On August 24th, the Centers for Medicare and Medicaid (CMS) released a Final Administrative Order that would revise and recalculate their payments toward Basic Health Programs (BHPs). Only two states have established BHPs—Minnesota and New York—under Section 1331 of the Affordable Care Act (ACA).
SHADAC Director Lynn Blewett and David Anderson, a researcher at the Duke University Margolis Center, co-authored a Health Affairs blog that takes a look at the background of BHPs in Minnesota and New York, how this new order affects them, and what may happen with federal BHP financing going forward.
BHP Background and Financing
BHPs are optional state coverage programs designed to improve continuity of care and affordable coverage for low-income individuals who would otherwise be eligible for coverage on the health insurance Marketplace. Minnesota and New York both implemented BHPs in 2015, and their BHPs currently cover 89,000 and 700,000 people, respectively. BHPs must cover the ACA’s essential health benefits, and both New York and Minnesota offer low to no cost-sharing.
Federal funding for BHPs is based on 95 percent of the total advance premium tax credits (APTCs) and cost-sharing reductions that would have been provided if a state’s BHP population would have enrolled in the second-lowest-cost silver qualified health plan (QHP) on the state’s health insurance Marketplace. The methodology for determining payment is published annually and is based on BHP enrollment characteristics for each state, including age, geographic area, household size, and income. Minnesota estimated that approximately 25 percent of the federal funding for its BHP came from cost-sharing reductions.
Major Changes to BHP Federal Financing
In October 2017, the Centers for Medicare and Medicaid Services (CMS) announced it would stop paying cost-sharing reductions to insurers, who remain legally obligated to pay for these same reductions to cover costs of deductibles, coinsurance, and co-payments for individuals at 100 to 250 percent FPL in states that did not expand Medicaid, and 138 to 250 percent FPL in Medicaid expansion states. Many insurers chose to offset the elimination of cost-sharing reduction by increasing premiums in order to secure higher premium tax credits for consumers.
State and Federal Responses
Minnesota and New York were notified that the CMS would stop funding the cost-sharing reductions of their BHPs in December 2017, and payments were subsequently halted in the first quarter of 2018. Both Minnesota and New York initially requested that CMS revise its calculations to account for a higher premium tax credit component of BHP payments to make up for the cost-sharing elimination. CMS did not initially respond, and the states moved to sue CMS.
CMS responded to the litigation by providing an interim settlement of $169 million to the states and establishing a new BHP payment methodology that provides an 18.8 percent adjustment to the BHP payment for both Minnesota and New York based on a survey of health insurers on the extent of their 2018 premium increase attributed to the discontinuation of cost-sharing reduction funding. Both Minnesota and New York questioned the revised BHP payment methodology. However, the new methodology currently only holds for 2018, and it is yet unknown if it will be used to calculate payments for 2019 and 2020.
Learn More
Read the full Health Affairs blog to learn more about the future of BHPs for Minnesota and New York.