandates Reform Act
C. Regulatory Flexibility Act
D. Federalism
I. Background
The Patient Protection and Affordable Care Act (Pub. L. 111-148,
enacted on March 23, 2010), together with the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010
are collectively referred as the Affordable Care Act. The Affordable
Care Act provides for the establishment of state Affordable Insurance
Exchanges (Exchanges, also called the Health Insurance Marketplace)
that provide access to affordable health insurance coverage offered by
qualified health plans (QHPs) for most individuals under age 65 who are
not eligible for health coverage under other federally supported health
benefits programs or through affordable employer-sponsored insurance
coverage, and who have incomes above 100 percent of the federal poverty
line (FPL), or whose income is below that level but are lawfully
present non-citizens ineligible for Medicaid because of immigration
status. Individuals enrolled through Exchanges in coverage offered by
QHPs with incomes below 400 percent of the FPL may qualify for the
federal premium tax credit (PTC) and federally-funded cost-sharing
reductions (CSRs) based on their household income, to ensure that such
coverage meets certain standards for affordability.
In the states that elect to operate a Basic Health Program (BHP),
BHP will make affordable health benefits coverage available for
individuals under age 65 with household incomes between 133 percent and
200 percent of the FPL who are not otherwise eligible for Medicaid, the
Children's Health Insurance Program (CHIP), or affordable employer
sponsored coverage. (For those states that have expanded Medicaid
coverage under section 1902(a)(10)(A)(i)(VIII) of the Act, the lower
income threshold for BHP eligibility is effectively 138 percent due to
the application of a required 5 percent income disregard in determining
the upper limits of Medicaid income eligibility.) Federal funding will
be available for BHP based on the amount of PTC and CSRs that BHP
enrollees would have received had they been enrolled in QHPs through
Exchanges.
We are publishing, concurrently with this final methodology, a
final rule entitled the ``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'' (hereinafter referred to as the BHP final rule)
implementing section 1331 of the Affordable Care Act, which requires
the establishment of BHP. The BHP final rule establishes the
requirements for state and federal administration of BHP, including
provisions regarding eligibility and enrollment, benefits, cost-sharing
requirements and oversight activities. While the BHP final rule
codifies the overall statutory requirements and basic procedural
framework for the funding methodology, it does not contain the specific
information necessary to determine federal payments. We anticipated
that the methodology would be based on data and assumptions that would
reflect ongoing operations and experience of BHP programs as well as
the operation of the Exchanges. For this reason, the BHP final rule
specifies that the development and publication of the funding
methodology, including any data sources, will be addressed in a
separate annual Payment Notice process. The BHP final rule also
specifies that the BHP Payment Notice process will include the annual
publication of both a proposed and final BHP Payment Notice.
II. Summary of Proposed Provisions and Analysis of and Responses to
Public Comments on the Proposed Methodology
The following sections, arranged by subject area, include a summary
of the public comments that we received, and our responses. For a
complete and full description of the BHP proposed funding methodology,
see the ``Basic Health Program; Proposed Federal Funding Methodology
for Program Year 2015'' proposed document published in the December 23,
2013 Federal Register (78 FR 77399).
We received a total of 32 timely comments from state agencies,
groups advocating on behalf of consumers, health care providers, health
insurers, health care associations, Tribes, and tribal organizations.
The public comments received ranged from general support or opposition
to the proposed methodology to very specific questions or comments
regarding the proposed methodological factors. In addition, we held a
consultation session on December 19, 2013 that was open to all
interested parties, to provide an overview of the BHP proposed funding
methodology where interested parties were afforded an opportunity to
ask questions and make comments. At the consultation session,
participating parties were reminded to submit written comments before
the close of the public comment period that was specified in the BHP
proposed methodology.
A. Background
In the December 23, 2013 (78 FR 77399) proposed methodology, as
background and for contextual purposes, we discussed the proposed
provisions from the September 25, 2013 BHP proposed rule (78 FR 77401).
The proposed document also specified the methodology of how the federal
BHP payments would be calculated. For specific discussions, please
refer to the December 23, 2013 proposed methodology (78 FR 77401).
We received the following comments on the background information
included in the proposed methodology:
Comment: One commenter expressed support for publishing the final
Payment Notice annually in February.
Response: We thank the commenter for their support.
Comment: Several commenters requested that CMS provide an option
for states to have BHP payments retrospectively reconciled for the
factors specified in statute. Specifically, commenters requested that
such a reconciliation process use actual, state-specific data by taking
into account the state's actual health insurance market experience for
the program year, measure the data and payment factors in manner agreed
upon by both CMS and the state, and perform the reconciliation using a
methodology that is generally consistent with the methodology of the
proposed payment document.
[[Page 13889]]
Response: We understand the commenters' concern regarding the
market uncertainties in 2014 and appreciate the recommendations to
refine the methodology to account for such uncertainties. However,
based on initial feedback we received from interested states, we
developed the BHP funding methodology on a prospective basis to provide
states with a level of fiscal certainty as they consider implementing
BHP in a given program year. Except for the population health factor,
which is discussed further below in section III.G in this final
methodology, we have determined not to retrospectively adjust or
reconcile the various factors that comprise the methodology because we
believe that states operating a BHP will need to have budget certainty
in order to plan and operate their programs.
In addition, as also discussed below, we are revising our
methodology to use actual 2015 premium amounts to calculate BHP funding
for 2015. While this would be part of the prospective methodology and
not a retrospective adjustment, it would further address some of the
issues raised in these comments.
Comment: Many commenters noted that state-specific market
conditions, such as in Minnesota where the state's high-risk pool will
continue to operate in 2014, will not be reflected in the 2014 Exchange
premiums but will affect the premium rates in 2015. As such, commenters
recommended that CMS use actual 2015 Exchange premiums to improve the
accuracy of the federal BHP payment rates for program year 2015.
Response: In response to these comments, and in particular because
of the various issues in the first year of BHP implementation, we have
adopted the commenters' recommendation and will use actual 2015
Exchange premiums to determine the final 2015 federal BHP payment rates
in states. Given the fact that the Exchanges are new in 2014 and the
potential for changes in 2015, we believe that it is appropriate to
make this adjustment in the methodology for the first year of BHP
implementation as it will improve the accuracy of the rates. For
additional information on the process we will use to determine the
final 2015 federal BHP payment rates, please see the additional
discussion included in section III.D.1 (reference premium) of this
final methodology.
While using actual 2015 Exchange premiums will improve the accuracy
of the federal BHP payment rates by taking into account certain market
conditions, we understand that, for decision making purposes, some
states may need to establish budgets based on final 2015 federal BHP
payment rates before actual 2015 premium information becomes available.
In such an event, we will provide the state with the option to have us
use 2014 premium data (projected forward to 2015) to calculate its
final 2015 federal BHP payment rates. As specified in this payment
notice, a state must notify CMS by May 15, 2014 that it is electing
this option. Upon completing the calculation process, we will publish
the final rates for such states in a subsequent Federal Register
notice, and use these final rates to determine the state's aggregate
2015 BHP federal payments, which will be deposited into the state's BHP
trust fund on a quarterly basis. We have amended this final methodology
by adding section III.F to discuss this process in further detail. If a
state does not elect this option to use 2014 Exchange premiums for
calculating final 2015 BHP federal payments, we will calculate the
payments using the 2015 premiums and also publish those rates in the
Federal Register. Before publication, we are available to provide
technical assistance to help the state better estimate the potential
range of 2015 BHP federal payments. Finally, as we gain more experience
in the Exchanges, and as data becomes more readily available, we will
continue to review the methodology, including the data elements and
other factors to further refine future BHP funding methodologies and
improve the accuracy of the overall result.
Comment: Several commenters requested that CMS consider adjusting
the funding methodology during the annual program year to ensure the
accuracy of the methodology in the event new data becomes available.
The commenters also requested that CMS consider adjusting the
methodology and recalculate the federal BHP payment rates in the event
that the payment rates are determined to be inadequate and negatively
affect the participation of standard health plan offerors.
Response: We appreciate the commenters' concern with respect to the
accuracy of the funding methodology as well as their interest in
ensuring robust standard health plan offeror participation. While the
statute directs the Secretary to adjust the payment for any fiscal year
to reflect any error in the determination of the payment amount in the
preceding fiscal year, the statute generally does not contemplate
retrospective adjustment to amounts properly calculated under the
certified methodology. Instead, the statute provides that adjustments
are only made prospectively, and only to reflect errors. We read that
term ``errors'' to mean mathematical errors or erroneous enrollment
numbers (which are multiplied by the per enrollee amount determined by
the certified methodology). While the statute does not expressly
provide for retrospective adjustments to a certified methodology, as
discussed below we are providing an optional process for states to
propose to include in the certified methodology a state-specific
retrospective adjustment to reflect any disparity in BHP population
health status (a risk adjustment) in each rate cell in comparison to
the Exchange population that would affect the federal payment for that
population. Permitting retrospective adjustment on this one factor (the
population health factor) given the difficulty in arriving at a
national approach to accurately determine this factor prospectively, in
particular due to the lack of data and experience from the exchanges
available at the beginning of 2014.
With respect to other commenters' concern that the federal BHP
payment rates could be so low that they would negatively affect
standard health plan offeror participation, the federal BHP payment is
not necessarily determinative of the contract costs for standard health
plans. The statute provides states that elect to operate a BHP with
considerable flexibility to control costs through a competitive
contracting process and other measures, and to supplement federal
funding with additional state or local funding. The state may negotiate
with its standard health plan offerors on the amount of capitation
payments, the benefits in excess of the required essential health
benefits, and the premiums consistent with the BHP enrollee
protections. A state does not need to structure its standard health
plan offeror payments to align with the federal BHP payment rate cells.
A state has the flexibility to use the same rate cell structure, mimic
the same structure that is used in other insurance affordability
programs, or develop a new structure specifically for BHP.
Comment: We received one comment requesting that CMS develop state-
specific BHP funding methodologies to more accurately account for the
health status of a state's BHP population relative to consumers in the
state's Exchange.
Response: We appreciate the commenter's interest in ensuring the
development of the most accurate population health factor, and as such,
are revising our methodology from what was proposed to include in the
certified methodology a temporary state-specific
[[Page 13890]]
adjustment to retrospectively adjust this factor for 2015. This
retrospective adjustment, which would be subject to CMS review and
approval, would be conducted to determine whether the difference in
health status between the state's BHP population and consumers in the
Exchange in 2015 would affect PTC, CSRs, risk adjustment and
reinsurance payments that would have been made had BHP enrollees been
enrolled in coverage through the Exchange. For additional information
on this option, please refer to section III.G.
Comment: One commenter requested that CMS clarify when the actual
reconciliation of BHP payment amounts will occur, including the
timeframes in each quarter.
Response: We appreciate the commenter's interest in the payment
reconciliation process, and anticipate providing future guidance on BHP
payment operations.
Comment: We received one comment requesting clarification on when a
state must submit both projected and actual enrollment data in order
for CMS to determine the prospective quarterly federal BHP payment.
Response: For a state to receive a prospective federal BHP payment,
the state must submit its projected BHP enrollment 60 days before the
start of the fiscal quarter. Actual enrollment is required no later
than 60 days after a fiscal quarter has ended. Once a state's BHP has
been in operation for a few fiscal quarters, we anticipate using the
state's actual enrollment in the previous quarter to determine the
upcoming quarter's federal BHP payment thereby eliminating the need for
the state to submit projected enrollment data.
B. Overview of the Funding Methodology and Calculation of the Payment
Amount
We proposed in the overview of the funding methodology to calculate
the PTC and CSRs as consistently as possible and in general alignment
with the methodology used by Exchanges to calculate the advance
payments of the PTC and CSRs, and by the Internal Revenue Service (IRS)
to calculate the final PTC. We proposed in this section four equations
that comprise the overall BHP funding methodology. For specific
discussions, please refer to the December 23, 2013 proposed methodology
(78 FR 77401).
We received the following comments regarding the equations proposed
to calculate the PTC and CSR components of the BHP funding methodology:
Comment: While we received support for the two-step process to
calculate the federal BHP payment rate, one commenter requested that
CMS release the data requirements states need to provide information
related to the BHP risk profile so that rates are properly set to
account for risk. The commenter also requested that CMS provide data
alternatives in the event that states encounter difficulties in
collecting the data needed to risk adjust.
Response: We appreciate the support for the two-step process and
are finalizing this approach as proposed in this final methodology. As
explained further in section III.D.2 of this final methodology, we are
not requiring any data from the states on the risk of these populations
unless a state elects to notify CMS that it will conduct a
retrospective risk adjustment analysis in accordance with the process
set forth in section III.G of this methodology. If the state decides to
conduct such an analysis, it has discretion when determining the data
requirements and any necessary alternatives; however, the state must
submit to CMS such information as well as the proposed methodology it
intends to use during the reconciliation process for approval and
certification. Regardless of whether or not states elect this option,
we will continue to review this factor as we gain more experience in
the Exchanges, and as data becomes more readily available, to refine
future BHP funding methodologies.
Comment: One commenter requested clarification on Equation 1.
Specifically, the commenter asked whether the average expected PTC that
all persons in the rate cell would receive is an average for people
within a certain region, or if this is a statewide average.
Response: The average expected PTC that all persons in the rate
cell would receive is an average for persons within a state's
geographic rating area, which in most instances would be a county or
county-equivalent entity. These would not be statewide rates.
Comment: One commenter requested that CMS revise Equation 1 to
account for the impact of induced utilization on the base premiums used
to calculate the advanced payment of the premium tax credit (APTC).
Such an adjustment would account for a greater APTC value due to the
increase in health care service utilization. The commenter proposed
such an adjustment to equal 1.12 divided by the average assumed induced
utilization adjustment inherent in commercial premiums absent BHP.
Response: We do not believe that this adjustment is appropriate.
This adjustment would be inconsistent with how the PTC is calculated
and with the statute. In addition, we would note that only accounting
for how the presence of the CSR may increase the average costs for
enrollees would not be appropriate, as the CSR may also have an effect
of lowering the average costs as well (for example, the provision of
the CSR may encourage persons with lower expected health care costs to
enroll).
Comment: Several commenters expressed support for the PTC
calculation as it takes into account the CSRs that are particular to
American Indians and Alaska Natives.
Response: We thank the commenters for their support and are
finalizing the proposed provision.
Comment: Several commenters requested that CMS reconsider applying
100 percent of the CSR that would have been available in the Exchange
to the BHP payment methodology, as opposed to 95 percent. Many
commenters stated that the statute provides for this interpretation
given the placement of the comma in section 1331(d)(3)(i) of the
Affordable Care Act.
Response: We appreciate the commenters' concern regarding this
issue, and we have carefully considered and reviewed the commenters'
suggestions. We have interpreted the 95 percent specified in statute to
refer to both the PTC and CSR components of the BHP payment
methodology. We believe that applying the 95 percent to both components
of the methodology represents the best reading of the statute and the
intent of the drafters, and we are therefore finalizing the proposed
provision.
Comment: We received one comment identifying a potential error in
Equation 2. Specifically, the commenter believes that the equation
should read ``FRAC x AV'' rather ``FRAC + AV.''
Response: We appreciate the identification of a potential error;
however, the equation, as written in the proposed methodology, is
correct. The symbol in the proposed methodology is the division symbol,
not the addition symbol. We have revised the display of the formula for
the sake of clarity, as shown below.
[[Page 13891]]
[GRAPHIC] [TIFF OMITTED] TR12MR14.004
Comment: We received a comment with respect to the premium trend
factor included in the equations. Specifically, the commenter expressed
concern that it will not capture changes in premiums due to non-claim
issues such as increases in premium taxes, assessment, and Exchange
user fees. The commenter recommended that non-claim issues be included
in the equations, and that the equations should be calculated using
only individual membership and vary by state.
Response: The methodology does take into account non-claim issues,
as the National Health Expenditure projections include all plan
expenses (including administrative costs and plan taxes and fees). We
recognize that the methodology does not use a factor specific to
individual private health insurance premiums, but we believe this is a
reasonable estimate of future growth of all private health insurance
premiums. We believe that the equation reflects a consistent approach
for calculating this portion of the federal BHP payment for all states,
and note that it incorporates state-specific values for the adjusted
reference premium and the tobacco rating factor adjustment.
We also note that the federal 2015 BHP payment will be calculated
using the actual 2015 Exchange premiums instead of the projected 2015
Exchange premiums (unless a state elects to use its 2014 premium as the
basis for the 2015 calculation). We believe that this addresses the
concerns raised by the commenters that there may be differences in the
premium growth rates across states because the calculation will use
actual Exchange premiums in effect for the year.
C. Required Rate Cells
In this section, we proposed that a state implementing BHP provide
us with an estimate of the number of BHP enrollees it will enroll in
the upcoming BHP program, 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 five factors: age; geographic rating area; coverage status;
household size; and income. For specific discussions, please refer to
the December 23, 2013 proposed methodology (78 FR 77403).
We received the following comments on the proposed rate cells:
Comment: One commenter expressed support in using rate cells
organized by income range to determine the aggregate federal BHP
payment. The commenter believes that the variation in available PTC is
minimal between the high and low points in each of the rates cells, and
the proposed approach provides for an administratively simple way to
calculate the federal BHP payment amount. The commenter believes that
it was unclear in the proposed methodology how the averages in each
rate cell will be calculated, and recommended that CMS provide states
with the flexibility to determine the average PTC within each rate cell
depending on the distribution of its BHP population.
Response: We thank the commenter for their support; however, we
believe that applying a uniform distribution across income ranges
within each rate cell to determine the average PTC is the most
appropriate approach. This approach will allow for timely calculation
of the rates, will eliminate the risk that rate cells with a small
number of persons projected to enroll would see the BHP payment rates
skewed, and will not require any estimation of BHP enrollment for each
rate cell prospectively. Furthermore, we do not believe that
determining the average PTC based on the distribution of the BHP
population would materially change the final BHP payment.
Comment: Several commenters expressed concern that the age bands
included in the proposed methodology were too broad, and recommended
that CMS consider narrowing the age bands, particularly the 21-44 age
band.
Response: We appreciate these comments, and the final BHP payment
methodology will split the proposed age band into two separate age
bands: 21-34 and 35-44.
Comment: One commenter requested that CMS offer as an option to
states a smaller number of rate categories, actuarially rolled up from
the population cells, to better align with the rate categories states
already have established in their Medicaid information systems. The
commenter believes that such an approach would reduce administrative
burden on states implementing BHP.
Response: We appreciate and share the commenter's interest in
reducing the administrative burden on states implementing BHP. The use
of distinct rate cells is necessary to accurately reflect the different
costs of the PTCs and CSRs for subcomponent population groups that
would be paid if the individuals had been enrolled in coverage through
the Exchange. This approach is necessary to ensure an accurate and
precise determination of available federal funding in the absence of
reliable data on the composition of the BHP population. At some future
point in time, when reliable data is available about the BHP
population, it might be possible to reduce the number of rate cells
based on actuarial projections.
These rate cells will likely differ from the rate cells that the
state uses to pay standard health plans (to the extent that a state
uses rate cells at all), because they are based on a different
underlying purpose. The BHP federal payment rate cells are to determine
the PTCs and CSRs that would be paid in the absence of a BHP, while
rate cells that a state may use for purpose of payment to standard
health plans need to reflect the relative overall covered health care
costs of each segment of the population. States have considerable
flexibility in determining how to pay standard health plan offerors,
and are not required to use rate cells at all. A state may elect to use
the BHP federal payment rate cells, may use a payment structure
borrowed from other insurance affordability programs, or may use a
payment structure specifically designed for BHP.
D. Sources and State Data Considerations
We proposed in this section to use, to the extent possible, data
submitted to the federal government by QHP issuers seeking to offer
coverage through an Exchange to determine the federal BHP payment cell
rates. However, in states operating a State Based Exchange (SBE), we
proposed that such states submit required data for CMS to calculate the
federal BHP payment rates in those states. For specific discussions,
please refer to the December 23, 2013 proposed methodology (78 FR
77404).
We received the following comments on the data needed from SBEs to
determine the federal BHP payment rates:
Comment: One commenter requested that CMS permit states operating
SBEs to submit data after the January 20, 2014 deadline on a technical
assistance basis.
Response: We will review 2014 premium data that is submitted on a
technical assistance basis after the January 20, 2014 deadline to help
[[Page 13892]]
provide interested states determine preliminary 2015 federal BHP
payment rates. Because final 2015 federal BHP payment rates will be
determined using actual 2015 premium data, states do not need to submit
2014 premium data unless they are interested in working with CMS to
develop preliminary estimates of the federal BHP payments using the
2014 data. Finally, we are also available to provide technical
assistance to states as they collect the information needed to complete
the premium collection tool.
E. Discussion of Specific Variables Used in Payment Equations
In this section, we proposed 11 specific variables to use in the
payment equations that comprise the overall BHP funding methodology.
For each proposed variable, we include a discussion on the assumptions
and data sources used in developing the variables. For specific
discussions, please refer to the December 23, 2013 proposed methodology
(78 FR 77404).
We received the following comments on the specific variables used
in the payment equations:
1. Variable 1--Reference Premium
Comment: Several commenters supported the assumptions used in
developing the funding methodology, including the use of the second
lowest cost silver plan premium and lowest cost bronze premium.
Response: We thank the commenters for their support and are
finalizing the proposed assumptions.
Comment: While one commenter expressed support for using the second
lowest cost silver plan as the methodology's reference premium, the
commenter recommended that CMS permit the value of the second lowest
cost silver plan change in the event that the QHP leaves the Exchange,
or enrollment in the QHP closes.
Response: While we appreciate the commenter's interest in ensuring
that the reference premium is reflective of the actual second lowest
cost silver plan at a given point, we are not revising the final
methodology to incorporate the commenter's recommendation. We believe
that such a recommendation would prove inconsistent with the policy set
forth in 26 CFR 1.36B-3(f)(6) to update the payment methodology, and
subsequently the federal BHP payment rates, in the event that the
second lowest cost silver plan used as the reference premium changes
(that is terminates or closes enrollment during the year).
Comment: Several commenters requested that CMS consider using a
national average premium as the reference premium in the methodology in
the event that CMS does not adjust the methodology to use actual
premiums rather than use a reference premium trended forward by the
premium trend factor.
Response: While we appreciate the commenters' recommendation, we
are not adopting the use of a national average premium as the
methodology's reference premium as we believe this would be
inconsistent with the requirements in statute. Unless otherwise
notified by a state, we intend to use the actual 2015 second lowest
cost silver plan premiums to determine the final 2015 federal BHP
payment rates, which we believe addresses the commenters' concerns.
Comment: Several commenters requested that, when calculating the
CSR component of the federal BHP payment, CMS account for the
likelihood that American Indians and Alaska Natives will elect to
enroll in a bronze-level QHP that would utilize the entire PTC that
would have otherwise been available to the enrollees rather than
assuming the enrollees will select the lowest cost bronze level QHP.
The commenter noted that while American Indians and Alaska Natives
purchasing coverage in the Exchange will likely select a bronze level
QHP, they may not always select the lowest cost bronze plan.
Response: We appreciate the commenters' concerns about the level of
funding related to American Indians and Alaska Natives enrolled in BHP.
With regard to comments that the methodology assume that American
Indians and Alaska Natives who enroll through the Exchange would choose
a QHP with a premium that is at least equal to the value of the PTC,
the payment methodology is consistent with this assumption.
With regard to the comments that American Indians and Alaska
Natives who would enroll through the Exchange may select other bronze
level QHPs than the lowest cost plan, we acknowledge the likelihood of
the selection of different bronze level QHPs, but we believe it is not
possible to project how these enrollees would select different plans
for 2015 (similar to the limitations regarding the assumption of how
enrollees would select plans other than the second lowest cost silver
plan). In addition, while there may be instances where the value of PTC
would exceed the value of some bronze QHP premiums, this may vary by
age, household size, household income, and other factors; we believe
this further limits the ability to project how enrollees would select
different plans. Thus, we have selected what we believe to be an
assumption that is reasonable and results in the correct level of
funding for BHP.
2. Variable 2--Premium Trend Factor
Comment: Several commenters requested that CMS reconsider removing
the premium trend factor from the methodology and simply reconcile the
BHP federal payment rates using actual 2015 second lowest cost silver
premiums. In the event that CMS will not use actual premiums, the
commenters recommended, as an alternative, that CMS not use the
proposed premium trend factor, but rather develop a factor that
sufficiently offsets the artificially low 2014 Exchange premiums, or
provide the state with the option to submit a state-specific trend
factor that is based on other reliable cost and experience data.
Commenters also expressed interest in using actual Exchange premium
data to develop the premium trend factor in future program years.
Response: As noted in an earlier response, and discussed further in
section III.D.1 of this final methodology, we will determine final 2015
federal BHP payment rates using actual 2015 premiums unless notified by
a state to calculate its payment rates with 2014 premium data. We
believe that this approach is appropriate in the first year of BHP
implementation given the uncertainties in market conditions in the
Exchanges.
Given that we are using actual 2015 premiums, we are not adopting
the commenters' recommendation to apply a different premium trend
factor other than the National Health Expenditure projection with an
adjustment for the impact of the reinsurance pool on QHP premiums
between 2014 and 2015. With respect to commenters' interest in the
premium trend factor that will be used in future BHP program years, we
will use actual Exchange and BHP experience to develop this factor for
future funding methodologies, which will follow the Payment document
process specified in the BHP final regulation. Publishing an annual
proposed and final Payment document will help refine the BHP funding
methodology as we gain more experience from the Exchanges as well as
better data that is based on actual market conditions.
Comment: One commenter requested that CMS provide additional
clarification on the transitional reinsurance adjustment. The commenter
believes that the adjustment would include a component that would be
[[Page 13893]]
equal to the percentage of costs not covered by reinsurance recoveries
in 2015 over the percentage of costs not covered by reinsurance
recoveries in 2014.
Response: We provide additional clarification on the reinsurance
adjustment in section III.F of this final methodology.
3. Variable 3--Population Health Factor
Comment: Several commenters disagreed with our proposed value for
the population health factor. Specifically, commenters believe that the
1.00 value did not accurately reflect the health status of potential
BHP eligible individuals in certain states. As such, commenters
requested that CMS retrospectively adjust this factor using either a
state-specific methodology, or the same methodology that is used to
risk adjust in the individual market.
Response: We understand the commenters' interest in ensuring that
the population health factor accurately reflects the health status of
BHP individuals relative to consumers in the Exchange. In light of the
comments we received on this issue, and, in particular, because of the
lack of currently available data, we are providing states with an
option to propose a methodology, as discussed further in section III.G
of this final methodology, for CMS approval that would retrospectively
adjust for risk. We understand that such an assessment may be necessary
to determine whether the difference in health status between the
state's BHP population and consumers in the Exchange would affect PTC,
CSRs, risk adjustment and reinsurance payments that would have been
made had BHP enrollees been enrolled in coverage through the Exchange.
While we are finalizing the proposed value of the population health
factor, we would note that as additional experience is gained in the
Exchange and more data becomes available, we believe that this factor
will be reviewed to ensure it accurately reflects the health status of
BHP enrollees relative to consumers in the Exchange.
Comment: While we received several comments in support of the
proposed provision to exclude BHP from the individual market's risk
pool, other commenters requested that CMS consider providing states
with the option to include BHP in its individual market's risk pool.
Commenters also requested that CMS permit states to have the ability to
apply aspects of the reinsurance, risk adjustment, and risk corridor
program to BHP. Several commenters noted that the existence of the
reinsurance program has likely reduced individual market premiums, and
further emphasized the importance of making a reinsurance payment in
BHP using the same mechanism and conditions in the individual market.
Response: We have carefully considered this issue and have
determined that BHP should be excluded from the individual market
because the market reform rules under the Public Health Service Act
that were added by Title I, Subtitles A and B of the Affordable Care
Act, such as the requirements for guaranteed issue, and premium rating
do not apply to standard health plans participating in BHP. Moreover,
in accordance with 45 CFR 153.234 and 45 CFR 153.20, standard health
plans operating under a BHP are not eligible to participate in the
reinsurance program and the federally-operated risk adjustment program.
With respect to the risk corridor program, the statute, under section
1342 of the Affordable Care Act, precludes standard health plans from
participation. To the extent that a state operating a BHP determines
that, because of the risk-profile of its BHP population, standard
health plans should be included in mechanisms that share risk, the
state would need to use other methods for achieving this goal, such as
electing to submit a proposed methodology to retrospectively risk
adjust.
Comment: One commenter requested that CMS consider, when developing
risk formulas, to adequately capture risk associated with chronic and
behavioral health conditions.
Response: We appreciate the comment, but as we are not developing a
risk adjustment between the BHP and individual market populations for
2015, the issue of risk associated with chronic and behavioral health
conditions does not affect the federal BHP payment. In the event that a
state elects to propose a risk adjustment reconciliation methodology,
we encourage the commenter to engage with the state as it develops such
a methodology.
Comment: One commenter requested clarification on whether the
population health factor will be based on a certain region, or if it
will be a statewide adjustment.
Response: The population health factor will be a state-wide
adjustment unless a state utilizes a different approach approved by CMS
in its risk adjustment reconciliation methodology.
4. Variable 6--Income Reconciliation Factor
Comment: Several commenters recommended that CMS explicitly state
that the PTC repayment caps specified in the Affordable Care Act will
be applied to income reconciliation process in BHP.
Response: We appreciate the commenters' interest in ensuring that
BHP enrollees are not subject to PTC repayments in excess of what would
have otherwise occurred had they enrolled in the Exchange, but want to
assure the commenters that BHP enrollees are not subject to PTC
repayments. Repayments were considered as we developed the income
reconciliation factor. While the repayment caps were included in the
development of this factor, they do not apply to BHP enrollees as there
is no individual income reconciliation process in BHP. BHP enrollees
are not eligible to receive an advance payment of the PTC (APTC), and
as such, they are not subject to the same income reconciliation process
as Exchange consumers.
Comment: One commenter requested that CMS consider the differences
in the income distribution of state BHP populations in estimating the
reconciliation effect.
Response: We appreciate the comment, but we believe that a national
factor is appropriate and we are maintaining it for this year's payment
notice. We note that there is a relatively narrow range of incomes for
BHP-eligible consumers, and thus state-specific income distributions
are unlikely to have a significant impact on the BHP payment.
Comment: Several commenters recommended that CMS adjust the income
reconciliation factor to account for certain eligibility and enrollment
processes. For example, the commenters noted that if a state reviews
databases and/or requires reporting of changes in enrollees' income and
household composition, it would be unfair to apply a full
reconciliation factor to this state since the income reconciliation
factor assumes no income changes in the course of the payment year will
affect eligibility. Commenters did note that a full reconciliation
factor could be applied if a state elected to implement a 12-month
continuous eligibility policy.
Response: The income reconciliation factor has been developed
consistent with the assumption that states will adopt a continuous
eligibility policy. We do not have a basis to develop a prospective
factor if a state does not do so, because state review and
redetermination processes will vary. We will consider revisiting this
assumption in future years for such states, based on available data on
the effectiveness of
[[Page 13894]]
state review and redetermination processes.
5. Variable 7--Tobacco Rating Adjustment Factor
Comment: Based on available state data, one commenter expressed
concern that the BHP population may have higher rates of smoking
relative to the state average. As such, the commenter requested that
CMS apply an adjustment based on state average smoking rates.
Response: We appreciate the comment, and intend to use state-
specific tobacco usage rates by age, based on data available from the
Center for Disease Control and Prevention, which is described in more
detail in section III.D.6 of this final methodology. We do not intend
to make an adjustment based on different rates of tobacco usage by
income level.
Comment: One commenter requested that CMS provide additional detail
on how it will calculate the estimated adjustment when calculating the
CSR and whether the tobacco adjustment factor will be the same factor
statewide, or vary by region.
Response: The tobacco usage rates that are a component of the
tobacco rating adjustment factor are statewide. To the extent that the
difference between the non-tobacco and tobacco premiums varies by
geographic rating area within the state, the tobacco rating adjustment
factor may also vary as well.
6. Variable 8--Factor to Remove Administrative Costs
Comment: Several commenters requested that CMS either provide
states the option to provide a state-specific factor, or to
retrospectively reconcile using the actual medical loss ratio in the
Exchange in a given BHP program year.
Response: We appreciate the comments, but we believe that using the
factor that we proposed to remove administrative costs is the most
appropriate and consistent methodology to calculate the federal BHP
payment. We would clarify that the factor to remove administrative
costs is not precisely the same as the medical loss ratio; the factor
to remove administrative costs also excludes certain plan costs (such
as taxes, fees, and quality improvement activities) that are not
counted towards the total plan revenue when calculating the medical
loss ratio. Thus, the factor to remove administrative costs would
likely be less than the actual or target medical loss ratios.
Comment: Several commenters expressed concern that because states
cannot expend BHP trust funds to cover administrative costs associated
with BHP operations, including this factor in the methodology would
only further reduce the state resources needed to support the operation
of BHP.
Response: While we understand the commenters' concerns regarding
the availability of funding for administrative costs, the statute does
not permit states to use BHP trust funds for any activity beyond the
expenditures related to the provision of the standard health plan
except for lowering premiums and cost sharing and/or providing
additional benefits. We believe that it is appropriate to include this
factor in the funding methodology as it is necessary to remove costs
such as taxes, fees and administrative expenses from the reference
premium in order to determine the costs associated with allowed health
benefits.
7. Variable 10--Induced Utilization Factor
Comment: Several commenters requested that CMS provide a state with
the option to use a different induced utilization factor if it can
demonstrate that utilization is more or less than 12 percent as a
result of the CSRs.
Response: While we appreciate the commenters' interest in ensuring
that the methodology is developed using the most accurate data
available, we are not adopting the commenters' recommendation to permit
such an option to states as we believe that using the factors developed
for the 2015 HHS Payment Notice is the most appropriate methodology for
calculating the federal BHP payment until more experience in BHP and
the Exchange is gained and more data become available.
8. Variable 11--Changes in Actuarial Value
Comment: One commenter requested that CMS allow states to adjust
for the actuarial value difference based on empirical evidence of the
utilization for a typical BHP eligible population in that state.
Response: While we appreciate the commenter's interest in ensuring
that the methodology is developed using the most accurate data
available that is based on market experience, we are not adopting the
commenter's recommendation to permit such an option to states as it is
not consistent with statute. The change in actuarial value, which
determines the value of the CSR, is specified in statute. As such,
there is no basis to make such an adjustment based on state experience.
F. Adjustments for American Indians and Alaska Natives
We proposed to make several adjustments for American Indians and
Alaska Natives when calculating the CSR portion of the federal BHP
payment rate to be consistent with the Exchange rules. For specific
discussions, please refer to the December 23, 2013 proposed methodology
(78 FR 77409).
We received the following comments on the proposed adjustments when
calculating the CSR component for American Indians and Alaska Natives:
Comment: Several commenters supported our proposal to make several
adjustments for American Indians and Alaska Natives when calculating
the CSR portion of the federal BHP payment rate.
Response: We thank the commenters for their support and are
finalizing the proposed provision.
Comment: Consistent with their comments regarding the reference
premium, many commenters requested that CMS provide states with the
option to retrospectively reconcile their federal BHP payments using
actual premiums for the lowest cost bronze plans in the CSR calculation
for American Indians and Alaska Natives.
Response: As discussed further in section III.D.1 of this final
methodology, and elsewhere, we believe that it is appropriate for the
first year of BHP implementation to determine final 2015 federal BHP
payments using actual 2015 premiums, unless otherwise notified by the
state, given the market uncertainties and the infancy of the Exchanges.
Given this, we will also use actual 2015 lowest cost bronze plan
premiums to calculate the CSR component for American Indians and Alaska
Natives.
G. Example Application of the BHP Funding Methodology
In this section, we included an example of the proposed approach
described in the proposed methodology. For specific discussions, please
refer to the December 23, 2013 proposed methodology (78 FR 77410).
We received the following comment on the example application of the
BHP funding methodology:
Comment: One commenter requested clarification with respect to
column 2 in Table 2 of the proposed methodology (78 FR 77411).
Specifically, the commenter believes that the percentages included in
the column were incorrect and requested that the correct values be
included in the final methodology.
Response: We thank the commenter for identifying the incorrect
percentages in Table 2 of the proposed methodology.
[[Page 13895]]
Because the table was simply illustrative, we are not republishing the
table in this final methodology. The incorrect percentages did not
affect the illustrative purpose of the Table, but the correct values
should have ranged from 3.29 to 4.00 percent, instead of 2.29 to 3.00
percent.
H. General/Miscellaneous Comments
We received the following general comments on the proposed federal
BHP funding methodology, as well as comments related to the BHP
proposed rule:
Comment: One commenter expressed support for the proposed
methodology stating that CMS had struck the right balance without
making the methodology unduly complex.
Response: We thank the commenter for their support.
Comment: Several commenters expressed concern that the proposed BHP
funding methodology will not provide sufficient funding to sustain
existing state coverage programs that provide affordable coverage to
individuals enrolled in such programs.
Response: We appreciate the commenters' concerns with respect to
ensuring the availability of affordable coverage and continuing
existing programs to prevent disruptions in care; however, the statute
specifies that the Secretary will determine the BHP funding amount such
that it equals 95 percent of the PTC and CSRs that would have otherwise
been available had BHP enrollees received QHP coverage in an Exchange.
Comment: Several commenters requested that CMS consider offering
states the option of implementing risk corridors as a means of sharing
risk.
Response: We appreciate the commenters' interest in the
implementation of risk corridors in BHP; to the extent that a state
operating a BHP determines that, because of the risk-profile of its BHP
population, standard health plans should be included in mechanisms that
share risk, the state would need to establish state-specific methods
for achieving this goal, such as proposing a risk adjustment
reconciliation methodology. Because section 1342 of the Affordable Care
Act specifically limits the risk corridor program to QHPs, standard
health plans operating under BHP are not eligible to participate. As
such, we are not revising the final methodology to adopt the
commenters' recommendation as the document provides state flexibility
in using other methods to implement mechanisms that share risk.
Comment: Several commenters urged CMS to permit states to use BHP
trust funds to cover the administrative costs associated with
implementing BHP.
Response: This comment is outside the scope of this final
methodology; however, we received an identical comment on the BHP
proposed rule. The statute only permits the expenditure of BHP trust
funds to further reduce premiums and cost sharing and provide
additional benefits to individuals eligible for BHP; more detail is
provided in the BHP final rule.
Comment: One commenter requested that CMS clarify whether BHP trust
funds can be used to provide benefits beyond Essential Health Benefits
(EHBs) and to make supplemental payments to FQHCs if such payments are
not equal to the PPS rate. The commenter also recommended that CMS
require states to use excess funds to lower premiums and cost sharing.
Response: This comment is outside the scope of this final
methodology; however, we received an identical comment on the BHP
proposed rule. The statute does provide states with the flexibility to
expend BHP trust funds to further reduce premiums and cost sharing and
provide additional benefits to individuals eligible for BHP; more
detail is provided in the BHP final rule.
Comment: One commenter requested that CMS require states to align
their BHPs with existing Medicaid regulations and program requirements
to prevent ``churn'' (that is, the temporary shifting of low-income
individuals from one insurance affordability program to another).
Response: This comment is outside the scope of this final
methodology; however, please refer to specific discussions in the BHP
final rule regarding the insurance affordability program coordination
requirements.
Comment: One commenter requested specific guidance on the premiums
and cost sharing imposed on BHP enrollees, including whether these
amounts can vary by income consistent with the premiums and cost
sharing imposed in the Exchange.
Response: This comment is outside the scope of this final
methodology; however, we received an identical comment on the BHP
proposed rule, which is addressed further in the BHP final rule.
Comment: One commenter requested that CMS require states, as a
condition of payment, assure that the BHP cost-sharing protections
applicable to American Indians and Alaska Natives are equivalent to
those these individuals would receive through the Exchange.
Response: This comment is outside the scope of this final
methodology; however, we received an identical comment on the BHP
proposed rule, which is addressed further in the BHP final rule.
Comment: One commenter expressed concern that the federal
regulations and informal guidance implementing the Exchange's network
adequacy standards do not sufficiently acknowledge FQHC's importance as
safety-net providers, and recommended that CMS require the availability
of FQHC services to each enrollee.
Response: This comment is outside the scope of this final
methodology; however, we received an identical comment on the BHP
proposed rule, which is addressed further in the BHP final rule.
Comment: Several commenters recommended that CMS require states to
include FQHCs in their standard health plan contracts and ensure that
FQHCs receive the PPS rate for services rendered.
Response: This comment is outside the scope of this final
methodology; however, we received an identical comment on the BHP
proposed rule, which is addressed further in the BHP final rule.
III. Provisions of the Final Methodology
A. Overview of the Funding Methodology and Calculation of the Payment
Amount
Section 1331(d)(3) of the Affordable Care Act directs the Secretary
to consider several factors when determining the federal BHP payment
amount, which, as specified in the statute, must equal 95 percent of
the value of the PTC and CSRs that BHP enrollees would have been
provided had they enrolled in a QHP through an Exchange. Thus, the BHP
funding methodology is designed to calculate the PTC and CSRs as
consistently as possible and in general alignment with the methodology
used by Exchanges to calculate the advance payments of the PTC and
CSRs, and by the IRS to calculate final PTCs. In general, we rely on
values for factors in the payment methodology specified in statute or
other regulations as available, and we have developed values for other
factors not otherwise specified in statute, or previously calculated in
other regulations, to simulate the values of the PTC and CSRs that BHP
enrollees would have received if they had enrolled in QHPs offered
through an Exchange. In accordance with section 1331(d)(3)(A)(iii) of
the Affordable Care Act, the final funding methodology must be
certified by the Chief Actuary of CMS, in consultation with the Office
of Tax Analysis of the Department of the
[[Page 13896]]
Treasury, as having met the requirements of section 1331(d)(3)(A)(ii)
of the Affordable Care Act.
Section 1331(d)(3)(A)(ii) of the Affordable Care Act specifies that
the payment determination ``shall take into account all relevant
factors necessary to determine the value of the premium tax credits and
cost-sharing reductions that would have been provided to eligible
individuals . . . including the age and income of the enrollee, whether
the enrollment is for self-only or family coverage, geographic
differences in average spending for health care across rating areas,
the health status of the enrollee for purposes of determining risk
adjustment payments and reinsurance payments that would have been made
if the enrollee had enrolled in a qualified health plan through an
Exchange, and whether any reconciliation of the credit or cost-sharing
reductions would have occurred if the enrollee had been so enrolled.''
The payment methodology takes each of these factors into account.
We have developed a methodology such that the total federal BHP
payment amount will be based on multiple ``rate cells'' in each state.
Each ``rate cell'' represents a unique combination of age range,
geographic rating area, coverage category (for example, self-only or
two-adult coverage through BHP), household size, and income range as a
percentage of FPL. Thus, there are distinct rate cells for individuals
in each coverage category within a particular age range who reside in a
specific geographic rating area and are in households of the same size
and income range. We note that for states that do not use age as a
rating factor in the individual market, we will develop BHP payment
rates to be consistent with those states' rating rules. Thus, in the
case of a state that does not use age as a rating factor, the BHP
payment rates would not vary by age.
The federal BHP payment rate for each rate cell will be calculated
in two parts. The first part will equal 95 percent of the estimated PTC
that would have been paid if a BHP enrollee in that rate cell had
instead enrolled in a QHP in the Exchange. The second part will equal
95 percent of the estimated CSR payment that would have been made if a
BHP enrollee in that rate cell had instead enrolled in a QHP in the
Exchange. These two parts will be added together and the total rate for
that rate cell will equal the sum of the PTC and CSR rates.
To calculate the total federal BHP payment, Equation (1) will be
used to calculate the estimated PTC for individuals in each rate cell
and Equation (2) will be used to calculate the estimated CSR payments
for individuals in each rate cell. By applying the equations separately
to rate cells based on age, income and other factors, we will have
taken those factors into account in the calculation. In addition, the
equations incorporate the estimated experience of individuals in each
rate cell if enrolled in coverage through the Exchange, taking into
account additional relevant variables. Each of the variables in the
equations is defined in the following sections, and further detail is
provided later in this section of the payment methodology.
In addition, we describe how we will calculate the adjusted
reference premium (described later in this section of the payment
methodology) that is used in Equations (1) and (2). This is defined in
Equation (3a) and Equation (3b).
1. Equation 1: Estimated PTC by Rate Cell
The estimated PTC, on a per enrollee basis, will be calculated for
each rate cell for each state based on age range, geographic rating
area, coverage category, household size, and income range. The PTC
portion of the rate will be calculated in a manner consistent with the
methodology used to calculate the PTC for persons enrolled in a QHP,
with three adjustments. First, the PTC portion of the rate for each
rate cell will represent the mean, or average, expected PTC that all
persons in the rate cell would receive, rather than being calculated
for each individual enrollee. Second, the reference premium used to
calculate the PTC (described in more detail later in the section) will
be adjusted for BHP population health status (and, in the case of a
state that elects to use 2014 premiums for the basis of the BHP federal
payment, for the projected change in the premium from the current year
(that is, the year of the final payment methodology) to the following
year, to which the rates announced in the final payment methodology
would apply.) These adjustments are described in Equation (3a) and
Equation (3b). Third, the PTC will be adjusted prospectively to reflect
the mean, or average, net expected impact of income reconciliation on
the combination of all persons enrolled in BHP; this adjustment, as
described further below, will account for the estimated impact on the
PTC that would have occurred had such reconciliation been performed.
Finally, the rate will be multiplied by 95 percent, consistent with
section 1331(d)(3)(A)(i) of the Affordable Care Act. We note that in
the situation where the average income contribution of an enrollee
would exceed the adjusted reference premium, we will calculate the PTC
to be equal to 0 and not let the PTC be negative. Equation (1) is
defined as:
[GRAPHIC] [TIFF OMITTED] TR12MR14.005
PTCa,g,c,h,i = Premium tax credit portion of BHP payment rate
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
h = Household size
i = Income range (as percentage of FPL)
ARPa,g,c = Adjusted reference premium
Ih,i,j = Income (in dollars per month) at each 1 percentage-point
increment of FPL
j = jth percentage-point increment FPL
n = Number of income increments used to calculate the mean PTC
PTCFh,i,j = Premium Tax Credit Formula percentage
IRF = Income reconciliation factor
2. Equation 2: Estimated CSR Payment by Rate Cell
The CSR portion of the rate will be calculated for each rate cell
for each state based on age range, geographic rating area, coverage
category, household size, and income range defined as a percentage of
FPL. The CSR portion of the rate will be calculated in a manner
consistent with the methodology used to calculate the CSR advance
payments for persons enrolled in a QHP, as described in the HHS Notice
of Benefit and Payment Parameters for 2015 proposed rule, with three
principal adjustments. (We will make separate calculations that include
different adjustments for American Indian Alaska Native BHP enrollees,
as described in section III.E of this final
[[Page 13897]]
methodology.) For the first adjustment, the CSR rate, like the PTC
rate, will represent the mean, or average, expected CSR subsidy that
would be paid on behalf of all persons in the rate cell, instead of the
CSR subsidy being calculated for each individual enrollee. Second, this
calculation will be based on the adjusted reference premium, as
described below. Third, as explained earlier, this equation uses an
adjusted reference premium that reflects premiums charged to non-
tobacco users, rather than the actual premium that is charged to
tobacco users to calculate CSR advance payments for tobacco users
enrolled in a QHP. Accordingly, the equation includes a tobacco rating
adjustment factor that will account for BHP enrollees' estimated
tobacco-related health costs that are outside the premium charged to
non-tobacco-users. Finally, the rate will be multiplied by 95 percent,
as provided in section 1331(d)(3)(A)(i) of the Affordable Care Act.
Equation (2) is defined as:
[GRAPHIC] [TIFF OMITTED] TR12MR14.006
CSRa,g,c,h,i = Cost-sharing reduction subsidy portion of BHP payment
rate
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
h = Household size
i = Income range (as percentage of FPL)
ARPa,g,c = Adjusted reference premium
TRAF = Tobacco rating adjustment factor
FRAC = Factor removing administrative costs
AV = Actuarial value of plan (as percentage of allowed benefits
covered by the applicable QHP without a cost-sharing reduction
subsidy)
IUFh,i = Induced utilization factor
[Delta]AVh,i = Change in actuarial value (as percentage of allowed
benefits)
3. Equation 3a and Equation 3b: Adjusted Reference Premium Variable
(Used in Equations 1 and 2)
As part of these calculations for both the PTC and CSR components,
the value of the adjusted reference premium is described, as specified
in Equation (3a) (except in the case of a state that elects to use the
2014 premiums as the basis for the federal BHP payment, as described in
section III.F of this final methodology, and in which case Equation
(3b) will be used). The adjusted reference premium will be equal to the
reference premium, which will be based on the second lowest cost silver
plan premium in 2015, multiplied by the BHP population health factor
(described in section III.D of this final methodology), which will
reflect the projected impact that enrolling BHP-eligible individuals in
QHPs on an Exchange would have had on the average QHP premium.
[GRAPHIC] [TIFF OMITTED] TR12MR14.007
ARPa,g,c = Adjusted reference premium
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
RPa,g,c = Reference premium
PHF = Population health factor
In the case of a state that elects to use the reference premium
based off of the 2014 premiums (as described in section III.F of this
final methodology), the value of the adjusted reference premium will be
calculated using Equation (3b). The adjusted reference premium will be
equal to the reference premium, which would be based on the second
lowest cost silver plan premium in 2014, multiplied by the BHP
population health factor (described in section III.D of this final
methodology), which will reflect the projected impact that enrolling
BHP-eligible individuals in QHPs on an Exchange would have had on the
average QHP premium, and by the premium trend factor, which will
reflect the projected change in the premium level between 2014 and 2015
(including the estimated impact of changes resulting from the
transitional reinsurance program established in section 1341 of the
Affordable Care Act).
[GRAPHIC] [TIFF OMITTED] TR12MR14.008
ARPa,g,c = Adjusted reference premium
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
RPa,g,c = Reference premium
PHF = Population health factor
PTF = Premium trend factor
4. Equation 4: Determination of Total Monthly Payment for BHP Enrollees
in Each Rate Cell
In general, the rate for each rate cell will be multiplied by the
number of BHP enrollees in that cell (that is, the number of enrollees
that meet the criteria for each rate cell) to calculate the total
monthly BHP payment. This calculation is shown in Equation 4.
[GRAPHIC] [TIFF OMITTED] TR12MR14.009
PMT = Total monthly BHP payment
PTCa,g,c,h,i = Premium tax credit portion of BHP payment rate
CSRa,g,c,h,i = Cost-sharing reduction subsidy portion of BHP payment
rate
Ea,g,c,h,i = Number of BHP enrollees
a = Age range
g = Geographic rating area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
h = Household size
i = Income range (as percentage of FPL)
[[Page 13898]]
B. Federal BHP Payment Rate Cells
We will require that a state implementing BHP provide us an
estimate of the number of BHP enrollees it projects will enroll in the
upcoming BHP program year, by applicable rate cell, prior to the first
quarter of program operations. Upon our approval of such estimates as
reasonable, the estimates will be used to calculate the prospective
payment for the first and subsequent quarters of program operation
until the state has provided us actual enrollment data. These data will
be required to calculate the final BHP payment amount, and make any
necessary reconciliation adjustments to the prior quarters' prospective
payment amounts due to differences between projected and actual
enrollment. Subsequent quarterly deposits to the state's trust fund
will be based on the most recent actual enrollment data submitted to
us. Procedures will ensure that federal payments to a state reflect
actual BHP enrollment during a year, within each applicable category,
and prospectively determined federal payment rates for each category of
BHP enrollment, with such categories defined in terms of age range,
geographic rating area, coverage status, household size, and income
range, as explained above.
We will require the use of certain rate cells as part of the
federal BHP payment methodology. For each state, we will use rate cells
that separate the BHP population into separate cells based on the
following five factors:
Factor 1--Age: We will separate enrollees into rate cells by age,
using the following age ranges that capture the widest variations in
premiums under HHS's Default Age Curve: \1\
---------------------------------------------------------------------------
\1\ This curve is used to implement the Affordable Care Act's
3:1 limit on age-rating in states that do not create an alternative
rate structure to comply with that limit. The curve applies to all
individual market plans, both within and outside the Exchange. The
age bands capture the principal allowed age-based variations in
premiums as permitted by this curve. More information can be found
at https://www.cms.gov/CCIIO/Resources/Files/Downloads/market-reforms-guidance-2-25-2013.pdf. Both children and adults under age
21 are charged the same premium. For adults age 21-64, the age bands
in this methodology divide the total age-based premium variation
into the three most equally-sized ranges (defining size by the ratio
between the highest and lowest premiums within the band) that are
consistent with the age-bands used for risk-adjustment purposes in
the HHS-Developed Risk Adjustment Model. For such age bands, see
Table 5, ``Age-Sex Variables,'' in HHS-Developed Risk Adjustment
Model Algorithm Software, May 7, 2013, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ra_tables_04_16_2013xlsx.xlsx.
---------------------------------------------------------------------------
Ages 0-20.
Ages 21-34.
Ages 35-44.
Ages 45-54.
Ages 55-64.
Factor 2--Geographic rating area: For each state, we will separate
enrollees into rate cells by geographic rating areas within which a
single reference premium is charged by QHPs offered through the state's
Exchange. Multiple, non-contiguous geographic rating areas may be
incorporated within a single cell, so long as those areas share a
common reference premium.\2\
---------------------------------------------------------------------------
\2\ For example, a cell within a particular state might refer to
``County Group 1,'' ``County Group 2,'' etc., and a table for the
state would list all the counties included in each such group. These
geographic areas are consistent with the geographic rating areas
established under the 2014 Market Reform Rules. They also reflect
the service area requirements applicable to qualified health plans,
as described in 45 CFR Sec. 155.1055, except that service areas
smaller than counties are addressed as explained below.
---------------------------------------------------------------------------
Factor 3--Coverage status: We will separate enrollees into rate
cells by coverage status, reflecting whether an individual is enrolled
in self-only coverage or persons are enrolled in family coverage
through BHP, as provided in section 1331(d)(3)(A)(ii) of the Affordable
Care Act. Among recipients of family coverage through BHP, separate
rate cells, as explained below, will apply based on whether such
coverage involves two adults alone or whether it involves children.
Factor 4--Household size: We will separate enrollees into rate
cells by household size that states use to determine BHP enrollees'
income as a percentage of the FPL under proposed 42 CFR 600.320. We
will require separate rate cells for several specific household sizes.
For each additional member above the largest specified size, we will
publish instructions on how we will calculate the appropriate payment
rate based on data for the rate cell with the closest specified
household size. We will publish rates for separate rate cells for
household sizes 1, 2, 3, 4, and 5, as unpublished analyses of American
Community Survey data conducted by the Urban Institute (which take into
account unaccepted offers of employer-sponsored insurance, as well as
income, Medicaid and CHIP eligibility, citizenship and immigration
status, and current health coverage status) find that less than 1
percent of all BHP-eligible persons live in households of size 5 or
greater.
Factor 5--Income: For households of each applicable size, we will
create separate rate cells by income range, as a percentage of FPL. The
PTC that a person would receive if enrolled in a QHP varies by income,
both in level and as a ratio to the FPL, and the CSR varies by income
as a percentage of FPL. Thus, separate rate cells will be used to
calculate federal BHP payment rates to reflect different bands of
income measured as a percentage of FPL. We will use the following
income ranges, measured as a ratio to the FPL:
0 to 50 percent of the FPL.
51 to 100 percent of the FPL.
101 to 138 percent of the FPL.\3\
---------------------------------------------------------------------------
\3\ The three lowest income ranges would be limited to lawfully
present immigrants who are ineligible for Medicaid because of
immigration status.
---------------------------------------------------------------------------
139 to 150 percent of the FPL.
151 to 175 percent of the FPL.
176 to 200 percent of the FPL.
These rate cells will only be used to calculate the federal BHP
payment amount. A state implementing BHP is not be required to use
these rate cells or any of the factors in these rate cells as part of
the state payment to the standard health plans participating in BHP or
to help define BHP enrollees' covered benefits, premium costs, or out-
of-pocket cost-sharing levels.
We will use the calculated rate for each rate cell to determine the
federal BHP payment, rather than varying such rates to correspond to
each individual BHP enrollee's age and income level. We believe that
the proposed approach will increase the administrative feasibility of
making federal BHP payments and provide an accurate and reasonable
methodology for calculating the total federal BHP payment. We believe
that this approach should not significantly change federal payment
amounts, as within applicable ranges, the BHP-eligible population is
distributed relatively evenly.
C. Sources and State Data Considerations
To the extent possible, we will use data submitted to the federal
government by QHP issuers seeking to offer coverage through an Exchange
to perform the calculations that determine federal BHP payment cell
rates.
States operating a State Based Exchange (SBE) in the individual
market, however, must provide certain data, including premiums for
second lowest cost silver plans, by geographic rating area, in order
for CMS to calculate the federal BHP payment rates in those states. An
SBE state interested in obtaining the applicable federal BHP payment
rates for its state must submit such data accurately, completely, and
as specified by CMS, by no later than November 1, 2014, in order for
CMS to calculate the applicable rates for 2015. If additional state
data (that is, in addition to the second lowest cost silver plan
premium data) are needed to determine the federal BHP payment
[[Page 13899]]
rate, such data must be submitted in a timely manner, and in a format
specified by CMS to support the development and timely release of
annual BHP payment notices. The specifications for data collection to
support the development of BHP payment rates for 2015 will be published
in a separate CMS notice.
If a state operating a SBE provides the necessary data accurately,
completely, and as specified by CMS, but after the date specified
above, we anticipate publishing federal payment rates for such a state
in a subsequent Payment Notice. As noted in the BHP proposed rule, a
state may elect to implement its BHP after a program year has begun. In
such an instance, we propose that the state, if operating a SBE, submit
its data no later than 30 days after the Blueprint submission for CMS
to calculate the applicable federal payment rates. We further propose
that the BHP Blueprint itself must be submitted for Secretarial
certification with an effective date of no sooner than 120 days after
submission of the BHP Blueprint. In addition, the state must ensure
that its Blueprint include a detailed description of how the state will
coordinate with other insurance affordability programs to transition
and transfer BHP-eligible individuals out of their existing QHP
coverage, consistent with the requirements set forth in proposed in 42
CFR 600.330 and 600.425. We believe that this 120-day period is
necessary to establish the requisite administrative structures and
ensure that all statutory and regulatory requirements are satisfied.
D. Discussion of Specific Variables Used in Payment Equations
1. Reference Premium (RP)
To calculate the estimated PTC that would be paid if individuals
enrolled in QHPs through the Exchange, we must calculate a reference
premium (RP) because the PTC is based, in part, on the premiums for the
second lowest cost silver plan as explained in section II.C.5 of this
final methodology regarding the Premium Tax Credit Formula (PTCF).
Accordingly, for the purposes of calculating the BHP payment rates, the
reference premium, in accordance with 26 U.S.C. 36B(b)(3)(C), is
defined as the adjusted monthly premium for an applicable second lowest
cost silver plan. The applicable second lowest cost silver plan is
defined in 26 U.S.C. 36B(b)(3)(B) as the second lowest cost silver plan
of the individual market in the rating area in which the taxpayer
resides, which is offered through the same Exchange. We will use the
adjusted monthly premium for an applicable second lowest cost silver
plan in 2015 as the reference premium (except in the case of a state
that elects to use the 2014 premium as the basis for the federal BHP
payment, as described in section III.F of this final methodology).
The reference premium will be the premium applicable to non-tobacco
users. This is consistent with the provision in 26 U.S.C. 36B(b)(3)(C)
that bases the PTC on premiums that are adjusted for age alone, without
regard to tobacco use, even for states that allow insurers to vary
premiums based on tobacco use pursuant to 42 U.S.C. 300gg(a)(1)(A)(iv).
Consistent with the policy set forth in 26 CFR 1.36B-3(f)(6) to
calculate the PTC for those enrolled in a QHP through an Exchange, we
will not update the payment methodology, and subsequently the federal
BHP payment rates, in the event that the second lowest cost silver plan
used as the reference premium changes (that is, terminates or closes
enrollment during the year).
The applicable second lowest cost silver plan premium will be
included in the BHP payment methodology by age range, geographic area,
and self-only or applicable category of family coverage obtained
through BHP.
American Indians and Alaska Natives are eligible for a full cost
sharing subsidy regardless of the plan they select. We assume that
American Indians and Alaska Natives would be more likely to enroll in
bronze plans as a result; thus, for American Indian/Alaska Native BHP
enrollees, we will use the lowest cost bronze plan as the basis for the
reference premium for the purposes of calculating the CSR portion of
the federal BHP payment as described further in section III.E of this
final methodology.
The applicable age bracket will be one dimension of each rate cell.
We have assumed a uniform distribution of ages and will estimate the
average premium amount within each rate cell. We believe that assuming
a uniform distribution of ages within these ranges is a reasonable
approach and would produce a reliable determination of the PTC and CSR
components. We also believe this approach would avoid potential
inaccuracies that could otherwise occur in relatively small payment
cells if age distribution were measured by the number of persons
eligible or enrolled. We will also use the same geographic rating areas
as specified for the Exchanges in each state within which the same
second lowest cost silver level premium is charged. Although plans are
allowed to serve geographic rating areas smaller than counties after
obtaining our approval, for purposes of defining BHP payment rate
cells, no geographic area will be smaller than a county. We do not
believe that this assumption will have a significant impact on federal
payment levels and it would likely simplify both the calculation of BHP
payment rates and the operation of BHP.
Finally, in terms of the coverage category, federal payment rates
will only recognize self-only and two-adult coverage, with exceptions
that account for children who are potentially eligible for BHP. First,
in states that set the upper income threshold for children's Medicaid
and CHIP eligibility below 200 percent of FPL (based on modified
adjusted gross income), children in households with incomes between
that threshold and 200 percent of FPL would be potentially eligible for
BHP. Currently, the only states in this category are Arizona, Idaho,
and North Dakota.\4\ Second, BHP would include lawfully present
immigrant children with incomes at or below 200 percent of FPL in
states that have not exercised the option under the sections
1903(v)(4)(A)(ii) and 2107(e)(1)(E) of the Social Security Act (the
Act) to qualify all otherwise eligible, lawfully present immigrant
children for Medicaid and CHIP. States that fall within these
exceptions would be identified based on their Medicaid and CHIP State
Plans, and the rate cells would include appropriate categories of BHP
family coverage for children. In other states, BHP eligibility will
generally be restricted to adults, since children who are citizens or
lawfully present immigrants and who live in households with incomes at
or below 200 percent of FPL will qualify for Medicaid or CHIP and thus
be ineligible for BHP under section 1331 (e)(1)(C) of the Affordable
Care Act, which limits BHP to individuals who are ineligible for
minimum essential coverage (as defined in section 5000A(f) of the
Internal Revenue Code of 1986).
---------------------------------------------------------------------------
\4\ CMCS. ``State Medicaid and CHIP Income Eligibility Standards
Effective January 1, 2014.''
---------------------------------------------------------------------------
2. Population Health Factor (PHF)
We considered including an explicit population health factor in
each rate cell that varies based on the characteristics of BHP
enrollees within that cell, but we are not proposing such a variable,
for several reasons. We believe that because BHP-eligible consumers'
are eligible to enroll in QHPs in 2014, the 2014 QHP premiums already
account for the health status of BHP-eligible consumers, as
[[Page 13900]]
explained in further detail below. Also, the function of this factor is
to provide a reference premium amount that reflects the premiums that
QHPs would have charged without the implementation of BHP, taking into
account both the risk profile of BHP-eligible consumers in the state
and the operation of risk-adjustment and reinsurance mechanisms in the
Exchanges. Our proposed approach to the population health factor seeks
to achieve this goal based on the characteristics of the state's BHP-
eligible consumers as a whole.
In the BHP proposed rule, we described in preamble what we believe
to be the most appropriate approach to account for potential
differences in health status between BHP enrollees and consumers in the
individual market, including those obtaining coverage through the
Exchange--that is, including a risk adjustment factor in the BHP
funding methodology. We believe that it is appropriate to consider
whether or not to develop a population health adjustment to account for
potential differences in health status between persons eligible for BHP
and those enrolled in the individual market, as the two populations may
not have the same average health status.
Accordingly, we have considered applying a population-wide
adjustment for health status in the BHP payment calculation to account
for the impact on a state's Exchange premiums, hence the PTC and the
value of CSRs, of changes to average risk levels in the state's
individual market that result from BHP implementation. Our proposed
approach to the adjustment for population health status seeks to have
the federal BHP payment reflect the premium that would have been
charged if BHP-eligible consumers were allowed to purchase QHPs in
their state's Exchange, rather than the premium that is being charged
in the Exchange without the inclusion of BHP consumers. This factor
would be greater than 1.00 if BHP enrollees in a state are, on average,
in poorer health status than those covered through the state's
individual market, and thus Exchange premiums would have been higher
had the state not implemented BHP. This factor would be less than 1.00
if BHP enrollees in a state are, on average, in better health status
than those covered through the state's individual market, and thus
Exchange premiums would have been lower if the state had not
implemented BHP.
We proposed that the population health adjustment for the 2015 BHP
program year would equal 1.00. Most BHP-eligible consumers will be able
to purchase coverage in the individual market during 2014, or the
``measurement year''--that is, the year that precedes implementation of
BHP and that provides the basis for estimating unadjusted reference
premiums; thus, making no adjustment to the premiums for differences in
BHP-eligible enrollees' health would be appropriate. As a result, BHP-
eligible consumers' health status is already included in the premiums
that would be used to calculate the federal BHP payment rates.
In states where significant numbers of BHP-eligible persons are
covered outside of the individual market in 2014, it may be possible to
estimate differences in expected health status between persons who are
eligible for BHP and persons otherwise eligible for coverage in the
individual market. However, we believe that the different levels of
federal subsidies based on household income for coverage for persons
enrolled in a QHP through an Exchange may have a substantial influence
on the participation rate of enrollees. This may result in relatively
healthier persons with higher levels of subsidies enrolling in
coverage, and this effect may partially or entirely offset some other
differences in the health status between BHP-eligible persons and those
otherwise covered in the individual market.
On the Exchanges, premiums in most states will vary based on age,
which research has shown is directly correlated to average health cost.
Because the reference premium used to calculate BHP federal payment
rates will vary by age, some of the difference in average health costs
would be addressed by this approach to calculating the BHP payment.
However, this does not further simplify the task of estimating the
remaining adjustment needed to compensate for any impact of BHP
implementation on average risk levels in the state's individual market.
Given these analytic challenges, the existing role played by age-rated
premiums in compensating for risk, and the limited data about Exchange
coverage and the characteristics of BHP-eligible consumers that will
available by the time we establish federal payment rates for 2015, we
believe that the most appropriate adjustment for 2015 would be 1.00,
including in states that cover BHP-eligible persons outside the
individual market in 2014. In the event that states believe this
adjustment is not reflective of the health status of their BHP
populations, we are providing states with the option, as described
further in section III.G, to include a retrospective population health
status adjustment in the certified methodology, which is subject to CMS
review and approval. Regardless of whether a state elects to include a
retrospective population health status adjustment, we anticipate that,
in future years, when additional data become available about Exchange
coverage and the characteristics of BHP enrollees, we may estimate this
factor differently.
Finally, while the statute requires consideration of risk
adjustment payments and reinsurance payments insofar as they would have
affected the PTC and CSRs that would have been provided to BHP-eligible
individuals had they enrolled in QHPs, this does not mean that a BHP
program's standard health plans receive such payments. As explained in
the BHP final rule, BHP standard health plans are not included in the
risk adjustment program operated by HHS on behalf of states. Further,
standard health plans do not qualify for payments from the transitional
reinsurance program established under section 1341 of the Affordable
Care Act.\5\ To the extent that a state operating a BHP determines
that, because of the distinctive risk profile of BHP-eligible
consumers, BHP standard health plans should be included in mechanisms
that share risk with other plans in the state's individual market, the
state would need to use other methods for achieving this goal.
---------------------------------------------------------------------------
\5\ See 45 CFR 153.400(a)(2)(iv) (BHP standard health plans are
not required to submit reinsurance contributions), 153.20
(definition of ``Reinsurance-eligible plan'' as not including
``health insurance coverage not required to submit reinsurance
contributions''), Sec. 153.230(a) (reinsurance payments under the
national reinsurance parameters are available only for
``Reinsurance-eligible plans'').
---------------------------------------------------------------------------
3. Income (I)
Household income is a significant determinant of the amount of the
PTC and CSRs that are provided for persons enrolled in a QHP through
the Exchange. Accordingly, the BHP payment methodology incorporates
income into the calculations of the payment rates through the use of
income-based rate cells. We are defining income in accordance with the
definition of modified adjusted gross income in 26 U.S.C. 36B(d)(2)(B)
and consistent with the definition in 45 CFR 155.300. Income will be
measured relative to the FPL, which is updated periodically in the
Federal Register by the Secretary of Health and Human Services under
the authority of 42 U.S.C. 9902(2), based on annual changes in the
consumer price index for all urban consumers (CPI-U). In this
methodology, household size and income as a percentage of FPL would be
[[Page 13901]]
used as factors in developing the rate cells. We will use the following
income ranges measured as a percentage of FPL: \6\
---------------------------------------------------------------------------
\6\ These income ranges and this analysis of income apply to the
calculation of the PTC. Many fewer income ranges and a much simpler
analysis apply in determining the value of CSRs, as specified below.
---------------------------------------------------------------------------
0-50 percent.
51-100 percent.
101-138 percent.
139-150 percent.
151-175 percent.
176-200 percent.
We will assume a uniform income distribution for each federal BHP
payment cell. We believe that assuming a uniform income distribution
for the income ranges proposed would be reasonably accurate for the
purposes of calculating the PTC and CSR components of the BHP payment
and would avoid potential errors that could result if other sources of
data were used to estimate the specific income distribution of persons
who are eligible for or enrolled in BHP within rate cells that may be
relatively small. Thus, when calculating the mean, or average, PTC for
a rate cell, we will calculate the value of the PTC at each one
percentage point interval of the income range for each federal BHP
payment cell and then calculate the average of the PTC across all
intervals. This calculation will rely on the PTC formula described
below.
As the PTC for persons enrolled in QHPs would be calculated based
on their income during the open enrollment period, and that income
would be measured against the FPL at that time, we will adjust the FPL
by multiplying the FPL by a projected increase in the CPI-U between the
time that the BHP payment rates are published and the QHP open
enrollment period, if the FPL is expected to be updated during that
time. In that case, the projected increase in the CPI-U would be based
on the intermediate inflation forecasts from the most recent OASDI and
Medicare Trustees Reports.\7\
---------------------------------------------------------------------------
\7\ See Table IV A1 from the 2013 reports in https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf.
---------------------------------------------------------------------------
4. Premium Tax Credit Formula (PTCF)
In Equation 1, we will use the formula described in 26 U.S.C.
36B(b) to calculate the estimated PTC that would be paid on behalf of a
person enrolled in a QHP on an Exchange as part of the BHP payment
methodology. This formula is used to determine the amount of premium
that an individual or household would be required to pay if they had
enrolled in the SLCSP on an Exchange, which is based on (A) the
household income; (B) the household income measured as a percentage of
FPL; and (C) the schedule specified in 26 U.S.C. 36B(b)(3)(A) and shown
below. The difference between the amount of premium a person or a
household is required to pay and the adjusted monthly premium for the
applicable second lowest cost silver plan is the amount of the PTC that
would be allowed to the enrollee.
The PTC amount provided for a person enrolled in a QHP through an
Exchange is calculated in accordance with the methodology described in
26 U.S.C. 36B(b)(2) as the amount equal to the lesser of: (A) The
monthly premiums for such month of one or more QHPs offered in the
individual market within a state that cover the taxpayer, the
taxpayer's spouse, or any dependent (as defined in 26 U.S.C. 152) of
the taxpayer and that the taxpayer and spouse or dependents were
enrolled in through an Exchange; or (B) the excess (if any) of (i) the
adjusted monthly premium for such month for the applicable second
lowest cost silver plan for the taxpayer over (ii) an amount equal to
\1/12\ of the product of the applicable percentage (described below)
and the taxpayer's household income for the taxable year.
The applicable percentage is defined in 26 U.S.C. 36B(b)(3)(A) and
26 CFR 1.36B-3(g) as the percentage that applies to a taxpayer's
household income that is within an income tier specified in the table,
increasing on a sliding scale in a linear manner from an initial
premium percentage to a final premium percentage specified in the table
(see Table 1):
Table 1--Household's Contribution to Health Insurance Premium as a
Percentage of Income
------------------------------------------------------------------------
In the case of household income
(expressed as a percent of poverty The initial The final premium
line) within the following income premium percentage is--
tier: percentage is--
------------------------------------------------------------------------
Up to 133%........................ 2.0 2.0
133% but less than 150%........... 3.0 4.0
150% but less than 200%........... 4.0 6.3
200% but less than 250%........... 6.3 8.05
250% but less than 300%........... 8.05 9.5
300% but not more than 400%....... 9.5 9.5
------------------------------------------------------------------------
These are the applicable percentages for CY 2015. The applicable
percentages will be updated in future years in accordance with 26
U.S.C. 36B(b)(3)(A)(ii).
5. Income Reconciliation Factor (IRF)
For persons enrolled in a QHP through an Exchange who receive APTC,
there will be an annual reconciliation following the end of the year to
compare such payment to the correct amount of PTC based on household
circumstances shown on the federal income tax return. Any difference
between the latter amounts and the credit received during the year
would either be paid to the taxpayer (if the taxpayer received less in
APTC than her or she was entitled to receive) or charged to the
taxpayer as additional tax (if the taxpayer received more in APTC than
he or she was entitled to receive, subject to any limitations in
statute or regulation), as provided in 26 U.S.C. 36B(f).
Section 1331(e)(2) of the Affordable Care Act specifies that
individuals enrolled in BHP may not be treated as a qualified
individual under section 1312 eligible for enrollment in a QHP offered
through an Exchange. Therefore, BHP enrollees are not eligible to
receive an APTC to purchase coverage in the Exchange. Because they do
not receive APTC, BHP enrollees are not subject to the same income
reconciliation as Exchange consumers. Nonetheless, there may still be
differences between a BHP enrollee's household income reported at the
beginning of the year and the actual income over the year. These may
include small changes (reflecting changes in hourly wage rates, hours
worked per week, and other fluctuations in income during the year) and
large
[[Page 13902]]
changes (reflecting significant changes in employment status, hourly
wage rates, or substantial fluctuations in income). There may also be
changes in household composition. Thus, we believe that using
unadjusted income as reported prior to the BHP program year may result
in calculations of estimated PTC that are inconsistent with the actual
incomes of BHP enrollees during the year. Even if the BHP program
adjusts household income determinations and corresponding claims of
federal payment amounts based on household reports during the year or
data from third-party sources, such adjustments may not fully capture
the effects of tax reconciliation that BHP enrollees would have
experienced had they been enrolled in a QHP through an Exchange and
received APTC.
Therefore, we are including an income adjustment factor in Equation
1 that would account for the difference between calculating estimated
PTC using: (a) Income relative to FPL as determined at initial
application and potentially revised mid-year, under proposed 42 CFR
600.320, for purposes of determining BHP eligibility and claiming
federal BHP payments; and (b) actual income relative to FPL received
during the plan year, as it would be reflected on individual federal
income tax returns. This adjustment will prospectively estimate the
average effect of income reconciliation aggregated across the BHP
population had those BHP enrollees been subject to tax reconciliation
after receiving APTC for coverage provided through QHPs. For 2015, the
reconciliation effects are based on tax data for 2 years, reflecting
income and tax unit composition changes over time among BHP-eligible
individuals. This estimate has been developed by the Office of Tax
Analysis (OTA) at the Department of the Treasury.
The OTA maintains a model that combines detailed tax and other
data, including Exchange enrollment and PTC claimed, to project
Exchange premiums, enrollment, and tax credits. For each enrollee, this
model compares the APTC estimated at the point of enrollment with the
PTC based on household income and family size reported at the end of
the tax year. The former reflects the determination using enrollee
information furnished by the applicant. The latter would reflect the
PTC eligibility based on information on the tax return, which would
have been determined if the individual had not enrolled in BHP. The
ratio of the reconciled PTC to the initial determination of PTC will be
used as the income reconciliation factor in Equation (1) for estimating
the PTC portion of the BHP payment rate.
For 2015, OTA has estimated that the income reconciliation factor
for states that have implemented the Medicaid eligibility expansion to
cover adults up to 133 percent of the FPL will be 94.52 percent, and
for states that have not implemented the Medicaid eligibility expansion
and do not cover adults up to 133 percent of the FPL will be 95.32
percent. Given that a state may implement the Medicaid eligibility
expansion at any time during the year, and potentially after BHP
payment rates have been developed, we will use the average of these two
factors (94.92 percent) for 2015.
6. Tobacco Rating Adjustment Factor (TRAF)
As described above, the reference premium is estimated, for
purposes of determining both the PTC and related federal BHP payments,
based on premiums charged for non-tobacco users, including in states
that allow premium variations based on tobacco use, as provided in 42
U.S.C. 300gg(a)(1)(A)(iv). In contrast, as proposed in the HHS Notice
of Benefit and Payment Parameters for 2015, the CSR advance payments
are based on the total premium for a policy, including any adjustment
for tobacco use. Accordingly, we will incorporate a tobacco rating
adjustment factor into Equation 2 that reflects the average percentage
increase in health care costs that results from tobacco use among the
BHP-eligible population and that would not be reflected in the premium
charged to non-users, subject to the tobacco rating factor adjustments
allowed by each state. This factor will also take into account the
estimated proportion of tobacco users among BHP-eligible consumers.
To estimate the average effect of tobacco use on health care costs
(not reflected in the premium charged to non-users), we will calculate
the ratio between premiums that silver level QHPs charge for tobacco
users to the premiums they charge for non-tobacco users at selected
ages. To calculate estimated proportions of tobacco users, we will use
data from the Centers for Disease Control and Prevention (CDC) to
estimate tobacco utilization rates by state and relevant population
characteristic.\8\ For BHP program year 2015, we will compare these
tobacco utilization rates to the characteristics of BHP-eligible
consumers, as shown by national and state survey data. Specifically,
for each state, we will calculate the tobacco usage rate based on the
percentage of persons by age who use cigarettes and the percentage of
persons by age that use smokeless tobacco, and calculate the
utilization rate by adding the two rates together. The data is
available for 3 age intervals: 18-24; 25-44; and 45-64. For the BHP
payment rate cell for persons ages 21-34, we would calculate the factor
as (4/14 * the utilization rate of 18-24 year olds) plus (10/14 * the
utilization rate of 25-44 year olds), which would be the weighted
average of tobacco usage for persons 21-34 assuming a uniform
distribution of ages; for all other age ranges used for the rate cells,
we would use the age range in the CDC data in which the BHP payment
rate cell age range is contained.
---------------------------------------------------------------------------
\8\ See https://www.cdc.gov/nchs/nhis/tobacco.htm; https://apps.nccd.cdc.gov/statesystem/default/DataSource.aspx.
---------------------------------------------------------------------------
We will provide tobacco rating factors that may vary by age and by
geographic area within each state. To the extent that the second lowest
cost silver plans have a different ratio of tobacco user rates to non
tobacco user rates in different geographic areas, the tobacco rating
adjustment factor may differ across geographic areas within a state. In
addition, to the extent that the second lowest cost silver plan has a
different ratio of tobacco user rates to non tobacco user rates by age,
or that there is a different prevalence of tobacco use by age, the
tobacco rating adjustment factor may differ by age.
7. Factor for Removing Administrative Costs (FRAC)
The Factor for Removing Administrative Costs (FRAC) represents the
average proportion of the total premium that covers allowed health
benefits, and we include this factor in our calculation of estimated
CSRs in Equation 2. The product of the reference premium and the FRAC
would approximate the estimated amount of EHB claims that would be
expected to be paid by the plan. This step is needed because the
premium also covers such costs as taxes, fees, and QHP administrative
expenses. We have set this factor equal to 0.80, which is proposed for
calculating CSR advance payments for 2015 in the HHS Notice of Benefit
and Payment Parameters for 2015.
8. Actuarial Value (AV)
The actuarial value is defined as the percentage paid by a health
plan of the total allowed costs of benefits, as defined under 45 CFR
Sec. 156.20. (For example, if the average health care costs for
enrollees in a health insurance plan were $1,000 and that plan has an
[[Page 13903]]
actuarial value of 70 percent, the plan would be expected to pay $700
($1,000 x 0.70) for health care costs per enrollee, on average.) By
dividing such estimated costs by the actuarial value in the proposed
methodology, we would calculate the estimated amount of total EHB-
allowed claims, including both the portion of such claims paid by the
plan and the portion paid by the consumer for in-network care. (To
continue with that same example, we would divide the plan's expected
$700 payment of the person's EHB-allowed claims by the plan's 70
percent actuarial value to ascertain that the total amount of EHB-
allowed claims, including amounts paid by the consumer, is $1,000.)
For the purposes of calculating the CSR rate in Equation 2, we will
use the standard actuarial value of the silver level plans in the
individual market, which is equal to 70 percent.
9. Induced Utilization Factor (IUF)
The induced utilization factor is proposed as a factor in
calculating estimated CSRs in Equation 2 to account for the increase in
health care service utilization associated with a reduction in the
level of cost sharing a QHP enrollee would have to pay, based on the
cost-sharing reduction subsidies provided to enrollees.
In the HHS Notice of Benefit and Payment Parameters for 2015
proposed rule, we proposed induced utilization factors for the purposes
of calculating cost-sharing reduction advance payments for 2015. The
induced utilization factor for all persons who would enroll in a silver
plan and qualify for BHP based on their household income as a
percentage of FPL is 1.12; this would include persons with household
income between 100 percent and 200 percent of FPL, lawfully present
non-citizens below 100 percent of FPL who are ineligible for Medicaid
because of immigration status, and persons with household income under
300 percent of FPL, not subject to any cost-sharing. Thus, we will use
the induced utilization factor equal to 1.12 for the BHP payment
methodology.
10. Change in Actuarial Value ([Delta]AV)
The increase in actuarial value would account for the impact of the
cost-sharing reduction subsidies on the relative amount of EHB claims
that would be covered for or paid by eligible persons, and we include
it as a factor in calculating estimated CSRs in Equation 2.
The actuarial values of QHPs for persons eligible for cost-sharing
reduction subsidies are defined in 45 CFR 156.420(a), and eligibility
for such subsidies is defined in 45 CFR 155.305(g)(2)(i) through (iii).
For QHP enrollees with household incomes between 100 percent and 150
percent of FPL, and those below 100 percent of FPL who are ineligible
for Medicaid because of their immigration status, CSRs increase the
actuarial value of a QHP silver plan from 70 percent to 94 percent. For
QHP enrollees with household incomes between 150 percent and 200
percent of FPL, CSRs increase the actuarial value of a QHP silver plan
from 70 percent to 87 percent.
We will apply this factor by subtracting the standard AV from the
higher AV allowed by the applicable cost-sharing reduction. For BHP
enrollees with household incomes at or below 150 percent of FPL, this
factor is 0.24 (94 percent minus 70 percent); for BHP enrollees with
household incomes more than 150 percent but not more than 200 percent
of FPL, this factor is 0.17 (87 percent minus 70 percent).
E. Adjustments for American Indians and Alaska Natives
There are several exceptions made for American Indians and Alaska
Natives enrolled in QHPs through an Exchange to calculate the PTC and
CSRs. Thus, we will make adjustments to the payment methodology
described above to be consistent with the Exchange rules.
We will make the following adjustments:
1. The adjusted reference premium for use in the CSR portion of the
rate will be the lowest cost bronze plan instead of the second lowest
cost silver plan, with the same adjustment for the population health
factor (and in the case of a state that elects to use the 2014 premiums
as the basis of the federal BHP payment, the same adjustment for the
premium trend factor). American Indians and Alaska Natives are eligible
for CSRs with any metal level plan, and thus we believe that eligible
persons would be more likely to select a bronze level plan instead of a
silver level plan. (It is important to note that this would not change
the PTC, as that is the maximum possible PTC payment, which is always
based on the second lowest cost silver plan.)
2. The actuarial value for use in the CSR portion of the rate is
0.60 instead of 0.70, which is consistent with the actuarial value of a
bronze level plan.
3. The induced utilization factor for use in the CSR portion of the
rate is 1.15, which is consistent with the proposed HHS Notice of
Benefit and Payment Parameters for 2015 induced utilization factor for
calculating advance CSR payments for persons enrolled in bronze level
plans and eligible for CSRs up to 100 percent of actuarial value.
4. The change in the actuarial value for use in the CSR portion of
the rate is 0.40. This reflects the increase from 60 percent actuarial
value of the bronze plan to 100 percent actuarial value, as American
Indians and Alaska Natives are eligible to receive CSRs up to 100
percent of actuarial value.
F. State Option To Use 2014 QHP Premiums for BHP Payments
In the interest of allowing states greater certainty in the total
BHP federal payments for 2015, we will provide states the option to
have their final 2015 federal BHP payment rates to be calculated using
the projected 2015 adjusted reference premium (that is, using 2014
premium data multiplied by the premium trend factor defined below), as
described in Equation (3b).
For a state that elects to use the 2014 premium as the basis for
the 2015 BHP federal payment, the state must inform CMS no later than
May 15, 2014.
For Equation (3b), we define the premium trend factor as follows:
Premium Trend Factor (PTF)
In Equation (3b), we calculate an adjusted reference premium (ARP)
based on the application of certain relevant variables to the reference
premium (RP), including a premium trend factor (PTF). In the case of a
state that elects to use the 2014 premiums as the basis for determining
the BHP payment, it is appropriate to apply a factor that would account
for the change in health care costs between the year of the premium
data and the BHP plan year. We are defining this as the premium trend
factor in the BHP payment methodology. This factor approximates the
change in health care costs per enrollee, which would include, but is
not limited to, changes in the price of health care services and
changes in the utilization of health care services. This provides an
estimate of the adjusted monthly premium for the applicable second
lowest cost silver plan that would be more accurate and reflective of
health care costs in the BHP program year, which will be the year
following issuance of the final federal payment notice. In addition, we
believe that it is appropriate to adjust the trend factor for the
estimated impact of changes to the transitional reinsurance program on
the average QHP premium.
We will use the annual growth rate in private health insurance
expenditures per enrollee from the National Health Expenditure
projections, developed by the Office of the Actuary in CMS (citation,
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
[[Page 13904]]
Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf).
For 2015, the projected increase in private health insurance premiums
per enrollee is 3.55 percent.
The adjustment for changes in the transitional reinsurance program
is developed from analysis by CMS' Center for Consumer Information and
Insurance Oversight (CCIIO). In the 2014 notice (78 FR 15519), CCIIO
estimated that the transitional reinsurance program reduced QHP
premiums on average by 10 to 15 percent. In unpublished analysis, CCIIO
estimated that the transitional reinsurance program would reduce QHP
premiums in 2015 on average by 6 percent, as the amount of funding in
the reinsurance program decreases. Based on these analyses, we estimate
that the changes in the transitional reinsurance program would lead to
an increase of 4.44 percent in average QHP premiums between 2014 and
2015; assuming that the 2014 QHP premiums are reduced by 10 percent due
to the reinsurance program, we calculate the adjustment as (1-0.06)/(1-
0.10)-1 = 0.0444.
Combining these two factors together, we calculate that the premium
trend factor for 2015 would be 8.15 percent: (1+0.0355) * (1+0.0444)-1
= 0.0815.
G. State Option To Include Retrospective State-specific Health Risk
Adjustment in Certified Methodology
In order to determine whether the potential difference in health
status between BHP enrollees and consumers in the Exchange would affect
the PTC, CSRs, risk adjustment and reinsurance payments that would have
otherwise been made had BHP enrollees been enrolled in coverage on the
Exchange, we will provide states implementing the BHP the option to
propose and to implement, as part of the certified methodology, a
retrospective adjustment to the federal BHP payments to reflect the
actual value that would be assigned to the population health factor (or
risk adjustment) based on data accumulated during program year 2015 for
each rate cell.
We acknowledge that there is notable uncertainty with respect to
this factor due to the lack of experience of QHPs on the Exchange and
other payments related to the Exchange, which is why, absent a state
election, we will use a value for the population health factor to
determine a prospective payment rate which assumes no difference in the
health status of BHP enrollees and QHP enrollees. There is considerable
uncertainty regarding whether the BHP enrollees will pose a greater
risk or a lesser risk compared to the QHP enrollees, how to best
measure such risk, and the potential effect such risk would have had on
PTC, CSRs, risk adjustment and reinsurance payments that would have
otherwise been made had BHP enrollees been enrolled in coverage on the
Exchange. To the extent, however, that a state develops an approved
protocol to collect data and effectively measure the relative risk and
the effect on federal payments, we would permit a retrospective
adjustment that measured the actual difference in risk between the two
populations to be incorporated into the certified BHP payment
methodology and used to adjust payments in the previous year.
In order for a state electing the option to implement a
retrospective population health status adjustment, the state would be
required to submit a proposed protocol to CMS, which would be subject
to approval by CMS and would be required to be certified by the Chief
Actuary of CMS, in consultation with the Office of Tax Analysis, as
part of the BHP payment methodology. We anticipate issuing future
guidance shortly that will provide the basic framework in which a state
must include in its proposed protocol and instructions for submission
to CMS for approval; a state must submit its proposed protocol by
August 1, 2014 for CMS approval. This submission must also include how
the state will collect the necessary data to determine the adjustment,
including any contracting contingences that may be in place with
participating standard health plan offerors. CMS will provide technical
assistance to states as they develop their protocol. In order to
implement the population health status, CMS must approve the state's
protocol no later than December 31, 2014. Finally, the state must
complete the population health status adjustment at the end of 2015
based on the approved protocol. After the end of the 2015 program year,
and once data is made available, CMS will review the state's findings,
consistent with the approved protocol, and make any necessary
adjustments to the state's federal BHP payment amount. If CMS
determines that the federal BHP payments were less than they would have
been using the final adjustment factor, CMS would apply the difference
to the state's quarterly BHP trust fund deposit. If CMS determines that
the federal BHP payments were more than they would have been using the
final reconciled factor, CMS would subtract the difference from the
next quarterly BHP payment to the state.
IV. Collection of Information Requirements
The information collection requirements and burden estimates
associated with this final methodology have been approved by OMB
through July 31, 2014 under OCN 0938-1218 (CMS-10510). CMS will be
seeking to extend OMB's approval period at a later time.
This final methodology would not impose any new or revised
reporting or recordkeeping requirements and, therefore, does not
require additional OMB review under the authority of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).
V. Regulatory Impact Statement
A. Overall Impact
We have examined the impacts of this final methodology as required
by Executive Order 12866 on Regulatory Planning and Review (September
30, 1993), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995
(March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism
(August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Section
3(f) of Executive Order 12866 defines a ``significant regulatory
action'' as an action that is likely to result in a rule: (1) Having an
annual effect on the economy of $100 million or more in any 1 year, or
adversely and materially affecting a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or state, local or tribal governments or communities (also
referred to as ``economically significant''); (2) creating a serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially altering the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raising novel legal or policy
issues arising out of legal mandates, the President's priorities, or
[[Page 13905]]
the principles set forth in the Executive Order.
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any 1
year). As noted in the BHP rule, BHP provides states the flexibility to
establish an alternative coverage program for low-income individuals
who would otherwise be eligible to purchase coverage through the
Exchange. We are uncertain, as described further below, as to whether
the effects of the rulemaking, and subsequently, this final
methodology, will be ``economically significant'' as measured by the
$100 million threshold, and hence a major rule under the Congressional
Review Act. In accordance with the provisions of Executive Order 12866,
this final methodology was reviewed by the Office of Management and
Budget.
1. Need for the Notice
Section 1331 of the Affordable Care Act (codified at 42 U.S.C.
18051) requires the Secretary to establish a BHP, and subsection (d)(1)
specifically provides that if the Secretary finds that a state ``meets
the requirements of the program established under subsection (a) [of
section 1331], the Secretary shall transfer to the State'' federal BHP
payments described in subsection (d)(3). This final methodology
provides for the funding methodology to determine the federal BHP
payment amounts required to implement these provisions.
2. Alternative Approaches
Many of the factors in this final methodology are specified in
statute; therefore, we are limited in the alternative approaches we
could consider. One area in which we had a choice was in selecting the
data sources used to determine the factors included in the methodology.
Except for state-specific reference premiums and enrollment data, we
are using national rather than state-specific data. This is due to the
lack of currently available state-specific data needed to develop the
majority of the factors included in the methodology. We believe the
national data will produce sufficiently accurate determinations of
payment rates. In addition, we believe that this approach will be less
burdensome on states. With respect to reference premiums and enrollment
data, using state-specific data rather than national data will produce
more accurate determinations than national averages.
3. Transfers
The provisions of this final methodology are designed to determine
the amount of funds that will be transferred to states offering
coverage through a BHP rather than to individuals eligible for premium
and cost-sharing reductions for coverage purchased on the Exchange. We
are uncertain what the total federal BHP payment amounts to states will
be as these amounts will vary from state to state due to the varying
nature of state composition. For example, total federal BHP payment
amounts may be greater in more populous states simply by virtue of the
fact that they have a larger BHP-eligible population and total payment
amounts are based on actual enrollment. Alternatively, total federal
BHP payment amounts may be lower in states with a younger BHP-eligible
population as the reference premium used to calculate the federal BHP
payment will be lower relative to older BHP enrollees. While state
composition will cause total federal BHP payment amounts to vary from
state to state, the methodology accounts for these variations to ensure
accurate BHP payment transfers are made to each state.
B. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation, by state,
local, or tribal governments, in the aggregate, or by the private
sector. In 2014, that threshold is approximately $141 million. States
have the option, but are not required, to establish a BHP. Further, the
methodology will establish federal payment rates without requiring
states to provide the Secretary with any data not already required by
other provisions of the Affordable Care Act or its implementing
regulations. Thus, this final methodology does not mandate expenditures
by state governments, local governments, or tribal governments.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA)
requires agencies to prepare an initial regulatory flexibility analysis
to describe the impact of the final rule on small entities, unless the
head of the agency can certify that the rule will not have a
significant economic impact on a substantial number of small entities.
The Act generally defines a ``small entity'' as (1) a proprietary firm
meeting the size standards of the Small Business Administration (SBA);
(2) a not-for-profit organization that is not dominant in its field; or
(3) a small government jurisdiction with a population of less than
50,000. Individuals and states are not included in the definition of a
small entity. Few of the entities that meet the definition of a small
entity as that term is used in the RFA would be impacted directly by
this final methodology.
Because this final document is focused on the funding methodology
that will be used to determine federal BHP payment rates, it does not
contain provisions that would have a significant direct impact on
hospitals and other health care providers that are designated as small
entities under the RFA. However, the provisions in this final
methodology may have a substantial, positive indirect effect on
hospitals and other health care providers due to the substantial
increase in the prevalence of health coverage among populations who are
currently unable to pay for needed health care, leading to lower rates
of uncompensated care at hospitals. As such, the Department cannot
determine whether this final methodology would have a significant
economic impact on a substantial number of small entities.
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a proposed notice may have a significant economic
impact on the operations of a substantial number of small rural
hospitals. For purposes of section 1102(b) of the Act, we define a
small rural hospital as a hospital that is located outside of a
metropolitan statistical area and has fewer than 100 beds. As indicated
in the preceding discussion, there may be indirect positive effects
from reductions in uncompensated care. Again, the Department cannot
determine whether this final methodology would have a significant
economic impact on a substantial number of small rural hospitals.
D. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct effects on states, preempts
state law, or otherwise has federalism implications. The BHP is
entirely optional for states, and if implemented in a state, provides
access to a pool of funding that would not otherwise be available to
the state.
We have consulted with states to receive input on how the
Affordable Care Act provisions codified in this final methodology would
affect states. We have participated in a number of conference calls and
in person meetings with state officials.
[[Page 13906]]
We continue to engage in ongoing consultations with states that
have expressed interest in implementing a BHP through the BHP Learning
Collaborative, which serves as a staff level policy and technical
exchange of information between CMS and the states. Through
consultations with this Learning Collaborative, we have been able to
get input from states on many of the specific issues addressed in this
methodology.
Authority: Section 1331(d)(3) of the Affordable Care Act.
Dated: February 19, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Approved: February 21, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-05257 Filed 3-7-14; 4:15 pm]
BILLING CODE 4120-01-P