BHP funding and wasted APTC

The Center for Medicare and Medicaid Services (CMS) released a proposed rule on funding the Basic Health Plan (BHP) for 2020.  They propose a rule that will lead to about a 3% reduction in federal spending to be counter-acted by a dollar for dollar increase in state spending.  BHPs are a part of the Affordable Care Act where states could run a program for people who earn under 200% of the Federal Poverty Level instead of running the exchange.  The BHP is funded by a block grant that is equal to 95% of what the federal government would have spent on premium and cost sharing reduction subsidies for the people who enroll in the BHP.

The termination of CSRs led to CMS cutting the CSR component of funding.  Minnesota and New York sued and a settlement was found where CMS attributed Silver Loading incremental premium increases to the BHP payments.  Dr. Lynn Blewett of the University of Minnesota and I examined this rule last year in a Health Affairs blog:

The BHPs in New York and Minnesota will receive almost half a billion dollars more in funding than they were told to expect in December 2017….

We can assume that 2019 BHP payment rules will continue to incorporate some type of plan adjustment factor that relies on an estimate of the silver increment due to the continued obligation of insurers to provide cost-sharing reduction payments without direct federal reimbursement. …

The plan adjustment factor in the proposed rule is the same exact plan adjustment factor as it was in the settlement rule. However CMS introduced a new factor this year; Metal Tier Selection Factor (MTSF) which is a multiplier to the rest of the formula that reduces what CMS owes.

After the discontinuance of the CSR payments in October 2017, several changes occurred that increased the expected impact of enrollees’ plan choices on the amount of PTC paid. Silver-level QHP premiums for the 2018 benefit year increased substantially relative to other metal-tier plans in many states (on average, by about 20 percent). We believe this contributed to an increase in the percentage of enrollees with lower incomes choosing bronze-level plans, despite being eligible for CSRs in silver-level plans, because many were able to purchase plans and pay $0 in premium; according to CMS data, the percentage of persons with incomes between 0 percent and 200 percent of FPL eligible for CSRs (those who would be eligible for the BHP if the state operated a BHP) selecting bronze plans increased from about 11 percent in 2017 to about 13 percent in 2018. In addition, the likelihood that a person choosing a bronze-level plan would pay $0 premium increased (and the difference between the bronze-level QHP premium and the available PTC widened). Between 2017 and 2018, the ratio of the average silver plan premium to the average bronze plan premium increased from about 117 percent to 133 percent;

Okay, that is a whole lot going on. Basically,CMS is saying that due to Silverloading, the gap between the benchmark silver plans and the cheapest Bronze plans increased significantly. 20% more people in 2018 who earned under 200% FPL bought Bronze plans because they were likely to be low or no premium. If the Bronze plan is a zero premium plan, it is very likely that the buyer “wasted” some eligible premium tax credits. CMS is trying to claw that “wasted” premium tax credits back.

Comments are needed by the first week of May if you want to tell CMS what you think can be done to this formula.