Update: Basic Health Program
Posted on October 3, 2013 | Comments (3)
By: Sara Rosenbaum
On September 25, 2013, the Obama Administration published a Notice of Proposed Rulemaking in the Federal Register (78 Fed. Reg. 59122) that implements §1331 of the Affordable Care Act, which directs the Secretary to establish a Basic Health Program (BHP). The long-delayed proposed rule reflects extensive consultation with stakeholders, a Request for Information (76 Fed. Reg. 56767) published on September 14, 2011, and a series of “listening sessions” to gather input. The comment period runs until 5 p.m., November 25, 2013. This update provides a background on the BHP and summarizes the proposed rule.
The purpose of the BHP is to create a bridge-option for coverage, which would enable states to create an alternative to the Exchange (Health Insurance Marketplace) coverage pathway in the case of nonelderly people with incomes between 133% and 200% of the federal poverty level, who are ineligible for Medicaid. Thus, the BHP does not substitute for Medicaid coverage for the poorest residents but instead is designed to supplement it; as a result, the BHP presumably would be of most interest to states that have elected to expand Medicaid and that want to pursue a different approach in the case of individuals whose incomes are low but not low enough to qualify for medical assistance. The BHP is exclusive for this population; that is, in a BHP state, individuals who qualify for BHP coverage would rely on the BHP and would not be entitled to premium tax credits and cost sharing reduction assistance.
The BHP model is also closer to Medicaid in its approach to implementation. Rather than simply certifying plans for participation, states would, as they do in the case of Medicaid managed care, actually contract with plans through a competitive procurement process, thereby acting as true purchasers rather than in a more limited role as plan regulators (§1331(c)).
The appeal of the BHP is the degree of flexibility it offers states – who would receive per capita payments equal to “95% of the premium tax credits, and the cost-sharing reductions” that otherwise would flow to individuals covered through the Marketplace – to purchase coverage on their behalf. Using their flexibility, states could provide more generous levels of cost-sharing and premium assistance to BHP enrollees, presumably by contracting with health plans that in turn pay lower rates to their provider networks than they might otherwise pay to networks offered through the Marketplace.
The Proposed Rules
In a number of respects, the proposed rules, which would add a new Part 600 to 45 C.F.R., reflect the flexibility built into the BHP option. The proposed rules also permit implementing states to essentially fashion their BHPs as an extension of their Medicaid programs or as a form of coverage whose rules more closely align with the rules that govern Marketplace coverage, especially in relation to the timing of enrollment. At the same time, the proposed rules hew to the insurance model (open enrollment periods with certain qualifying exceptions) rather than the Medicaid model (which permits enrollment at any time).
In other respects, however, the proposed rule has the potential to financially deter states from pursuing this option. The proposed rule also would appear to create additional challenges for states because of the altered relationship the proposed rule would create between BHP-covered individuals (who are likely to include many younger, healthier workers and their families) and a state’s Marketplace risk pool.
Because of the delay in issuing the proposed rule, the HHS Centers for Medicare and Medicaid Services (CMS) will permit states to implement a BHP only as of January 2015.
Establishing a BHP
Blueprint contents. The proposed rule would require states that desire to establish a BHP to submit a BHP Blueprint similar to the Exchange Blueprints submitted by states that elect to operate their own Marketplaces. The purpose of the BHP Blueprint is to “establish compliance” with applicable requirements of the law, including a description or assurance of the following:
- that the “standard health plans” offered through the BHP cover all “essential health benefits” in accordance with EHB regulations;
- that the state will use a competitive contracting process for standard health plans;
- that the state will incorporate certain standard contracting requirements into all plans (discussed below);
- the state’s methods for assuring the availability of standard health plan coverage and for coordinating with other insurance affordability programs;
- that premiums and cost-sharing comply with federal requirements, as do standards for disenrollment for non-payment of premiums;
- that the state has policies in place regarding enrollment, disenrollment, and verification, as well as a plan to ensure coordination across affordability programs in order to reduce gaps in coverage;
- that the state is in compliance with BHP payment rules and the requirement of the special BHP Trust fund, out of which BHP financing will flow; and
- assurances related to program integrity and an operational assessment of program readiness
Use of BHP Trust Fund payments. A state also must include a 12-month funding plan and must assure that BHP funds will “only be used to reduce premiums and cost-sharing or provide additional benefits.” In other words, the trust fund is limited to the costs of actual coverage (provision of additional benefits beyond the EHB package is permitted out of the BHP Trust Fund).
Public comment. The proposed rule provides that a state must give “an opportunity for public comment” on the BHP Blueprint before submission, as well as on “significant subsequent revisions” prior to submission to the Secretary. A significant revision is one that alters core program operations. These core operations include functions related to eligibility determination, eligibility appeals, contracting standards and procedures, oversight and financial integrity, consumer assistance, compliance with special protections for American Indians and Alaska Natives, compliance with civil rights laws, and data collection and reporting. The proposed rule provides for certification as of the date of Secretarial signature and sets out procedures for withdrawing or terminating a BHP.
Operating the approved BHP. The proposed rule specifies that once established, a BHP must give all persons wishing to apply an opportunity to do so and must enroll all people found eligible. The rule bars caps on enrollment and requires statewide operation.
Information disclosure and enrollment assistance. The proposed rule further establishes enrollment assistance and information disclosure requirements similar to those applicable to Medicaid and the Marketplace. The rule specifically requires “accurate, easily understood information” to both potential applicants and enrollees about the BHP coverage option. It also requires “accessible information on coverage” including “additional benefits that may be provided outside of the standard health plan coverage, [and] any tiers of coverage” built into the BHP (including eligibility requirements for each tier).
The proposed rule also requires standard health plans to provide “clear information on premiums, covered services including any limits on amount, duration and scope of those services, applicable cost sharing using a standard format supplied by the state, and other data” specified under regulations governing QHPs sold in the Marketplace. In addition, the proposed rule requires standard health plans to “make publicly available and keep up to date, the names and locations of currently participating providers.”
Tribal consultation. The proposed rules establish certain tribal consultation requirements while also extending the same special enrollment rules to Indians that apply to Marketplace enrollment under 45 C.F.R. §155.420(d).
Federal Program Administration
Compliance reviews. The proposed rule would establish an annual compliance review process (with more reviews as needed as determined by HHS) that examines state administration in relation to its Blueprint as well as applicable federal laws and standards. A specific review would examine potentially “improper” use of BHP Trust fund resources. States would be given the opportunity to resolve concerns over improper use of the Trust Fund, with State restitution of improperly used Trust Funds permitted.
Governance by state BHP Trustees. In the event of a report regarding improper Trust Fund use, the proposed rule provides that a State’s BHP trustees (individuals with independent oversight powers of the state’s established BHP Trust Fund, who are appointed by the State) and the State would be required to develop a written response within 60 days. To the extent that “the State and BHP trustees determine that BHP trust funds may not have been properly spent,” they must ensure restitution by the trustees, the state, or a legally liable third party, with whom they have entered into indemnification agreements. The proposed rules would set a 2-year time limit on restitution.
HHS oversight. The proposed rules would also permit HHS to exercise independent oversight of Trust Fund administration and to order make-whole actions. The proposed rule would further authorize HHS to set out an appeals process, with a return of Trust Fund improper expenditures within 60 days of the disallowance notice or the final administrative reconsideration upholding the disallowance.
Eligibility and Enrollment
In general. The proposed rules provide that a state “must determine individuals eligible to enroll in a standard health plan if they (1) are residents of the state [and] not eligible for the state’s Medicaid program consisting of [coverage for] at least . . . essential health benefits . . . ; (2) have household income which exceeds 133% but not 200% FPL; (3) are not eligible to enroll in affordable minimum essential coverage; (4) are 64 years old or younger; and (5) are citizens or lawfully present non-citizens.”
Limited-benefit Medicaid and CHIP coverage and unaffordable ESI. The proposed rule would treat as eligible for standard health plan coverage otherwise-eligible individuals who are eligible for employer-sponsored insurance that is unaffordable under the Internal Revenue Code or for limited-benefit Medicaid or CHIP coverage that does not meet the minimum essential coverage standard (e.g., pregnancy coverage, family planning coverage), thereby enabling limited-benefit Medicaid and CHIP coverage to act as supplemental or secondary coverage.
Bar against additional eligibility restrictions. The proposed rules would bar other state-imposed eligibility restrictions, including waiting periods, enrollment caps, or less-than-statewide coverage.
Single streamlined application. The proposed rules would require participating states to use the single streamlined application and to give all individuals wishing to do so the opportunity to apply for BHP coverage, a requirement identical to the Medicaid program’s rules regarding applications.
The proposed rules allow but do not require states to have a certified application counselor program. States choosing this option would be expected to follow the CAC requirements established under 45 C.F.R. §155.225 (Exchange rules) and 42 C.F.R. §435.908 (Medicaid rules).
As with Marketplace eligibility and Medicaid eligibility, the proposed rules would permit states to allow eligibility determinations to be made by an entity also designated as the eligibility determination entity for Medicaid and CHIP. Determination authority also may be delegated to the Exchange under the proposed rule. The proposed rule would require states to establish a timely eligibility determination standard.
The proposed rules permit states to use either Medicaid or Exchange standards for the effective date of eligibility. At the same time, however, the proposed rules would require states to use open enrollment periods as well as special enrollment periods that mirror the special enrollment rules under the Exchange regulations, 45 C.F.R. §§155.410 and 420 (Exchange rules). The proposed rules would also permit states to choose between what is termed the “continuous eligibility” standards now applicable to Medicaid or the Exchange enrollment standards under 45 C.F.R. §155.420(b)(1) (Exchange rules). In the Preamble to the proposed rule, CMS explains that what it means by “continuous eligibility” under Medicaid is “continuous enrollment,” which, under Medicaid regulations, can continue for 12 months unless changed circumstances require a redetermination of eligibility. As with Medicaid, the proposed rules would use a 12-month annual enrollment period but with redeterminations as needed based on new, verified information. Individuals who remain continuously eligible for coverage (that is, whose eligibility does not change from one year to the next), would be given an opportunity to change plans at the point of renewal.
As with other insurance affordability programs, the proposed rules require states to coordinate their BHP eligibility and enrollment mechanisms with other insurance affordability programs and to verify eligibility information. The proposed rules require use of MAGI and, to the extent reflected in delegation agreements, determinations across all insurance affordability programs by single eligibility determination entities.
The proposed rules also specify the use of electronic methods for transferring information among agencies, as well as the use of coordinated notification systems both to other agencies and individuals. The proposed rules also would establish the Medicaid appeals process as the system for BHP eligibility appeals, with no second-stage appeal to HHS, as is permissible in the case of Exchange eligibility determination appeals.
Standard Health Plans
The proposed rules establish standard health plan coverage at the EHB level (including prescribed drug EHB standards under 45 C.F.R. §§156.120 and 122), while at the same time allowing states to vary the Standard Health Plan package. In other words, the proposed rules allow states to use more than one benchmark to set Standard Health Plan coverage. The proposed rules also require state BHP programs to use the state Exchange standards in deciding which state benefit mandates after December 31, 2011 would apply to the EHB package and extend the non-discrimination standard applicable to EHBs to standard health plans.
As noted, unlike Exchanges — which certify and regulate health plans — state BHPs act as actual purchasers, as do state Medicaid and CHIP programs. In this regard, the proposed rules set out competitive procurement standards that must be followed in developing BHP contracts. (The Preamble emphasizes state flexibility in the details of the procurement process itself, including joint procurement of Medicaid and BHP contracts, as long as the process is open and competitive.)
The proposed rules establish negotiation criteria that cover premiums and cost sharing within the parameters of the regulations, benefits that meet the EHB requirements, inclusion of “innovative features” such as care coordination and care management with a particular focus on enrollees with chronic health conditions, preventive services incentives, and provider-patient incentives that promote patient involvement, patient choice of providers, and appropriate health care utilization incentives. Other “considerations” proposed for inclusion in the state negotiation process are: a focus on enrollee health care needs; local availability and accessibility of providers; use of managed care processes [undefined] to improve quality and efficiency; performance measures that focus on the quality of care and health outcomes; coordination among other health insurance affordability programs; and measures to identify fraud and waste.
The proposed rule would bar discrimination in enrollment on pre-existing conditions or other health status risk factors.
The proposed rules would recognize as “eligible offerors” licensed HMOs, licensed health insurance issuers, provider networks, and non-licensed Medicaid managed care organizations. General contract provisions must address network adequacy, service provision and authorization, quality and performance, enrollment procedures, disenrollment procedures, noticing and appeals, privacy protections, and other requirements recognized by the Secretary. The process of procurement must meet federal procurement standards and, to the extent that the contract is with a licensed issuer, an 85% MLR is required.
The proposed rule would require state BHPs to offer a choice of at least two standard health plans and permits states to enter into interstate compacts to develop regional plans.
Financial Responsibilities of Enrollees
The proposed rules establish certain premium and cost-sharing requirements. As in the case of other coverage subject to the essential health benefit and preventive services coverage requirements, standard health plans would be prohibited from imposing cost-sharing on preventive benefits. The proposed rules would require states to make premium and cost sharing information (including the consequences of failing to pay premiums) available “either upon request or through an internet Web site.” In setting cost-sharing standards, states would be expected to follow CHIP principles and not favor higher-income people over those with lower incomes. The proposed rules also would require states to extend a 30-day grace period prior to disenrollment for non-payment and would bar restrictions on re-enrollment that extend beyond the next open enrollment period.
Payments to States
Basic formula. The BHP statute provides a methodology for calculating payments to states. Under this methodology, the payment would be calculated as “95 percent of the premium tax credits [under the Internal Revenue Code], and the cost sharing reductions made under section 1402.” CMS has interpreted this relatively ambiguous provision as applying the 95% rule to both the premium payment and the cost-sharing reduction assistance; its proposed rules therefore would withhold both premium and cost sharing financing from any state that elects a BHP. Payments would be made on a federal fiscal year basis, although determination of payment rates will be made on a calendar year basis to conform to Marketplace operations.
Risk adjusting state per capita payments. The proposed rules would adjust per capita state payments to reflect enrollee age, income, self-only or family coverage, and geographic differences in health care spending. The Preamble clarifies that BHP plans will not be eligible to receive reinsurance payments “since they are not contributing to the program” and therefore the federal per capita payment to the states would exclude any consideration of these payments. The Preamble also clarifies the agency’s intent to exclude BHP standard health plans from the risk corridor program, which, under PPACA §1342, is limited to qualified health plans.
With respect to risk adjustment for health status, the Preamble discusses at length the agency’s approach to health status risk adjustment, which will treat BHP enrollees as a separate risk pool from QHP enrollees in the individual Marketplace:
One possible approach we considered was to include BHP plans in risk adjustment as well as require that BHP enrollees and plans be included in the individual market risk pool. Under this approach, the funding mechanism would take into account the actual payments that would be made from that risk pool. The second approach was to account for the various differences between BHP enrollees and individual market enrollees in the BHP funding methodology only. We also considered under this approach the most appropriate time to include a risk adjustment factor in the BHP funding methodology; that is, whether we should address risk adjustment for year one or in the future, as well as the potential consequences of such timing.
We have . . . decided that the most appropriate approach is to develop a risk adjustment factor to include in the BHP funding methodology rather than include BHP in the individual market risk pool. Our rationale for this approach is twofold. Specifically, potential differences may exist between BHP and Exchange benefit packages and the market reform rules in the Affordable Care Act, such as the requirements for guaranteed issue, standard premium rating, and other such requirements may not apply to some standard health plan offerors. We believe that developing an appropriate factor in the BHP funding formula that accounts for the potential difference in health status between BHP enrollees and individual market enrollees would ensure that the BHP payment accurately reflects the statute’s requirement to consider the impact of risk adjustment.
In addition, we believe that this would provide a level of funding to BHP that more accurately reflects the expected health care costs for BHP enrollees. Finally, the risk adjustment method being applied in the individual market is a concurrent model, which means that a current year’s experience is applied retrospectively to premiums; however, we are proposing, as discussed further below, to limit the retrospective adjustments in calculating the federal payment amount for BHP to a small set, including enrollment, to improve predictability for states in the amount of federal funding they will receive in a given fiscal year. In so doing, we are not proposing to retrospectively apply risk adjustment to the federal payment amount. While we seek comment on this approach, we will provide additional guidance that will further address this factor in our proposed Payment Notice which will be published in the fall of 2013 and will provide an additional opportunity for comment. Finally, we are not proposing to consider the issue of risk corridors in the BHP funding methodology as section 1342 of the Affordable Care Act specifically limits the program to QHPs.
In sum, because of the potential for BHPs to be more responsive to adults with heavier health burdens, coupled with the assumption that states would use the BHP model to further reduce cost-sharing burdens (which in turn affects utilization rates), CMS has proposed to separate BHP enrollment into its own risk group for rate-setting purposes.
Further adjustments to reflect reconciliation and other factors. Additionally, the proposed rules would withhold not only 5% from both premium subsidies and cost sharing reduction assistance, but would further adjust payments to states to reflect the law’s reconciliation requirements. Under these requirements, the federal government would have recovered funds from enrollees covered through Exchange plans who had experienced an income increase during an enrollment year that in turn necessitated a recovery of credits and assistance previously paid.
The proposed rules also would adjust payments by the “Marketplace experience in other states with respect to Exchange participation and the effect of premium tax credit and cost-sharing reductions provided to residents, particularly those residents with incomes below 200 percent of the FPL.”
Payment amounts. The proposed rules would provide for quarterly prospective aggregate BHP payment amounts reflecting the payment rates by the projected number of enrollees. The rules would provide for retrospective payment adjustments to reflect payment errors.
The proposed rules raise several issues, and CMS seeks comments on several matters.
Should the withhold methodology that applies to BHP premium payments to states also be applied to cost sharing reduction assistance? As described above, the BHP statute contains ambiguous language regarding whether the 95% payment rule applicable to premium subsidies also applies to cost-sharing reduction assistance. Applying the statutory 5% reduction only to the premium payments and not to cost sharing assistance arguably makes sense given the fact that since provider payment rates under standard health plans are expected to be lower to begin with. Enabling states to give the highest level of cost-sharing reduction assistance to lower income adults may best position standard health plan network providers to offer more substantial payment discounts; by contrast, the greater the risk of non-payment of patient cost sharing, presumably the greater the level of provider resistance to deeper payment discounts.
Furthermore, as CMS itself notes, it is possible that the people who participate in BHPs will have more serious health conditions than people who enroll in QHPs sold in the Marketplace and as a result, can be expected to have a greater need for cost sharing assistance. Indeed, as CMS notes, it is precisely the flexibility to adjust Marketplace principles to accommodate higher need patients that in part gave rise to the BHP in the first place.
Given the ambiguity of the statutory language and the underlying policy considerations behind the BHP, should CMS exempt cost sharing reduction assistance payments from the 95% withhold methodology? The question of cost sharing reduction assistance levels may become even more considerable when the exclusion of standard health plans from the Act’s reinsurance and risk corridor systems is considered.
Segregating the BHP risk pool. CMS argues for a rate-setting methodology that would segregate the BHP risk pool. Yet past studies examining the characteristics of low income potential enrollees under the ACA suggest that, like their higher-income counterparts, the low income group is characterized by younger workers in good health. The impact of removing the BHP population from the Exchange population cannot be known, and arguably, the BHP population is one that by and large offers good health risks. Given the ability to create variable BHP packages to address the needs of higher risk groups, it may be that grouping some or most BHP populations with the Exchange population actually helps stabilize Exchanges, while enabling state BHP programs to offer greater coverage and cost-sharing protections for more medically frail adults.
Is it advantageous to the stability of state Exchanges to segment this group in states electing the BHP option, especially given the fact that the proposed CMS rules would extend key protections against adverse risk selection, such as the use of defined enrollment periods with exceptions only for certain narrow triggering events? In setting risk-adjusted rates for the BHP, should states be given the leeway to determine whether to segment some or all of their BHP populations or merge the population groups at least to some degree?
Conflict of interest standards for BHP state trustees. The proposed rule would require states to appoint independent trustees to oversee their BHP Trust Funds. But the proposed rule establishes no conflict of interest standards for the trustees similar to standards that apply to state Exchange governance systems. Should similar conflict of interest standards apply, such as a prohibition against membership by individuals who have a financial interest in the sale or operation of standard health plans?
 Proposed 45 C.F.R. §600.110.
 Proposed 45 C.F.R. §600.110(b).
 This prohibition on the use of funds for purposes other than reducing premiums or cost sharing or providing additional benefits reflects the statute itself. PPACA §1331(d)(2).
 Proposed 45 C.F.R. §600.115.
 Proposed 45 C.F.R. §600.145(e).
 Proposed 45 C.F.R. §600.145(a)-(d).
 Proposed 45 C.F.R. §600.150(a)(1)-(2).
 Proposed 45 C.F.R. §600.150(a)(3)-(5).
 Proposed 45 C.F.R. §600.150(a)(5).
 Proposed 45 C.F.R. §600.200.
 Proposed 45 C.F.R. §600.200(c).
 Proposed 45 C.F.R. §600.705(a).
 Proposed 45 C.F.R. §600.715 (b).
 Proposed 45 C.F.R. §600.715 (c).
 Proposed 45 C.F.R. §600.715(e).
 Proposed 45 C.F.R. §600.305(a)(1)-(5).
 Proposed 45 C.F.R. §600.305(a)(3)(i) and (ii).
 Proposed 45 C.F.R. §600.305(b).
 Proposed 45 C.F.R. §600.310(a).
 Proposed 45 C.F.R. §600.310(b).
 Proposed 45 C.F.R. §600.315.
 Proposed 45 C.F.R. §600.320(a).
 Proposed 45 C.F.R. §600.320(b).
 Proposed 45 C.F.R. §600.320(c).
 The Preamble offers examples of “triggering events” for special enrollment periods, such as loss of minimum essential coverage, gaining or becoming a dependent, gaining legal status, or making a “permanent” move. 78 Fed. Reg. 59127.
 78 Fed. Reg. 59127.
 Proposed 45 C.F.R. §600.340(a).
 Proposed 45 C.F.R. §600.340(b).
 Proposed 45 C.F.R. §600.330(a) and (b).
 Proposed 45 C.F.R. §600.330(c).
 Proposed 45 C.F.R. §600.330(d) and (e).
 Proposed 45 C.F.R. §600.335.
 Proposed 45 C.F.R. §600.405(a).
 Proposed 45 C.F.R. §600.405(b) and (d).
 Proposed 45 C.F.R. §600.410. States are given the flexibility to phase in a process under a proposed timeline if they cannot meet the competitive process requirement in the first year.
 78 Fed. Reg. 59130.
 Proposed 45 C.F.R. §600.410(d).
 Proposed 45 C.F.R. §600.410(e) CMS seeks comments on appropriate measures and indicates that the agency is considering measures such as tracking and monitoring grievances and appeals, “while, at the same time, balancing our goals of state flexibility and effective contracting.” 78 Fed. Reg. 59130.
 Proposed 45 C.F.R. §600.410(f).
 Proposed 45 C.F. R. §600.415.
 Proposed 45 C.F.R. §600.415(b).
 Proposed 45 C.F.R. §600.420.
 Proposed 45 C.F.R. §600.510(b).
 Proposed 45 C.F.R. §600.515(a).
 Proposed 45 C.F.R. §600.520.
 Proposed 45 C.F.R. §600.525.
 Proposed 45 C.F.R. §600.605.
 78 Fed. Reg. at 59133.
 78 Fed. Reg. 59134 .
 78 Fed. Reg. 59134 .
 78 Fed. Reg. 59134.
 Proposed 45 C.F.R. §600.605(b)(6).
 Proposed 45 C.F.R. §600.605(b)(7).
 Proposed 45 C.F.R. §600.610(b)(2).