[Federal Register Volume 85, Number 213 (Tuesday, November 3, 2020)]
[Proposed Rules]
[Pages 69525-69539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24147]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 600

[CMS-2438-PN]
RIN 0938-ZB64


Basic Health Program; Federal Funding Methodology for Program 
Year 2022

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Proposed methodology.

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SUMMARY: This document proposes the methodology and data sources 
necessary

[[Page 69526]]

to determine Federal payment amounts to be made for program year 2022 
to states that elect to establish a Basic Health Program under the 
Patient Protection and Affordable Care Act to offer health benefits 
coverage to low-income individuals otherwise eligible to purchase 
coverage through Affordable Insurance Exchanges.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on December 3, 2020.

ADDRESSES: In commenting, refer to file code CMS-2438-PN.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2438-PN, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2438-PN, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Christopher Truffer, (410) 786-1264; 
or Cassandra Lagorio, (410) 786-4554.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that website to view public comments.

I. Background

A. Overview of the Basic Health Program

    Section 1331 of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148, enacted on March 23, 2010), as amended by the Health 
Care and Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted 
on March 30, 2010) (collectively referred to as the Patient Protection 
and Affordable Care Act) provides states with an option to establish a 
Basic Health Program (BHP). In the states that elect to operate a BHP, 
the BHP will make affordable health benefits coverage available for 
individuals under age 65 with household incomes between 133 percent and 
200 percent of the Federal poverty level (FPL) who are not otherwise 
eligible for Medicaid, the Children's Health Insurance Program (CHIP), 
or affordable employer-sponsored coverage, or for individuals whose 
income is below these levels but are lawfully present non-citizens 
ineligible for Medicaid. For those states that have expanded Medicaid 
coverage under section 1902(a)(10)(A)(i)(VIII) of the Social Security 
Act (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 (section 1902(e)(14)(I) of the Act).
    A BHP provides another option for states in providing affordable 
health benefits to individuals with incomes in the ranges described 
above. States may find a BHP a useful option for several reasons, 
including the ability to potentially coordinate standard health plans 
in the BHP with their Medicaid managed care plans, or to potentially 
reduce the costs to individuals by lowering premiums or cost-sharing 
requirements.
    Federal funding for a BHP under section 1331(d)(3)(A) of the 
Patient Protection and Affordable Care Act is based on the amount of 
premium tax credit (PTC) and cost-sharing reductions (CSRs) that would 
have been provided for the fiscal year to eligible individuals enrolled 
in BHP standard health plans in the state if such eligible individuals 
were allowed to enroll in a qualified health plan (QHP) through 
Affordable Insurance Exchanges (``Exchanges''). These funds are paid to 
trusts established by the states and dedicated to the BHP, and the 
states then administer the payments to standard health plans within the 
BHP.
    In the March 12, 2014 Federal Register (79 FR 14112), we published 
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 Patient Protection and Affordable Care 
Act), which governs the establishment of BHPs. The BHP final rule 
established the standards for state and Federal administration of BHPs, 
including provisions regarding eligibility and enrollment, benefits, 
cost-sharing requirements and oversight activities. While the BHP final 
rule codified 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 BHPs, as well as the 
operation of the Exchanges. For this reason, the BHP final rule 
indicated that the development and publication of the funding 
methodology, including any data sources, would be addressed in a 
separate annual BHP Payment Notice.
    In the BHP final rule, we specified that the BHP Payment Notice 
process would include the annual publication of both a proposed and 
final BHP Payment Notice. The proposed BHP Payment Notice would be 
published in the Federal Register each October, 2 years prior to the 
applicable program year, and would describe the proposed funding 
methodology for the relevant BHP year,\1\ including how the Secretary 
considered the factors specified in section 1331(d)(3) of the Patient 
Protection and Affordable Care Act, along with the proposed data 
sources used to determine the Federal BHP payment rates for the 
applicable program year. The final BHP Payment Notice would be 
published in the Federal Register in February, and would include the 
final BHP funding methodology, as well as the Federal BHP payment rates 
for the applicable BHP program year. For example, payment rates in the 
final BHP Payment Notice published in February 2015 applied to BHP 
program year 2016, beginning in January 2016. As discussed in section 
II.D. of this proposed methodology, and as referenced in 42 CFR 
600.610(b)(2), state data needed to calculate the Federal BHP payment 
rates for the final BHP Payment Notice must be submitted to CMS.
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    \1\ BHP program years span from January 1 through December 31.

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[[Page 69527]]

    As described in the BHP final rule, once the final methodology for 
the applicable program year has been published, we will generally make 
modifications to the BHP funding methodology on a prospective basis, 
with limited exceptions. The BHP final rule provided that retrospective 
adjustments to the state's BHP payment amount may occur to the extent 
that the prevailing BHP funding methodology for a given program year 
permits adjustments to a state's Federal BHP payment amount due to 
insufficient data for prospective determination of the relevant factors 
specified in the applicable final BHP Payment Notice. For example, the 
population health factor adjustment described in section II.D.3. of 
this proposed methodology allows for a retrospective adjustment (at the 
state's option) to account for the impact that BHP may have had on the 
risk pool and QHP premiums in the Exchange. Additional adjustments 
could be made to the payment rates to correct errors in applying the 
methodology (such as mathematical errors).
    Under section 1331(d)(3)(ii) of the Patient Protection and 
Affordable Care Act, the funding methodology and payment rates are 
expressed as an amount per eligible individual enrolled in a BHP 
standard health plan (BHP enrollee) for each month of enrollment. These 
payment rates may vary based on categories or classes of enrollees. 
Actual payment to a state would depend on the actual enrollment of 
individuals found eligible in accordance with a state's certified BHP 
Blueprint eligibility and verification methodologies in coverage 
through the state BHP. A state that is approved to implement a BHP must 
provide data showing quarterly enrollment of eligible individuals in 
the various Federal BHP payment rate cells. Such data must include the 
following:
     Personal identifier;
     Date of birth;
     County of residence;
     Indian status;
     Family size;
     Household income;
     Number of persons in household enrolled in BHP;
     Family identifier;
     Months of coverage;
     Plan information; and
     Any other data required by CMS to properly calculate the 
payment.

B. The 2018 Final Administrative Order, 2019 Payment Methodology, 2020 
Payment Methodology, and 2021 Payment Methodology

    On October 11, 2017, the Attorney General of the United States 
provided the Department of Health and Human Services and the Department 
of the Treasury with a legal opinion indicating that the permanent 
appropriation at 31 U.S.C. 1324, from which the Departments had 
historically drawn funds to make CSR payments, cannot be used to fund 
CSR payments to insurers. In light of this opinion--and in the absence 
of any other appropriation that could be used to fund CSR payments--the 
Department of Health and Human Services directed us to discontinue CSR 
payments to issuers until Congress provides for an appropriation. In 
the absence of a Congressional appropriation for Federal funding for 
CSRs, we cannot provide states with a Federal payment attributable to 
CSRs that BHP enrollees would have received had they been enrolled in a 
QHP through an Exchange.
    Starting with the payment for the first quarter (Q1) of 2018 (which 
began on January 1, 2018), we stopped paying the CSR component of the 
quarterly BHP payments to New York and Minnesota (the states), the only 
states operating a BHP in 2018. The states then sued the Secretary for 
declaratory and injunctive relief in the United States District Court 
for the Southern District of New York. See State of New York, et al., 
v. U.S. Department of Health and Human Services, 18-cv-00683 (S.D.N.Y. 
filed Jan. 26, 2018). On May 2, 2018, the parties filed a stipulation 
requesting a stay of the litigation so that HHS could issue an 
administrative order revising the 2018 BHP payment methodology. As a 
result of the stipulation, the court dismissed the BHP litigation. On 
July 6, 2018, we issued a Draft Administrative Order on which New York 
and Minnesota had an opportunity to comment. Each state submitted 
comments. We considered the states' comments and issued a Final 
Administrative Order on August 24, 2018 (Final Administrative Order) 
setting forth the payment methodology that would apply to the 2018 BHP 
program year.
    In the November 5, 2019 Federal Register (84 FR 59529 through 
59548) (hereinafter referred to as the November 2019 final BHP Payment 
Notice), we finalized the payment methodologies for BHP program years 
2019 and 2020. The 2019 payment methodology is the same payment 
methodology described in the Final Administrative Order. The 2020 
payment methodology is the same methodology as the 2019 payment 
methodology with one additional adjustment to account for the impact of 
individuals selecting different metal tier level plans in the Exchange, 
referred to as the Metal Tier Selection Factor (MTSF).\2\ In the August 
13, 2020 Federal Register (85 FR 49264 through 49280) (hereinafter 
referred to as the August 2020 final BHP Payment Notice), we finalized 
the payment methodology for BHP program year 2021. The 2021 payment 
methodology is the same methodology as the 2020 payment methodology, 
with one adjustment to the income reconciliation factor (IRF). The 2022 
proposed payment methodology is the same as the 2021 payment 
methodology, except for using more recent data for developing the value 
of the Metal Tier Selection Factor (MTSF).
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    \2\ ``Metal tiers'' refer to the different actuarial value plan 
levels offered on the Exchanges. Bronze-level plans generally must 
provide 60 percent actuarial value; silver-level 70 percent 
actuarial value; gold-level 80 percent actuarial value; and 
platinum-level 90 percent actuarial value. See 45 CFR 156.140.
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II. Provisions of the Proposed Methodology

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

    Section 1331(d)(3) of the Patient Protection and 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 (APTC) and CSRs, and by the Internal Revenue 
Service (IRS) to calculate final PTCs. In general, we have relied on 
values for factors in the payment methodology specified in statute or 
other regulations as available, and 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 Patient Protection and Affordable Care Act, the final funding 
methodology must be certified by the Chief Actuary of CMS, in 
consultation with the Office of Tax Analysis (OTA) of the Department of 
the Treasury, as having met the requirements of section 
1331(d)(3)(A)(ii) of the Patient Protection and Affordable Care Act.

[[Page 69528]]

    Section 1331(d)(3)(A)(ii) of the Patient Protection and Affordable 
Care Act specifies that the payment determination shall take into 
account all relevant factors necessary to determine the value of the 
PTCs and CSRs that would have been provided to eligible individuals, 
including but not limited to, 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 QHP through an Exchange, and whether 
any reconciliation of PTC and CSR would have occurred if the enrollee 
had been so enrolled. Under the payment methodologies for 2015 (79 FR 
13887 through 14151) (published on March 12, 2014), for 2016 (80 FR 
9636 through 9648) (published on February 24, 2015), for 2017 and 2018 
(81 FR 10091 through 10105) (published on February 29, 2016), for 2019 
and 2020 (84 FR 59529 through) (published on November 5, 2019), and for 
2021 (85 FR 49264 through 49280) (published on August 13, 2020) 
(hereinafter referred to as the August 2020 final BHP Payment Notice), 
the total Federal BHP payment amount has been calculated using multiple 
rate cells in each state. Each rate cell represents a unique 
combination of age range (if applicable), geographic area, coverage 
category (for example, self-only or two-adult coverage through the 
BHP), household size, and income range as a percentage of FPL, and 
there is a distinct rate cell for individuals in each coverage category 
within a particular age range who reside in a specific geographic area 
and are in households of the same size and income range. The BHP 
payment rates developed also are consistent with the state's rules on 
age rating. Thus, in the case of a state that does not use age as a 
rating factor on an Exchange, the BHP payment rates would not vary by 
age.
    Under the methodology finalized in the August 2020 final BHP 
Payment Notice, the rate for each rate cell is calculated in two parts. 
The first part is equal to 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 an Exchange. The second part is equal to 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 an Exchange. These two 
parts are added together and the total rate for that rate cell would be 
equal to the sum of the PTC and CSR rates. As noted in the November 
2019 final BHP Payment Notice, we currently assign a value of zero to 
the CSR portion of the BHP payment rate calculation, because there is 
presently no available appropriation from which we can make the CSR 
portion of any BHP Payment.
    We propose that Equation (1) would be used to calculate the 
estimated PTC for eligible individuals enrolled in the BHP in each rate 
cell. We note that throughout this proposed methodology, when we refer 
to enrollees and enrollment data, we mean data regarding individuals 
who are enrolled in the BHP who have been found eligible for the BHP 
using the eligibility and verification requirements that are applicable 
in the state's most recent certified Blueprint. By applying the 
equations separately to rate cells based on age (if applicable), income 
and other factors, we would effectively take those factors into account 
in the calculation. In addition, the equations would reflect the 
estimated experience of individuals in each rate cell if enrolled in 
coverage through an Exchange, taking into account additional relevant 
variables. Each of the variables in the equations is defined in this 
section, and further detail is provided later in this section of this 
proposed methodology. In addition, we describe in Equation (2a) and 
Equation (2b) (below) how we propose to calculate the adjusted 
reference premium (ARP) that is used in Equation (1).
Equation 1: Estimated PTC by Rate Cell
    We propose that the estimated PTC, on a per enrollee basis, would 
continue to be calculated for each rate cell for each state based on 
age range (if applicable), geographic area, coverage category, 
household size, and income range. The PTC portion of the rate would be 
calculated in a manner consistent with the methodology used to 
calculate the PTC for persons enrolled in a QHP, with 5 adjustments. 
First, the PTC portion of the rate for each rate cell would 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 (RP) (described in section 
II.D.1. of this proposed methodology) used to calculate the PTC would 
be adjusted for the BHP population health status, and in the case of a 
state that elects to use 2021 premiums for the basis of the BHP Federal 
payment, for the projected change in the premium from 2021 to 2022, to 
which the rates announced in the final payment methodology would apply. 
These adjustments are described in Equation (2a) and Equation (2b). 
Third, the PTC would be adjusted prospectively to reflect the mean, or 
average, net expected impact of income reconciliation on the 
combination of all persons enrolled in the BHP; this adjustment, the 
IRF, as described in section II.D.7. of this proposed methodology, 
would account for the impact on the PTC that would have occurred had 
such reconciliation been performed. Fourth, the PTC would be adjusted 
to account for the estimated impacts of plan selection; this 
adjustment, the MTSF, would reflect the effect on the average PTC of 
individuals choosing different metal tier levels of QHPs. Finally, the 
rate is multiplied by 95 percent, consistent with section 
1331(d)(3)(A)(i) of the Patient Protection and Affordable Care Act. We 
note that in the situation where the average income contribution of an 
enrollee would exceed the ARP, we would calculate the PTC to be equal 
to 0 and would not allow the value of the PTC to be negative.
    We propose using Equation (1) to calculate the PTC rate, consistent 
with the methodology described above:
[GRAPHIC] [TIFF OMITTED] TP03NO20.020

PTCa,g,c,h,i = Premium tax credit portion of BHP payment rate
a = Age range
g = Geographic 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

[[Page 69529]]

PTCFh,i,j = Premium tax credit formula percentage
IRF = Income reconciliation factor
MTSF = Metal tier selection factor

Equation (2a) and Equation (2b): Adjusted Reference Premium (ARP) 
Variable (Used in Equation 1)
    As part of the calculations for the PTC component, we propose to 
continue to calculate the value of the ARP as described below. 
Consistent with the existing approach, we are proposing to allow states 
to choose between using the actual current year premiums or the prior 
year's premiums multiplied by the premium trend factor (PTF) (as 
described in section II.E. of this proposed methodology). Below we 
describe how we would continue to calculate the ARP under each option.
    In the case of a state that elected to use the reference premium 
(RP) based on the current program year (for example, 2022 premiums for 
the 2022 program year), we propose to calculate the value of the ARP as 
specified in Equation (2a). The ARP would be equal to the RP, which 
would be based on the second lowest cost silver plan premium in the 
applicable program year, multiplied by the BHP population health factor 
(PHF) (described in section II.D.3. of this proposed methodology), 
which would reflect the projected impact that enrolling BHP-eligible 
individuals in QHPs through an Exchange would have had on the average 
QHP premium, and multiplied by the premium adjustment factor (PAF) 
(described in section II.D of this proposed methodology), which would 
account for the change in silver-level premiums due to the 
discontinuance of CSR payments.
[GRAPHIC] [TIFF OMITTED] TP03NO20.039

ARPa,g,c = Adjusted reference premium
a = Age range
g = Geographic area
c = Coverage status (self-only or applicable category of family 
coverage) obtained through BHP
RPa,g,c = Reference premium
PHF = Population health factor
PAF = Premium adjustment factor

    In the case of a state that elected to use the RP based on the 
prior program year (for example, 2021 premiums for the 2022 program 
year, as described in more detail in section II.E. of this proposed 
methodology), we propose to calculate the value of the ARP as specified 
in Equation (2b). The ARP would be equal to the RP, which would be 
based on the second lowest cost silver plan premium in 2021, multiplied 
by the BHP PHF (described in section II.D of this proposed 
methodology), which would reflect the projected impact that enrolling 
BHP-eligible individuals in QHPs on an Exchange would have had on the 
average QHP premium, multiplied by the PAF (described in section II.D. 
of this proposed methodology), which would account for the change in 
silver-level premiums due to the discontinuance of CSR payments, and 
multiplied by the premium trend factor (PTF) (described in section 
II.E. of this proposed methodology), which would reflect the projected 
change in the premium level between 2021 and 2022.
[GRAPHIC] [TIFF OMITTED] TP03NO20.037

ARPa,g,c = Adjusted reference premium
a = Age range
g = Geographic area
c = Coverage status (self-only or applicable category of family 
coverage) obtained through BHP
RPa,g,c = Reference premium
PHF = Population health factor
PAF = Premium adjustment factor
PTF = Premium trend factor

Equation 3: Determination of Total Monthly Payment for BHP Enrollees in 
Each Rate Cell
    In general, the rate for each rate cell would 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 (3).
[GRAPHIC] [TIFF OMITTED] TP03NO20.038

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 portion of BHP payment rate
Ea,g,c,h,i = Number of BHP enrollees
a = Age range
g = Geographic 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)
    In this equation, we would assign a value of zero to the CSR part 
of the BHP payment rate calculation (CSRa,g,c,h,i) because there is 
presently no available appropriation from which we can make the CSR 
portion of any BHP payment. In the event that an appropriation for CSRs 
for 2022 is made, we would determine whether and how to modify the CSR 
part of the BHP payment rate calculation (CSRa,g,c,h,i) or the PAF and 
the MTSF in the payment methodology.

B. Federal BHP Payment Rate Cells

    Consistent with the previous payment methodologies, we propose that 
a state implementing a BHP provide us an estimate of the number of BHP 
enrollees it projects will enroll in the upcoming BHP program quarter, 
by applicable rate cell, prior to the first quarter and each subsequent 
quarter of program operations until actual enrollment data is 
available. Upon our approval of such estimates as reasonable, we will 
use those estimates to calculate the prospective payment for the first 
and subsequent quarters of program operation until the state provides 
us with actual enrollment data for those periods. The actual enrollment 
data is 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 
would be based on the most recent actual enrollment data

[[Page 69530]]

submitted to us. Actual enrollment data must be based on individuals 
enrolled for the quarter who the state found eligible and whose 
eligibility was verified using eligibility and verification 
requirements as agreed to by the state in its applicable BHP Blueprint 
for the quarter that enrollment data is submitted. 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 (if applicable), 
geographic area, coverage status, household size, and income range, as 
explained above.
    We propose requiring the use of certain rate cells as part of the 
proposed methodology. For each state, we propose using rate cells that 
separate the BHP population into separate cells based on the five 
factors described as follows:
    Factor 1--Age: We propose to continue separating enrollees into 
rate cells by age (if applicable), using the following age ranges that 
capture the widest variations in premiums under HHS's Default Age 
Curve: \3\
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    \3\ This curve is used to implement the Patient Protection and 
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. The 
default age curve was updated for plan or policy years beginning on 
or after January 1, 2018 to include different age rating factors 
between children 0-14 and for persons at each age between 15 and 20. 
More information is available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/StateSpecAgeCrv053117.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 
HHS-Developed Risk Adjustment Model Algorithm ``Do It Yourself 
(DIY)'' Software Instructions for the 2018 Benefit Year, April 4, 
2019 Update, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated-CY2018-DIY-instructions.pdf.
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     Ages 0-20.
     Ages 21-34.
     Ages 35-44.
     Ages 45-54.
     Ages 55-64.
    This proposed provision is unchanged from the current 
methodology.\4\
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    \4\ In this document, references to the ``current methodology'' 
refer to the 2021 program year methodology as outlined in the August 
2020 final BHP Payment Notice.
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    Factor 2--Geographic area: For each state, we propose separating 
enrollees into rate cells by geographic areas within which a single RP 
is charged by QHPs offered through the state's Exchange. Multiple, non-
contiguous geographic areas would be incorporated within a single cell, 
so long as those areas share a common RP.\5\ This proposed provision is 
also unchanged from the current methodology.
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    \5\ 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 areas 
established under the 2014 Market Reform Rules. They also reflect 
the service area requirements applicable to QHPs, as described in 45 
CFR 155.1055, except that service areas smaller than counties are 
addressed as explained in this methodology.
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    Factor 3--Coverage status: We propose to continue separating 
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 the BHP, as provided in section 
1331(d)(3)(A)(ii) of the Patient Protection and Affordable Care Act. 
Among recipients of family coverage through the BHP, separate rate 
cells, as explained below, would apply based on whether such coverage 
involves two adults alone or whether it involves children. This 
proposed provision is unchanged from the current methodology.
    Factor 4--Household size: We propose to continue the current 
methods for separating enrollees into rate cells by household size that 
states use to determine BHP enrollees' household income as a percentage 
of the FPL under 42 CFR 600.320 (Determination of eligibility for and 
enrollment in a standard health plan). We propose to require separate 
rate cells for several specific household sizes. For each additional 
member above the largest specified size, we propose to publish 
instructions for how we would develop additional rate cells and 
calculate an appropriate payment rate based on data for the rate cell 
with the closest specified household size. We propose to publish 
separate rate cells for household sizes of 1 through 10. This proposed 
provision is unchanged from the current methodology.
    Factor 5--Household income: For households of each applicable size, 
we propose to continue the current methods for creating separate rate 
cells by income range, as a percentage of FPL. The PTC that a person 
would receive if enrolled in a QHP through an Exchange varies by 
household income, both in level and as a ratio to the FPL. Thus, we 
propose that separate rate cells would be used to calculate Federal BHP 
payment rates to reflect different bands of income measured as a 
percentage of FPL. We propose using the following income ranges, 
measured as a percentage of the FPL:
     0 to 50 percent of the FPL.
     51 to 100 percent of the FPL.
     101 to 138 percent of the FPL.\6\
---------------------------------------------------------------------------

    \6\ 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.
    This proposed provision is unchanged from the current methodology.
    These rate cells would only be used to calculate the Federal BHP 
payment amount. A state implementing a BHP would 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 the BHP 
or to help define BHP enrollees' covered benefits, premium costs, or 
out-of-pocket cost-sharing levels.
    Consistent with the current methodology, we propose using averages 
to define Federal payment rates, both for income ranges and age ranges 
(if applicable), rather than varying such rates to correspond to each 
individual BHP enrollee's age (if applicable) and income level. We 
believe that the proposed approach will increase the administrative 
feasibility of making Federal BHP payments and reduce the likelihood of 
inadvertently erroneous payments resulting from highly complex 
methodologies. We also believe this approach should not significantly 
change Federal payment amounts, since within applicable ranges, the 
BHP-eligible population is distributed relatively evenly.
    The number of factors contributing to rate cells, when combined, 
can result in over 350,000 rate cells which can increase the complexity 
when generating quarterly payment amounts. In future years, and in the 
interest of administrative simplification, we will consider whether to 
combine or eliminate certain rate cells, once we are certain that the 
effect on payment would be insignificant.

C. Sources and State Data Considerations

    To the extent possible, unless otherwise provided, we intend to 
continue to use data submitted to the Federal Government by QHP issuers 
seeking to offer coverage through the

[[Page 69531]]

Exchange in the relevant BHP state 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 area, for CMS to 
calculate the Federal BHP payment rates in those states. We propose 
that a State-based Exchange interested in obtaining the applicable 2022 
program year Federal BHP payment rates for its state must submit such 
data accurately, completely, and as specified by CMS, by no later than 
October 15, 2021. 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 rate, such data must be submitted in a timely 
manner, and in a format specified by us 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 are 
published in CMS guidance and are available in the Federal Policy 
Guidance section at https://www.medicaid.gov/federal-policy-Guidance/index.html.
    States operating a BHP must submit enrollment data to us on a 
quarterly basis and should be technologically prepared to begin 
submitting data at the start of their BHP, starting with the beginning 
of the first program year. This differs from the enrollment estimates 
used to calculate the initial BHP payment, which states would generally 
submit to CMS 60 days before the start of the first quarter of the 
program start date. This requirement is necessary for us to implement 
the payment methodology that is tied to a quarterly reconciliation 
based on actual enrollment data.
    We propose to continue the policy first adopted in the 2016 final 
BHP Payment Notice that in states that have BHP enrollees who do not 
file Federal tax returns (non-filers), the state must develop a 
methodology to determine the enrollees' household income and household 
size consistently with Marketplace requirements.\7\ The state must 
submit this methodology to us at the time of their Blueprint 
submission. We reserve the right to approve or disapprove the state's 
methodology to determine household income and household size for non-
filers if the household composition and/or household income resulting 
from application of the methodology are different than what typically 
would be expected to result if the individual or head of household in 
the family were to file a tax return. States currently operating a BHP 
that wish to change the methodology for non-filers must submit a 
revised Blueprint outlining the revisions to its methodology, 
consistent with Sec.  600.125.
---------------------------------------------------------------------------

    \7\ See 81 FR at 10097.
---------------------------------------------------------------------------

    In addition, as the Federal payments are determined quarterly and 
the enrollment data is required to be submitted by the states to us 
quarterly, we propose that the quarterly payment would be based on the 
characteristics of the enrollee at the beginning of the quarter (or 
their first month of enrollment in the BHP in each quarter). Thus, if 
an enrollee were to experience a change in county of residence, 
household income, household size, or other factors related to the BHP 
payment determination during the quarter, the payment for the quarter 
would be based on the data as of the beginning of the quarter (or their 
first month of enrollment in the BHP in the applicable quarter). 
Payments would still be made only for months that the person is 
enrolled in and eligible for the BHP. We do not anticipate that this 
would have a significant effect on the Federal BHP payment. The states 
must maintain data that are consistent with CMS' verification 
requirements, including auditable records for each individual enrolled, 
indicating an eligibility determination and a determination of income 
and other criteria relevant to the payment methodology as of the 
beginning of each quarter.
    Consistent with Sec.  600.610 (Secretarial determination of BHP 
payment amount), the state is required to submit certain data in 
accordance with this methodology. We require that this data be 
collected and validated by states operating a BHP, and that this data 
be submitted to CMS.

D. Discussion of Specific Variables Used in Payment Equations

1. Reference Premium (RP)
    To calculate the estimated PTC that would be paid if BHP-eligible 
individuals enrolled in QHPs through an Exchange, we must calculate a 
RP because the PTC is based, in part, on the premiums for the 
applicable second lowest cost silver plan as explained in section 
II.D.5. of this proposed methodology, regarding the premium tax credit 
formula (PTCF). The proposal is unchanged from the current methodology 
except to update the reference years, and to provide additional 
methodological details to simplify calculations and to deal with 
potential ambiguities. Accordingly, for the purposes of calculating the 
BHP payment rates, the RP, 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 that is offered through the same Exchange. We propose to use 
the adjusted monthly premium for an applicable second lowest cost 
silver plan in the applicable program year (2022) as the RP (except in 
the case of a state that elects to use the prior plan year's premium as 
the basis for the Federal BHP payment for 2022, as described in section 
II.E. of this proposed methodology).
    The RP would 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 in accordance with 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 
propose not 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 RP, or the lowest cost silver plan, 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 (if applicable), 
geographic area, and self-only or applicable category of family 
coverage obtained through the BHP.
    We note that the choice of the second lowest cost silver plan for 
calculating BHP payments would rely on several simplifying assumptions 
in its selection. For the purposes of determining the second lowest 
cost silver plan for calculating PTC for a person enrolled in a QHP 
through an Exchange, the applicable plan may differ for various 
reasons. For example, a different second lowest cost silver plan may 
apply to a family consisting of two adults, their child, and their 
niece than to a family with two adults and their children, because one 
or more QHPs in the family's geographic area might not offer family 
coverage that includes the niece. We believe that it would not be 
possible to replicate such variations for calculating the BHP payment 
and

[[Page 69532]]

believe that in the aggregate, they would not result in a significant 
difference in the payment. Thus, we propose to use the second lowest 
cost silver plan available to any enrollee for a given age, geographic 
area, and coverage category.
    This choice of RP relies on an assumption about enrollment in the 
Exchanges. In the payment methodologies for program years 2015 through 
2019, we had assumed that all persons enrolled in the BHP would have 
elected to enroll in a silver level plan if they had instead enrolled 
in a QHP through an Exchange (and that the QHP premium would not be 
lower than the value of the PTC). In the November 2019 final BHP 
Payment Notice, we continued to use the second-lowest cost silver plan 
premium as the RP, but for the 2020 payments we changed the assumption 
about which metal tier plans enrollees would choose (see section 
II.D.6. on the MTSF in this proposed methodology). In the 2021 payment 
methodology, we continued to account for how enrollees may choose other 
metal tier plans by applying the MTSF. For the 2022 payment 
methodology, we propose to continue accounting for how enrollees may 
choose other metal tier plans by proposing the continued application of 
the MTSF as described in section II.D.6. of this proposed methodology.
    We do not believe it is appropriate to adjust the payment for an 
assumption that some BHP enrollees would not have enrolled in QHPs for 
purposes of calculating the BHP payment rates, since section 
1331(d)(3)(A)(ii) of the Patient Protection and Affordable Care Act 
requires the calculation of such rates as if the enrollee had enrolled 
in a QHP through an Exchange.
    The applicable age bracket (if any) will be one dimension of each 
rate cell. We propose to assume a uniform distribution of ages and 
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 
total monthly payment for BHP enrollees. 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 propose to use geographic areas based on the rating areas used 
in the Exchanges. We propose to define each geographic area so that the 
RP is the same throughout the geographic area. When the RP varies 
within a rating area, we propose defining geographic areas as 
aggregations of counties with the same RP. Although plans are allowed 
to serve geographic areas smaller than counties after obtaining our 
approval, we propose that no geographic area, for purposes of defining 
BHP payment rate cells, 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 simplify both the calculation of BHP 
payment rates and the operation of the BHP.
    Finally, in terms of the coverage category, we propose that Federal 
payment rates only recognize self-only and two-adult coverage, with 
exceptions that account for children who are potentially eligible for 
the 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 (MAGI)), children in 
households with incomes between that threshold and 200 percent of FPL 
would be potentially eligible for the BHP. Currently, the only states 
in this category are Idaho and North Dakota.\8\ Second, the BHP would 
include lawfully present immigrant children with household incomes at 
or below 200 percent of FPL in states that have not exercised the 
option under sections 1903(v)(4)(A)(ii) and 2107(e)(1)(E) of 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. For example, Idaho's Medicaid and CHIP eligibility is limited 
to families with MAGI at or below 185 percent FPL. If Idaho implemented 
a BHP, Idaho children with household incomes between 185 and 200 
percent could qualify. In other states, BHP eligibility will generally 
be restricted to adults, since children who are citizens or lawfully 
present immigrants and live in households with incomes at or below 200 
percent of FPL will qualify for Medicaid or CHIP, and thus be 
ineligible for a BHP under section 1331(e)(1)(C) of the Patient 
Protection and Affordable Care Act, which limits a BHP to individuals 
who are ineligible for minimum essential coverage (as defined in 26 
U.S.C. 5000A(f)).
---------------------------------------------------------------------------

    \8\ CMCS. ``State Medicaid, CHIP and BHP Income Eligibility 
Standards Effective October 1, 2020.''
---------------------------------------------------------------------------

2. Premium Adjustment Factor (PAF)
    The PAF considers the premium increases in other states that took 
effect after we discontinued payments to issuers for CSRs provided to 
enrollees in QHPs offered through Exchanges. Despite the discontinuance 
of Federal payments for CSRs, QHP issuers are required to provide CSRs 
to eligible enrollees. As a result, many QHP issuers increased the 
silver-level plan premiums to account for those additional costs; 
adjustments and how those were applied (for example, to only silver-
level plans or to all metal tier plans) varied across states. For the 
states operating BHPs in 2018, the increases in premiums were 
relatively minor, because the majority of enrollees eligible for CSRs 
(and all who were eligible for the largest CSRs) were enrolled in the 
BHP and not in QHPs on the Exchanges, and therefore issuers in BHP 
states did not significantly raise premiums to cover unpaid CSR costs.
    In the Final Administrative Order, the November 2019 final BHP 
Payment Notice, and the August 2020 final BHP Payment Notice, we 
incorporated the PAF into the BHP payment methodologies for 2018, 2019, 
2020, and 2021 to capture the impact of how other states responded to 
us ceasing to pay CSRs. We propose to include the PAF in the 2022 
payment methodology and to calculate it in the same manner as in the 
Final Administrative Order. In the event that an appropriation for CSRs 
for 2022 is made, we would determine whether and how to modify the PAF 
in the payment methodology.
    Under the Final Administrative Order, we calculated the PAF by 
using information sought from QHP issuers in each state and the 
District of Columbia, and determined the premium adjustment that the 
responding QHP issuers made to each silver level plan in 2018 to 
account for the discontinuation of CSR payments to QHP issuers. Based 
on the data collected, we estimated the median adjustment for silver 
level QHPs nationwide (excluding those in the two BHP states). To the 
extent that QHP issuers made no adjustment (or the adjustment was 
zero), this would be counted as zero in determining the median 
adjustment made to all silver level QHPs nationwide. If the amount of 
the adjustment was unknown--or we determined that it should be excluded 
for methodological reasons (for example, the adjustment was negative, 
an outlier, or unreasonable)--then we did not count the adjustment 
towards determining the median adjustment.\9\ The median adjustment for 
silver level

[[Page 69533]]

QHPs is the nationwide median adjustment.
---------------------------------------------------------------------------

    \9\ Some examples of outliers or unreasonable adjustments 
include (but are not limited to) values over 100 percent (implying 
the premiums doubled or more as a result of the adjustment), values 
more than double the otherwise highest adjustment, or non-numerical 
entries.
---------------------------------------------------------------------------

    For each of the two BHP states, we determined the median premium 
adjustment for all silver level QHPs in that state, which we refer to 
as the state median adjustment. The PAF for each BHP state equaled one 
plus the nationwide median adjustment divided by one plus the state 
median adjustment for the BHP state. In other words,

PAF = (1 + Nationwide Median Adjustment) / (1 + State Median 
Adjustment)

    To determine the PAF described above, we sought to collect QHP 
information from QHP issuers in each state and the District of Columbia 
to determine the premium adjustment those issuers made to each silver 
level plan offered through the Exchange in 2018 to account for the end 
of CSR payments. Specifically, we sought information showing the 
percentage change that QHP issuers made to the premium for each of 
their silver level plans to cover benefit expenditures associated with 
the CSRs, given the lack of CSR payments in 2018. This percentage 
change was a portion of the overall premium increase from 2017 to 2018.
    According to our records, there were 1,233 silver-level QHPs 
operating on Exchanges in 2018. Of these 1,233 QHPs, 318 QHPs (25.8 
percent) responded to our request for the percentage adjustment applied 
to silver-level QHP premiums in 2018 to account for the discontinuance 
of the CSRs. These 318 QHPs operated in 26 different states, with 10 of 
those states running State-based Exchanges (SBEs) (while we requested 
information only from QHP issuers in states serviced by an FFE, many of 
those issuers also had QHPs in states operating SBEs and submitted 
information for those states as well). Thirteen of these 318 QHPs were 
in New York (and none were in Minnesota). Excluding these 13 QHPs from 
the analysis, the nationwide median adjustment was 20.0 percent. Of the 
13 QHPs in New York that responded, the state median adjustment was 1.0 
percent. We believe that this is an appropriate adjustment for QHPs in 
Minnesota, as well, based on the observed changes in New York's QHP 
premiums in response to the discontinuance of CSR payments (and the 
operation of the BHP in that state) and our analysis of expected QHP 
premium adjustments for states with BHPs. We calculated the proposed 
PAF as (1 + 20%) / (1 + 1%) (or 1.20/1.01), which results in a value of 
1.188.
    We propose that the PAF continue to be set to 1.188 for program 
year 2022. We believe that this value for the PAF continues to 
reasonably account for the increase in silver-level premiums 
experienced in non-BHP states that took effect after the discontinuance 
of the CSR payments. We believe that the impact of the increase in 
silver-level premiums in 2022 can reasonably be expected to be similar 
to that in 2018, because the discontinuation of CSR payments has not 
changed. Moreover, we believe that states and QHP issuers have not 
significantly changed the manner and degree to which they are 
increasing QHP silver-level premiums to account for the discontinuation 
of CSR payments since 2018, and we expect the same for 2022.
    In addition, the percentage difference between the average second 
lowest-cost silver level QHP and the bronze-level QHP premiums has not 
changed significantly since 2018, and we do not expect a significant 
change for 2022. In 2018, the average second lowest-cost silver level 
QHP premium was 41.1 percent higher than the average lowest-cost 
bronze-level QHP premium ($481 and $341, respectively). In 2020 (the 
latest year for which premiums have been published), the difference is 
similar; the average second lowest-cost silver-level QHP premium is 
39.6 percent higher than the average lowest-cost bronze-level QHP 
premium ($462 and $331, respectively).\10\ In contrast, the average 
second lowest-cost silver-level QHP premium was only 23.8 percent 
higher than the average lowest-cost bronze-level QHP premium in 2017 
($359 and $290, respectively).\11\ If there were a significant 
difference in the amounts that QHP issuers were increasing premiums for 
silver-level QHPs to account for the discontinuation of CSR payments 
over time, then we would expect the difference between the bronze-level 
and silver-level QHP premiums to change significantly over time, and 
that this would be apparent in comparing the lowest-cost bronze-level 
QHP premium to the second lowest-cost silver-level QHP premium.
---------------------------------------------------------------------------

    \10\ See Kaiser Family Foundation, ``Average Marketplace 
Premiums by Metal Tier, 2018-2020,'' https://www.kff.org/health-reform/state-indicator/average-marketplace-premiums-by-metal-tier/.
    \11\ See Basic Health Program: Federal Funding Methodology for 
Program Years 2019 and 2020; Final Methodology, 84 FR 59529 at 59532 
(November 5, 2019).
---------------------------------------------------------------------------

    We request comments on our proposal that the PAF continue to be set 
to 1.188 for program year 2022. We request comments on whether sources 
of data other than what we sought in 2018 are available to account for 
the adjustment to the silver-level QHP premiums to account for the 
discontinuation of CSRs beyond 2018.
    We also generally seek comment on what impact (if any) the recent 
court decisions \12\ regarding the government's obligation to make CSR 
payments may have on the observed trends regarding adjustments to the 
silver-level QHP premiums to account for the discontinuation of CSRs, 
as well as the potential continuation of these trends for the 2022 plan 
year. We also generally seek comment on whether, in the event an 
appropriation for CSRs for 2022 is made, we should determine if and how 
to modify the PAF in the payment methodology, including whether to 
eliminate it in light of the purpose for which it was initially 
included in the payment methodology.
---------------------------------------------------------------------------

    \12\ See Sanford Health Plan v. United States, 969 F.3d 1370 
(Fed. Cir. 2020) and Community Health Choice, Inc. v. United States, 
970 F.3d 1364 (Fed. Cir. 2020).
---------------------------------------------------------------------------

3. Population Health Factor (PHF)
    We propose that the PHF be included in the methodology to account 
for the potential differences in the average health status between BHP 
enrollees and persons enrolled through the Exchanges. To the extent 
that BHP enrollees would have been enrolled through an Exchange in the 
absence of a BHP in a state, the exclusion of those BHP enrollees in 
the Exchange may affect the average health status of the overall 
population and the expected QHP premiums.
    We currently do not believe that there is evidence that the BHP 
population would have better or poorer health status than the Exchange 
population. At this time, there continues to be a lack of data on the 
experience in the Exchanges that limits the ability to analyze the 
potential health differences between these groups of enrollees. More 
specifically, Exchanges have been in operation since 2014, and 2 states 
have operated BHPs since 2015, but data is not available to do the 
analysis necessary to determine if there are differences in the average 
health status between BHP and Exchange enrollees. In addition, 
differences in population health may vary across states. We also do not 
believe that sufficient data would be available to permit us to make a 
prospective adjustment to the PHF under Sec.  600.610(c)(2) for the 
2022 program year.
    Given these analytic challenges and the limited data about Exchange 
coverage and the characteristics of BHP-eligible consumers, we propose 
that the PHF continue to be 1.00 for program year 2022.

[[Page 69534]]

    In previous years BHP payment methodologies, we included an option 
for states to include a retrospective population health status 
adjustment. We propose that states be provided with the same option for 
2022 to include a retrospective population health status adjustment in 
the certified methodology, which is subject to our review and approval. 
This option is described further in section II.F. of this proposed 
methodology. Regardless of whether a state elects to include a 
retrospective population health status adjustment, we anticipate that, 
in future years, when additional data becomes available about Exchange 
coverage and the characteristics of BHP enrollees, we may propose a 
different PHF.
    While the statute requires consideration of risk adjustment 
payments and reinsurance payments insofar as they would have affected 
the PTC that would have been provided to BHP-eligible individuals had 
they enrolled in QHPs, we are not proposing to require that a BHP's 
standard health plans receive such payments. As explained in the BHP 
final rule, BHP standard health plans are not included in the 
federally-operated risk adjustment program.\13\ Further, standard 
health plans did not qualify for payments under the transitional 
reinsurance program established under section 1341 of the Patient 
Protection and Affordable Care Act for the years the program was 
operational (2014 through 2016).\14\ 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.
---------------------------------------------------------------------------

    \13\ See 79 FR at 14131.
    \14\ 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''), 153.230(a) (reinsurance payments under the 
national reinsurance parameters are available only for 
``Reinsurance-eligible plans'').
---------------------------------------------------------------------------

4. Household Income (I)
    Household income is a significant determinant of the amount of the 
PTC that is provided for persons enrolled in a QHP through an Exchange. 
Accordingly, both the current and proposed BHP payment methodologies 
incorporate household income into the calculations of the payment rates 
through the use of income-based rate cells. We propose defining 
household 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 would be measured relative to the 
FPL, which is updated periodically in the Federal Register by the 
Secretary under the authority of 42 U.S.C. 9902(2). In our proposed 
methodology, household size and income as a percentage of FPL would be 
used as factors in developing the rate cells. We propose using the 
following income ranges measured as a percentage of FPL: \15\
---------------------------------------------------------------------------

    \15\ These income ranges and this analysis of income apply to 
the calculation of the PTC.
---------------------------------------------------------------------------

     0-50 percent.
     51-100 percent.
     101-138 percent.
     139-150 percent.
     151-175 percent.
     176-200 percent.
    We further propose to 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 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 the BHP within rate cells that may be 
relatively small.
    Thus, when calculating the mean, or average, PTC for a rate cell, 
we propose to 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 would rely on the PTC formula described in section II.D.5. 
of this proposed methodology.
    As the APTC for persons enrolled in QHPs would be calculated based 
on their household income during the open enrollment period, and that 
income would be measured against the FPL at that time, we propose to 
adjust the FPL by multiplying the FPL by a projected increase in the 
CPI-U between the time that the BHP payment rates are calculated and 
the QHP open enrollment period, if the FPL is expected to be updated 
during that time. We propose that the projected increase in the CPI-U 
would be based on the intermediate inflation forecasts from the most 
recent OASDI and Medicare Trustees Reports. \16\
---------------------------------------------------------------------------

    \16\ See Table IV A1 from the 2020 Annual Report of the Boards 
of Trustees of the Federal Hospital Insurance and Federal 
Supplementary Medical Insurance Trust Funds, available at https://www.cms.gov/files/document/2020-medicare-trustees-report.pdf.
---------------------------------------------------------------------------

5. Premium Tax Credit Formula (PTCF)
    In Equation 1 described in section II.A.1. of this proposed 
methodology, we propose to 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 contribution amount 
(the amount of premium that an individual or household theoretically 
would be required to pay for coverage in a QHP on an Exchange), which 
is based on (A) the household income; (B) the household income as a 
percentage of FPL for the family size; and (C) the schedule specified 
in 26 U.S.C. 36B(b)(3)(A) and shown below.
    The difference between the contribution amount and the adjusted 
monthly premium (that is, the monthly premium adjusted for the age of 
the enrollee) for the applicable second lowest cost silver plan is the 
estimated amount of the PTC that would be provided for 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). The amount is equal to the lesser of the premium 
for the plan in which the person or household enrolls, or the adjusted 
premium for the applicable second lowest cost silver plan minus the 
contribution amount.
    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 Table 1, 
increasing on a sliding scale in a linear manner from an initial 
premium percentage to a final premium percentage specified in Table 1. 
We propose to continue to use applicable percentages 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 as part of 
Equation 1. We propose that the applicable percentages in Table 1 for 
calendar year (CY) 2021 would be effective for BHP program year 2022. 
The applicable percentages will be updated in future years in 
accordance with 26 U.S.C. 36B(b)(3)(A)(ii).

[[Page 69535]]



           Table 1--Applicable Percentage Table for CY 2021 a
------------------------------------------------------------------------
 In the case of household income
   (expressed as a percent of         The initial      The final premium
    poverty line) within the      premium percentage    percentage is--
     following  income tier:             is--
------------------------------------------------------------------------
Up to 133%......................                2.07                2.07
133% but less than 150%.........                3.10                4.14
150% but less than 200%.........                4.14                6.52
200% but less than 250%.........                6.52                8.33
250% but less than 300%.........                8.33                9.83
300% but not more than 400%.....                9.83                8.83
------------------------------------------------------------------------
\a\ IRS Revenue Procedure 2020-36. https://www.irs.gov/pub/irs-drop/rp-20-36.pdf.

6. Metal Tier Selection Factor (MTSF)
    On the Exchange, if an enrollee chooses a QHP and the value of the 
APTC to which the enrollee is entitled is greater than the premium of 
the plan selected, then the APTC is reduced to be equal to the premium. 
This usually occurs when enrollees eligible for larger APTCs choose 
bronze-level QHPs, which typically have lower premiums on the Exchange 
than silver-level QHPs. Prior to 2018, we believed that the impact of 
these choices and plan selections on the amount of PTCs that the 
Federal Government paid was relatively small. During this time, most 
enrollees in income ranges up to 200 percent FPL chose silver-level 
QHPs, and in most cases where enrollees chose bronze-level QHPs, the 
premium was still more than the PTC. Based on our analysis of the 
percentage of persons with incomes below 200 percent FPL choosing 
bronze-level QHPs and the average reduction in the PTCs paid for those 
enrollees, we believe that the total PTCs paid for persons with incomes 
below 200 percent FPL were reduced by about 1 percent in 2017. 
Therefore, we did not seek to make an adjustment based on the effect of 
enrollees choosing non-silver-level QHPs in developing the BHP payment 
methodology applicable to program years prior to 2018. However, after 
the discontinuance of the CSR payments in October 2017, several changes 
occurred that increased the expected impact of enrollees' plan 
selection choices on the amount of PTC the government paid. These 
changes led to a larger percentage of individuals choosing bronze-level 
QHPs, and for those individuals who chose bronze-level QHPs, these 
changes also generally led to larger reductions in PTCs paid by the 
Federal Government per individual. The combination of more individuals 
with incomes below 200 percent of FPL choosing bronze-level QHPs and 
the reduction in PTCs had an impact on PTCs paid by the Federal 
Government for enrollees with incomes below 200 percent FPL.
    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 QHPs, despite being eligible for CSRs in silver-level 
QHPs, because many were able to purchase bronze-level QHPs 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-level QHPs increased from about 11 percent in 2017 to 
about 13 percent in 2018. In addition, the likelihood that a person 
choosing a bronze-level QHP 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-level 
QHP premium to the average bronze-level QHP premium increased: The 
average silver-level QHP premium was 17 percent higher than the average 
bronze-level QHP premium in 2017, whereas the average silver-level QHP 
premium was 33 percent higher than the average bronze-level QHP premium 
in 2018. Similarly, the average estimated reduction in APTC for 
enrollees with incomes between 0 percent and 200 percent FPL that chose 
bronze-level QHPs increased from about 11 percent in 2017 to about 23 
percent in 2018 (after adjusting for the average age of bronze-level 
QHP and silver-level QHP enrollees); that is, in 2017, enrollees with 
incomes in this range who chose bronze-level QHPs received 11 percent 
less than the full value of the APTC, and in 2018, those enrollees who 
chose bronze-level QHPs received 23 percent less than the full value of 
the APTC.
    The discontinuance of the CSR payments led to increases in silver-
level QHP premiums (and thus in the total potential PTCs), but did not 
generally increase the bronze-level QHP premiums in most states; we 
believe this is the primary reason for the increase in the percentage 
reduction in PTCs paid by the government for those who enrolled in 
bronze-level QHPs between 2017 and 2018. Therefore, we now believe that 
the impacts on the amount of PTC the government would pay due to 
enrollees' plan selection choices are larger and thus more significant, 
and we are proposing to include an adjustment (the MTSF) in the BHP 
payment methodology to account for the effects of these choices. 
Section 1331(d)(3) of the Patient Protection and Affordable Care Act 
requires that the BHP payments to states be based on what would have 
been provided if such eligible individuals were allowed to enroll in 
QHPs, and we believe that it is appropriate to consider how individuals 
would have chosen different plans--including across different metal 
tiers--as part of the BHP payment methodology.
    We finalized the application of the MTSF for the first time in the 
2020 payment methodology, and here we propose to calculate the MTSF 
using the same approach as finalized there (84 FR 59543). First, we 
would calculate the percentage of enrollees with incomes below 200 
percent of the FPL (those who would be potentially eligible for the 
BHP) in non-BHP states who enrolled in bronze-level QHPs. Second, we 
would calculate the ratio of the average PTC paid for enrollees in this 
income range who selected bronze-level QHPs compared to the average PTC 
paid for enrollees in the same income range who selected silver-level 
QHPs. Both of these calculations would be done using CMS data on 
Exchange enrollment and payments. For 2022, we propose to use 2019 
data, as it is the latest year of data available at this time. In the 
2021 final BHP Payment Notice, we used 2018 data, as it was the latest 
year of data available at that time.
    The MTSF would then be set to the value of 1 minus the product of 
the percentage of enrollees who chose bronze-level QHPs and 1 minus the 
ratio of the average PTC paid for enrollees in bronze-level QHPs to the 
average PTC paid for enrollees in silver-level QHPs:


[[Page 69536]]


MTSF = 1-(percentage of enrollees in bronze-level QHPs x (1-average PTC 
paid for bronze-level QHP enrollees/average PTC paid for silver-level 
QHP enrollees))

    We have calculated that 16.14 percent of enrollees in households 
with incomes below 200 percent of the FPL selected bronze-level QHPs in 
2019. We also have calculated that the ratio of the average PTC paid 
for those enrollees in bronze-level QHPs to the average PTCs paid for 
enrollees in silver-level QHPs was 79.41 percent after adjusting for 
the average age of bronze-level and silver-level QHP enrollees. The 
MTSF is equal to 1 minus the product of the percentage of enrollees in 
bronze-level QHPs (16.14 percent) and 1 minus the ratio of the average 
PTC paid for bronze-level QHP enrollees to the average PTC paid for 
silver-level QHP enrollees (79.41 percent). Thus, the MTSF would be 
calculated as:

MTSF = 1-(16.14% x (1-79.41%))

    Therefore, we propose that the value of the MTSF for 2022 would be 
96.68 percent.
    We believe it is reasonable to update the value for the MTSF from 
the value that was used in the 2021 payment methodology. In general, we 
believe it is appropriate to update the calculation of the MTSF (and 
other factors) as more recent data becomes available. At this time, we 
have complete data for 2019, and only for several months of 2020. 
Therefore, we propose to use 2019 data to calculate the 2022 MTSF. 
Therefore, we believe that our proposal to update the value of the MTSF 
to 96.68 percent is reasonable for program year 2022.
    We request comments on this proposal. In particular, we welcome 
comments on whether other sources of data beyond 2019 are available and 
should be used to calculate the MTSF for 2022. One potential 
alternative would be to update the MTSF with partial 2020 data 
collected by CMS for Exchange plan selection and enrollment (by income 
and by metal tier selection) and for APTC paid for 2021 (based on the 
number of months available at the time the final payment methodology is 
published).
    We also seek comment on what impact (if any) the recent court 
decisions \17\ regarding the government's obligation to make CSR 
payments may have on the observed trends regarding adjustments to the 
silver-level QHP premiums to account for the discontinuation of CSRs 
and consumer plan selection behaviors, as well as the potential 
continuation of these trends for the 2022 plan year. We also seek 
comment on the potential for Congressional action on CSR 
appropriations.
---------------------------------------------------------------------------

    \17\ See Sanford Health Plan v. United States, 969 F.3d 1370 
(Fed. Cir. 2020) and Community Health Choice, Inc. v. United States, 
970 F.3d 1364 (Fed. Cir. 2020).
---------------------------------------------------------------------------

7. 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 the APTC 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 APTC paid during the year would 
either be paid to the taxpayer (if too little APTC was paid) or charged 
to the taxpayer as additional tax (if too much APTC was paid, subject 
to any limitations in statute or regulation), as provided in 26 U.S.C. 
36B(f).
    Section 1331(e)(2) of the Patient Protection and Affordable Care 
Act specifies that an individual eligible for the BHP may not be 
treated as a ``qualified individual'' under section 1312 of the Patient 
Protection and Affordable Care Act who is eligible for enrollment in a 
QHP offered through an Exchange. We are defining ``eligible'' to mean 
anyone for whom the state agency or the Exchange assesses or 
determines, based on the single streamlined application or renewal 
form, as eligible for enrollment in the BHP. Because enrollment in a 
QHP is a requirement for individuals to receive APTC, individuals 
determined or assessed as eligible for a BHP are not eligible to 
receive APTC for coverage in the Exchange. Because they do not receive 
APTC, BHP enrollees, on whom the BHP payment methodology is generally 
based, 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 household 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 
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 
household incomes of BHP enrollees during the year. Even if the BHP 
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, in accordance with current practice, we propose 
including in Equation 1 an adjustment, the IRF, that would account for 
the difference between calculating estimated PTC using: (a) Household 
income relative to FPL as determined at initial application and 
potentially revised mid-year under Sec.  600.320, for purposes of 
determining BHP eligibility and claiming Federal BHP payments; and (b) 
actual household income relative to FPL received during the plan year, 
as it would be reflected on individual Federal income tax returns. This 
adjustment would seek prospectively to capture 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. Consistent with the methodology 
used in past years, we propose estimating reconciliation effects based 
on tax data for 2 years, reflecting income and tax unit composition 
changes over time among BHP-eligible individuals.
    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 based on household income and family size 
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 and tax data furnished by the IRS. 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 the BHP. 
Consistent with prior years, we propose to use the ratio of the 
reconciled PTC to the initial estimation of PTC as the IRF in Equations 
(1a) and (1b) for estimating the PTC portion of the BHP payment rate.
    For 2022, OTA has estimated that the IRF for states that have 
implemented the Medicaid eligibility expansion to cover adults up to 
133 percent of the FPL will be 99.01 percent. We believe that it is 
appropriate to refine the calculation of the IRF and only use data 
regarding

[[Page 69537]]

Exchange enrollees with incomes between 133 percent and 200 percent 
FPL, as in Medicaid expansion states, instead of an average that also 
includes data regarding Exchange enrollees with incomes between 100 
percent and 200 percent FPL, as in non-Medicaid expansion states. This 
is the same approach that we finalized in the 2021 BHP Payment Notice. 
For other factors used in the BHP payment methodology, it may not 
always be possible to separate the experiences between different types 
of states and there may not be meaningful differences between the 
experiences of such states. Therefore, we propose to set the value of 
the IRF equal to the value of the IRF for states that have expanded 
Medicaid eligibility, which would be 99.01 percent for program year 
2022.
    We propose to use this value for the IRF in Equations (1a) and (1b) 
for calculating the PTC portion of the BHP payment rate.

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

    In the interest of allowing states greater certainty in the total 
BHP Federal payments for a given plan year, we have given states the 
option to have their final Federal BHP payment rates calculated using a 
projected ARP (that is, using premium data from the prior program year 
multiplied by the premium trend factor (PTF), as described in Equation 
(2b). We propose to require states to make their election to have their 
final Federal BHP payment rates calculated using a projected ARP by the 
later of (1) May 15 of the year preceding the applicable program year 
or (2) 60 days after the publication of the final methodology. 
Therefore, we propose states inform CMS in writing of their election 
for the 2022 program year by the later of May 15, 2021 or 60 days after 
the publication of the final methodology.
    For Equation (2b), we propose to continue to define the PTF, with 
minor proposed changes in calculation sources and methods, as follows:
    PTF: In the case of a state that would elect to use the 2021 
premiums as the basis for determining the 2022 BHP payment, it would be 
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 
program year. This factor would approximate the change in health care 
costs per enrollee, which would include, but not be limited to, changes 
in the price of health care services and changes in the utilization of 
health care services. This would provide 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.
    For the PTF we propose to use the annual growth rate in private 
health insurance expenditures per enrollee from the National Health 
Expenditure (NHE) projections, developed by the Office of the Actuary 
in CMS (https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html). Based on these projections, for 
BHP program year 2022, we propose that the PTF would be 4.7 percent.
    We note that the increase in premiums for QHPs from 1 year to the 
next may differ from the PTF developed for the BHP funding methodology 
for several reasons. In particular, we note that the second lowest cost 
silver plan may be different from one year to the next. This may lead 
to the PTF being greater than or less than the actual change in the 
premium of the second lowest cost silver plan.

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

    To determine whether the potential difference in health status 
between BHP enrollees and consumers in an Exchange would affect the PTC 
and risk adjustment payments that would have otherwise been made had 
BHP enrollees been enrolled in coverage through an Exchange, we propose 
to continue to 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 that program year for 
each rate cell.
    We acknowledge that there is uncertainty with respect to this 
factor due to the lack of available data to analyze potential health 
differences between the BHP and QHP populations, which is why, absent a 
state election, we propose to use a value for the PHF (see section 
II.D.3. of this proposed methodology) 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, the potential effect such risk would have had on PTC, and risk 
adjustment that would have otherwise been made had BHP enrollees been 
enrolled in coverage through an Exchange. To the extent, however, that 
a state would develop an approved protocol to collect data and 
effectively measure the relative risk and the effect on Federal 
payments of PTCs and CSRs, we propose to continue to permit a 
retrospective adjustment that would measure 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.
    For a state electing the option to implement a retrospective 
population health status adjustment as part of the BHP payment 
methodology applicable to the state, we propose requiring the state to 
submit a proposed protocol to CMS, which would be subject to approval 
by us and would be required to be certified by the Chief Actuary of 
CMS, in consultation with the OTA. We propose to apply the same 
protocol for the population health status adjustment as what is set 
forth in guidance in Considerations for Health Risk Adjustment in the 
Basic Health Program in Program Year 2015 (http://www.medicaid.gov/Basic-Health-Program/Downloads/Risk-Adjustment-and-BHP-White-Paper.pdf). We propose requiring a state to submit its proposed 
protocol for the 2022 program year by August 1, 2021 or 60 days after 
the publication of the final methodology. We propose that this 
submission would also need to include descriptions of how the state 
would collect the necessary data to determine the adjustment, including 
any contracting contingences that may be in place with participating 
standard health plan issuers. We would provide technical assistance to 
states as they develop their protocols, as requested. To implement the 
population health status adjustment, we propose that we must approve 
the state's protocol by December 31, 2021 for the 2022 program year. 
Finally, we propose that the state be required to complete the 
population health status adjustment at the end of the program year 
based on the approved protocol. After the end of the program year, and 
once data is made available, we propose to review the state's findings, 
consistent with the approved protocol, and make any necessary 
adjustments to the state's Federal BHP payment amounts. If we determine 
that the Federal BHP payments were less than they would have been using 
the final adjustment factor, we would apply the difference to the 
state's next quarterly BHP trust fund

[[Page 69538]]

deposit. If we determine that the Federal BHP payments were more than 
they would have been using the final reconciled factor, we would 
subtract the difference from the next quarterly BHP payment to the 
state.

III. Collection of Information Requirements

    Although our Federal funding methodology's information collection 
requirements and burden had at one time been approved by OMB under 
control number 0938-1218 (CMS-10510), the approval was discontinued on 
August 31, 2017, since we adjusted our estimated number of respondents 
to be below the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 
et seq.) threshold of ten or more respondents. Since we continue to 
estimate fewer than ten respondents (only New York and Minnesota 
operate a BHP at this time), the proposed program year 2022 methodology 
is not subject to the requirements of the PRA.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Statement of Need

    Section 1331 of the Patient Protection and Affordable Care Act (42 
U.S.C. 18051) requires the Secretary to establish a BHP, and section 
1331(d)(1) specifically provides that if the Secretary finds that a 
state meets the requirements of the program established under section 
1331(a) of the Patient Protection and Affordable Care Act, the 
Secretary shall transfer to the state Federal BHP payments described in 
section 1331(d)(3). This proposed methodology provides for the funding 
methodology to determine the Federal BHP payment amounts required to 
implement these provisions for program year 2022.

B. Overall Impact

    We have examined the impacts of this 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 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), the Congressional Review Act (5 U.S.C. 804(2) and Executive 
Order 13771 on Reducing Regulation and Controlling Regulatory Costs 
(January 30, 2017).
    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 
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 final rule, the BHP provides states the 
flexibility to establish an alternative coverage program for low-income 
individuals who would otherwise be eligible to purchase coverage on an 
Exchange. Because we make no changes in methodology that would have a 
consequential effect on state participation incentives, or on the size 
of either the BHP program or offsetting PTC and CSR expenditures, the 
effects of the changes made in this Payment Notice would not approach 
the $100 million threshold, and hence it is neither an economically 
significant rule under E.O. 12866 nor a major rule under the 
Congressional Review Act. Moreover, the proposed regulation is not 
economically significant within the meaning of section 3(f)(1) of the 
Executive Order.

C. Anticipated Effects

    The provisions of this proposed 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 
Federal financial assistance 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 state-
specific factors and conditions. 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 RP 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, we 
believe that the methodology, like the methodology used in 2021, 
accounts for these variations to ensure accurate BHP payment transfers 
are made to each state.
    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare a final 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 RFA 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 methodology.
    Because this methodology is focused solely on Federal BHP payment 
rates to states, it does not contain provisions that would have a 
direct impact on hospitals, physicians, and other health care providers 
that are designated as small entities under the RFA. Accordingly, we 
have determined that the methodology, like the previous methodology and 
the final rule that established the BHP program, will not have a 
significant economic impact on a substantial number of small entities.

[[Page 69539]]

    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a methodology 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. For the preceding 
reasons, we have determined that the methodology will not have a 
significant impact on a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act (UMRA) of 2005 
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 2020, that threshold is approximately $156 million. States 
have the option, but are not required, to establish a BHP. Further, the 
methodology would establish Federal payment rates without requiring 
states to provide the Secretary with any data not already required by 
other provisions of the Patient Protection and Affordable Care Act or 
its implementing regulations. Thus, neither the current nor the 
proposed payment methodologies mandate expenditures by state 
governments, local governments, or tribal governments.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a 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. Accordingly, the 
requirements of Executive Order 13132 do not apply to this proposed 
methodology.

D. Alternative Approaches

    We considered several alternatives in developing the proposed BHP 
payment methodology for 2022, and we discuss some of these alternatives 
below.
    We considered alternatives as to how to calculate the PAF in the 
proposed methodology for 2022. The proposed value for the PAF is 1.188, 
which is the same as was used for 2018, 2019, 2020, and 2021. We 
believe it would be difficult to obtain the updated information from 
QHP issuers comparable to what was used to develop the 2018 factor, 
because QHP issuers may not distinctly consider the impact of the 
discontinuance of CSR payments on the QHP premiums any longer. We do 
not have reason to believe that the value of the PAF would change 
significantly between program years 2018 and 2022. We are continuing to 
consider whether or not there are other methodologies or data sources 
we may be able to use to calculate the PAF.
    We also considered alternatives as how to calculate the MTSF in the 
proposed methodology for 2022. The proposed value for the MTSF for 
program year 2022 is 96.68 percent. We considered whether other sources 
of data that include data after 2019 should be used to calculate the 
MTSF for 2022, including calculating the MTSF with partial 2020 data 
collected by CMS for Exchange plan selection and enrollment (by income 
and by metal tier selection) and for APTC paid for 2021 (based on the 
number of months available at the time the final payment methodology is 
published).
    We also considered whether to continue to provide states the option 
to develop a protocol for a retrospective adjustment to the population 
health factor (PHF) as we did in previous payment methodologies. We 
believe that continuing to provide this option is appropriate and 
likely to improve the accuracy of the final payments.
    We also considered whether to require the use of the program year 
premiums to develop the Federal BHP payment rates, rather than allow 
the choice between the program year premiums and the prior year 
premiums trended forward. We believe that the payment rates can still 
be developed accurately using either the prior year QHP premiums or the 
current program year premiums and that it is appropriate to continue to 
provide the states these options.
    Many of the factors proposed in this proposed methodology are 
specified in statute; therefore, for these factors we are limited in 
the alternative approaches we could consider. One area in which we 
previously had and still have a choice is in selecting the data sources 
used to determine the factors included in the proposed methodology. 
Except for state-specific RPs and enrollment data, we propose 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 proposed 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. In many cases, using state-specific data would 
necessitate additional requirements on the states to collect, validate, 
and report data to CMS. By using national data, we are able to collect 
data from other sources and limit the burden placed on the states. For 
RPs and enrollment data, we propose using state-specific data rather 
than national data as we believe state-specific data will produce more 
accurate determinations than national averages.
    We request public comment on these alternative approaches.

E. Regulatory Reform Analysis Under E.O. 13771

    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017 and requires that the 
costs associated with significant new regulations ``shall, to the 
extent permitted by law, be offset by the elimination of existing costs 
associated with at least two prior regulations.'' This proposed 
methodology, if finalized as proposed, is expected to be neither an 
E.O. 13771 regulatory action nor an E.O. 13771 deregulatory action.

F. Conclusion

    We believe that this proposed BHP payment methodology is 
effectively the same methodology as finalized for 2021. BHP payment 
rates may change as the values of the factors change, most notably the 
QHP premiums for 2021 or 2022. We do not anticipate this proposed 
methodology to have any significant effect on BHP enrollment in 2022.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

    Dated: October 8, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: October 15, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-24147 Filed 10-30-20; 11:15 am]
BILLING CODE 4120-01-P