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Proposed Rule2022-11047

Basic Health Program; Federal Funding Methodology for Program Year 2023 and Proposed Changes to Basic Health Program Regulations

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Published

May 25, 2022

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This document proposes the methodology and data sources necessary to determine Federal payment amounts to be made for program year 2023 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 Health Insurance Exchanges.

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<title>Federal Register, Volume 87 Issue 101 (Wednesday, May 25, 2022)</title>
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[Federal Register Volume 87, Number 101 (Wednesday, May 25, 2022)]
[Proposed Rules]
[Pages 31815-31833]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-11047]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 600

[CMS-2441-P]
RIN 0938-AU89

Basic Health Program; Federal Funding Methodology for Program
Year 2023 and Proposed Changes to Basic Health Program Regulations

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This document proposes the methodology and data sources
necessary to determine Federal payment amounts to be made for program
year 2023 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 Health 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 June 24, 2022.

ADDRESSES: In commenting, refer to file code CMS-2441-P.
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 <a href="http://www.regulations.gov">http://www.regulations.gov</a>. 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-2441-P, 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-2441-P, 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: <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm another individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other 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 Affordable Care Act
or ACA) provides States with an option to establish a Basic Health
Program (BHP). In the States that elect to operate a BHP, the BHP makes
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

[[Page 31816]]

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 is another option for States to provide 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 ACA is
based on the amount of the Federal premium tax credit (PTC) allowed and
payments to cover required 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 Health
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 14111), 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 ACA, 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 methodology. 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
of the Department of Health and Human Services (the Secretary)
considered the factors specified in section 1331(d)(3) of the ACA,
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 payment methodology, as well as the Federal
BHP payment rates for the applicable BHP program year.\2\ 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 rule, 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.
\2\ In section III. of this proposed rule, we propose to modify
the publication schedule of the BHP payment notices.
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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 rule 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 ACA, 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:
<bullet> Personal identifier;
<bullet> Date of birth;
<bullet> County of residence;
<bullet> Indian status;
<bullet> Family size;
<bullet> Household income;
<bullet> Number of persons in household enrolled in BHP;
<bullet> Family identifier;
<bullet> Months of coverage;
<bullet> Plan information; and
<bullet> Any other data required by CMS to properly calculate the
payment.

B. The 2018 Final Administrative Order and 2019 Through 2022 Payment
Methodologies

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 (the Departments) 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 CMS
to discontinue CSR payments to issuers until Congress provides for an
appropriation. In the absence of a Congressional appropriation for
Federal funding for CSR payments, we cannot provide States with a
Federal payment attributable to CSRs that would have been paid on
behalf of BHP enrollees had they been enrolled in a QHP through an
Exchange.

[[Page 31817]]

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 New York v. U.S. Dep't of
Health & Human Servs., No. 18-cv-00683 (RJS) (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 \3\ (Final Administrative Order) setting forth the
payment methodology that would apply to the 2018 BHP program year.
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\3\ <a href="https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf">https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf</a>.
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In the November 5, 2019 Federal Register (84 FR 59529) (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).\4\ 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). In the July 7,
2021 Federal Register (86 FR 35615) (hereinafter referred to as the
July 2021 final BHP Payment Notice), we finalized the payment
methodology for BHP program year 2022. The 2022 payment methodology is
the same as the 2021 payment methodology, which the exception of the
removal of the Metal Tier Selection Factor. The 2023 proposed payment
methodology is the same as the 2022 payment methodology, except for the
addition of a factor to account for a State operating a BHP and
implementing an approved State Innovation Waiver under section 1332 of
the ACA (referred to as a section 1332 waiver throughout this proposed
payment methodology). In section III of this proposed rule, we also
propose regulation changes related to the publication schedule of the
BHP payment notices and recalculation of States' Federal payments due
to mathematical errors.
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\4\ ``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 Rule

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

Section 1331(d)(3) of the ACA 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 allowed and CSRs that would have been paid on behalf of BHP
enrollees 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 advance payments of the PTC (APTC) and
CSRs, and the methodology used to calculate PTC under 26 U.S.C. 36B,
for the tax year. 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 allowed and CSRs that would have been
paid on behalf of BHP enrollees if they had enrolled in QHPs offered
through an Exchange. In accordance with section 1331(d)(3)(A)(iii) of
the ACA, 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 ACA.
Section 1331(d)(3)(A)(ii) of the ACA specifies that the payment
determination shall take into account all relevant factors necessary to
determine the value of the PTC allowed and CSRs that would have been
paid on behalf of 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 APTC and CSR
would have occurred if the enrollee had been so enrolled. Under all
previous payment methodologies, 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 July 2021 final BHP Payment
Notice, the rate for each rate cell is calculated in 2 parts. The first
part is equal to 95 percent of the estimated PTC that would have been
allowed 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 July 2021
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 seek comment on the following proposals.
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 rule, 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

[[Page 31818]]

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 effectively take those factors into account in the
calculation. In addition, the equations 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 rule.
In addition, we describe in Equation (2a) and Equation (2b) (below) how
we propose to calculate the adjusted reference premium 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 as defined in 26 CFR
1.36B-3, with five adjustments. First, the PTC portion of the rate for
each rate cell would represent the mean, or average, expected PTC that
would be paid on behalf of all persons in the rate cell, rather than
being calculated for each individual enrollee. Second, the reference
premium (RP) (described in section II.D.1. of this proposed rule) 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 2022 premiums for
the basis of the BHP Federal payment, for the projected change in the
premium from 2022 to 2023, 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.6. of this
proposed rule, would account for the impact on the PTC that would have
occurred had such reconciliation been performed. Finally, the rate is
multiplied by 95 percent, consistent with section 1331(d)(3)(A)(i) of
the ACA. We note that in the situation where the average contribution
amount of an enrollee would exceed the adjusted reference premium, 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] TP25MY22.001

PTC<INF>a,g,c,h,i</INF> = 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)
ARP<INF>a,g,c</INF> = Adjusted reference premium
I<INF>h,i,j</INF> = 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
PTCF<INF>h,i,j</INF> = Premium tax credit formula percentage
IRF = Income reconciliation factor
Equation (2a) and Equation (2b): Adjusted Reference Premium Variable
(used in Equation 1)
As part of the calculations for the PTC component, we propose to
continue to calculate the value of the adjusted reference premium 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
rule). Below we describe how we would continue to calculate the
adjusted reference premium 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, 2023 premiums for
the 2023 program year), we propose to calculate the value of the
adjusted reference premium as specified in Equation (2a). The adjusted
reference premium will 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 rule), 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 PAF (described in section II.D.2. of this proposed
rule), which would account for the change in silver-level premiums due
to the discontinuance of CSR payments. We also propose to multiply this
by the section 1332 waiver factor (WF) (described in section II.D.7 of
this proposed rule), as applicable.
[GRAPHIC] [TIFF OMITTED] TP25MY22.002

In the case of a State that elected to use the RP based on the
prior program year (for example, 2022 premiums for the 2023 program
year, as described in more detail in section II.E. of this proposed
rule), we propose to calculate the value of the adjusted reference
premium as specified in Equation (2b). The adjusted reference premium
will be equal to the RP, which would be based on the second lowest cost
silver plan premium in 2022, multiplied by the BHP PHF (described in
section II.D.3. of this proposed rule), 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

[[Page 31819]]

the PAF (described in section II.D.2. of this proposed rule), which
would account for the change in silver-level premiums due to the
discontinuance of CSR payments, and multiplied by the PTF (described in
section II.E. of this proposed rule), which would reflect the projected
change in the premium level between 2022 and 2023. We also propose to
multiply this by the WF (described in section II.D.7. of this proposed
rule).
[GRAPHIC] [TIFF OMITTED] TP25MY22.003

ARP<INF>a,g,c</INF> = Adjusted reference premium
a = Age range
g = Geographic area
c = Coverage status (self-only or applicable category of family
coverage) obtained through BHP
RP<INF>a,g,c</INF> = Reference premium
PHF = Population health factor
PAF = Premium adjustment factor
PTF = Premium trend factor
WF<INF>g</INF> = Section 1332 waiver 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] TP25MY22.004

PMT = Total monthly BHP payment
PTC<INF>a,g,c,h,i</INF> = Premium tax credit portion of BHP payment
rate
CSR<INF>a,g,c,h,i</INF> = Cost sharing reduction portion of BHP
payment rate
E<INF>a,g,c,h,i</INF> = 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 CSR
payments for 2023 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 in the payment methodology.

B. Federal BHP Payment Rate Cells

Consistent with the previous payment methodologies, we propose that
a State implementing a BHP will 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 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: \5\
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\5\ This curve is used to implement the ACA'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 <a href="https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/StateSpecAgeCrv053117.pdf">https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/StateSpecAgeCrv053117.pdf</a>. Both children and
adults under age 21 are charged the same premium. For adults age 21-
64, the age bands in this notice 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, <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated-CY2018-DIY-instructions.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated-CY2018-DIY-instructions.pdf</a>.
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<bullet> Ages 0-20.
<bullet> Ages 21-34.
<bullet> Ages 35-44.
<bullet> Ages 45-54.
<bullet> Ages 55-64.
This proposed provision is unchanged from the current
methodology.\6\
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\6\ In this document, references to the ``current methodology''
refer to the 2022 program year methodology as outlined in the 2022
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.\7\ This

[[Page 31820]]

proposed provision is also unchanged from the current methodology.
---------------------------------------------------------------------------

\7\ 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 notice.
---------------------------------------------------------------------------

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 ACA. Among individuals enrolled in 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 Sec. 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:
<bullet> 0 to 50 percent of the FPL.
<bullet> 51 to 100 percent of the FPL.
<bullet> 101 to 138 percent of the FPL.\8\
---------------------------------------------------------------------------

\8\ The three lowest income ranges would be limited to lawfully
present immigrants who are ineligible for Medicaid because of
immigration status.
---------------------------------------------------------------------------

<bullet> 139 to 150 percent of the FPL.
<bullet> 151 to 175 percent of the FPL.
<bullet> 176 to 200 percent of the FPL.
This proposed provision is unchanged from the current methodology.
These rate cells would be used only 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.

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 Exchange in the relevant BHP
State to perform the calculations that determine Federal BHP payment
cell rates.
States operating a State Exchange 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 States
operating BHPs interested in obtaining the applicable 2023 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, 2022. 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 Methodologies. The specifications
for data collection to support the development of BHP payment rates are
published in CMS guidance and are available on the Basic Health Program
page of <a href="http://Medicaid.gov">Medicaid.gov</a>, <a href="https://www.medicaid.gov/sites/default/files/2019-11/premium-data-collection-tool.zip">https://www.medicaid.gov/sites/default/files/2019-11/premium-data-collection-tool.zip</a>.
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 Methodology 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 Exchange requirements.\9\ 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 from 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.
---------------------------------------------------------------------------

\9\ 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 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,

[[Page 31821]]

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 is 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 notice. 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 allowed 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 rule, regarding the premium tax credit formula
(PTCF). The proposed method 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 (2023) 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 2023, as described in section
II.E. of this proposed rule).
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)(7), 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 two 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 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, by adding the
MTSF. In the 2021 payment methodology, we continued to apply the MTSF.
In the final 2022 payment methodology, we removed the MTSF. We propose
to continue the approach taken in the final 2022 payment methodology
and not apply the MTSF in this proposed 2023 payment 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 ACA 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 to determining 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 have used this approach starting since the
2015 program year. We believe that other approaches (than assuming
uniform age distribution) could skew the calculation of the payment
rates for each rate cell. Given the number of rate cells and the fact
that in some cases the number of enrollees in a cell may be small
(particularly for less common family sizes, smaller counties, etc.), we
believe that using estimates of age distribution or historical data
could skew results. We also believe a uniform age distribution is
reasonably simple to use and avoids increasing burden on States to
report data to CMS. We have found this approach reliable to date.
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 believe that
the benefits of simplifying both the

[[Page 31822]]

calculation of BHP payment rates and the operation of the BHP justify
any impacts on Federal payment levels.
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.\10\ 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 ACA, which
limits a BHP to individuals who are ineligible for minimum essential
coverage (as defined in 26 U.S.C. 5000A(f)).
---------------------------------------------------------------------------

\10\ CMCS. ``State Medicaid, CHIP and BHP Income Eligibility
Standards Effective July 1, 2021.''
---------------------------------------------------------------------------

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 costs related to
HHS not making CSR payments.
In the Final Administrative Order and the 2019 through 2022 final
BHP Payment Notices, we incorporated the PAF into the BHP payment
methodologies to capture the impact of how other States responded to us
ceasing to make CSR payments. We propose to include the PAF in the 2023
payment methodology and to calculate it in the same manner as in the
Final Administrative Order. In the event that an appropriation for CSR
payments is made for 2023, we would determine whether and how to modify
the PAF in the payment methodology.
Under the Final Administrative Order,\11\ we calculated the PAF by
using information sought from QHP issuers in each State and the
District of Columbia, and we 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.\12\ The median adjustment
for silver level QHPs is the nationwide median adjustment.
---------------------------------------------------------------------------

\11\ <a href="https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf">https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf</a>.
\12\ Some examples of outliers or unreasonable adjustments
include (but are not limited to) values over 100 percent (implying
the premiums doubled or more because 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 2018 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 HHS making CSR payments. 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 State
Exchanges 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 to continue to set the PAF to 1.188 for program year
2023, with one limited exception as described below. 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

[[Page 31823]]

effect after the discontinuance of the CSR payments. We believe that
the impact of the increase in silver-level premiums in 2023 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 2023.
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 2023. 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 2022, (the
latest year for which premiums have been published), the difference was
modestly lower; the average second lowest-cost silver-level QHP premium
was 33.1 percent higher than the average lowest-cost bronze-level QHP
premium ($438 and $329, respectively).\13\ 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).\14\ 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.
---------------------------------------------------------------------------

\13\ See Kaiser Family Foundation, ``Average Marketplace
Premiums by Metal Tier, 2018-2021,'' <a href="https://www.kff.org/health-reform/State-indicator/average-marketplace-premiums-by-metal-tier/">https://www.kff.org/health-reform/State-indicator/average-marketplace-premiums-by-metal-tier/</a>.
\14\ See Basic Health Program: Federal Funding Methodology for
Program Years 2019 and 2020; Final Methodology, 84 FR 59529 at 59532
(November 5, 2019).
---------------------------------------------------------------------------

We propose to make one limited exception in setting the value of
the PAF, all for States in the first year of implementing a BHP. In the
case of a State in the first year of implementing a BHP, if the State
chooses to use prior year second lowest cost silver plan (SLCSP)
premiums to determine the BHP payment (for example, the 2022 premiums
for the 2023 program year), we propose to set the value of the PAF to
1.00. In this case, we believe that adjustment to the QHP premiums to
account for the discontinuation of CSR payments would be included fully
in the prior year premiums. If the State chooses to use the prior year
premiums, then no further adjustment would be necessary for the BHP
payments; therefore, the value of the PAF would be 1.00.
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 two
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
2023 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 2023.
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
2023 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
rule. 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 allowed for 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.\15\ Further, standard
health plans did not qualify for payments under the transitional
reinsurance program established under section 1341 of the ACA for the
years the program was operational (2014 through 2016).\16\ 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.
---------------------------------------------------------------------------

\15\ See 79 FR at 14131.
\16\ 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, all 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 in 26 U.S.C. 36B(d)(2)(A) 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: \17\
---------------------------------------------------------------------------

\17\ These income ranges and this analysis of income apply to
the calculation of the PTC.
---------------------------------------------------------------------------

<bullet> 0-50 percent.
<bullet> 51-100 percent.

[[Page 31824]]

<bullet> 101-138 percent.
<bullet> 139-150 percent.
<bullet> 151-175 percent.
<bullet> 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 rule.
As the APTC for persons enrolling in QHPs would be calculated
during the open enrollment period based on their projected household
income for the coverage year, 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 Old-Age, Survivors, and
Disability Insurance (OASDI) and Medicare Trustees Reports.\18\
---------------------------------------------------------------------------

\18\ 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 <a href="https://www.cms.gov/files/document/2020-medicare-trustees-report.pdf">https://www.cms.gov/files/document/2020-medicare-trustees-report.pdf</a>.
---------------------------------------------------------------------------

5. Premium Tax Credit Formula (PTCF)
In Equation 1 described in section II.A.1. of this proposed rule,
we propose to use the formula described in 26 U.S.C. 36B(b) to
calculate the estimated PTC that would be allowed for 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 allowed 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, increasing on a sliding
scale in a linear manner from an initial premium percentage to a final
premium percentage. We propose to continue to use applicable
percentages to calculate the estimated PTC that would be allowed for a
person enrolled in a QHP on an Exchange as part of the BHP payment
methodology as part of Equation 1.
The Internal Revenue Service publishes the applicable percentages
each year. They are not yet available for 2023, but we propose to apply
them to the 2023 payment methodology upon publication.
6. Income Reconciliation Factor (IRF)
For persons who enroll, or enroll a family member, in a QHP through
an Exchange for which APTC is paid, a reconciliation is required by 26
U.S.C. 36B(f) following the end of the coverage year. The
reconciliation requires the enrolling individual (the taxpayer) to
compare the total amount of APTC paid on behalf of the taxpayer or a
family member of the taxpayer for the year of coverage to the total
amount of PTC allowed for the year of coverage, based on household
circumstances shown on the Federal income tax return. If the amount of
a taxpayer's PTC exceeds the APTC paid on behalf of the taxpayer, the
difference reduces the taxpayer's tax liability for the year of
coverage or results in a refund to the extent it exceeds the taxpayer's
tax liability. If the APTC exceeds the PTC allowed, the taxpayer must
increase his or her tax liability for the year of coverage by the
difference, subject to any limitations in statute or regulation.
Section 1331(e)(2) of the ACA specifies that an individual eligible
for the BHP may not be treated as a ``qualified individual'' under
section 1312 of the ACA 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 APTC is paid only on behalf of
individuals enrolled in a QHP, individuals determined or assessed as
eligible for a BHP are not eligible for APTC for coverage in the
Exchange. Consequently, unlike Exchange enrollees for whom APTC is
paid, no reconciliation is required of BHP enrollees, on whom the BHP
payment methodology is generally based.
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 for 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 with
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 for the plan year, as it would
be reflected on individual Federal income tax returns. This adjustment
would seek

[[Page 31825]]

prospectively to capture the average effect of income reconciliation
aggregated across the BHP population had those BHP enrollees been
subject to reconciliation after APTC was paid for coverage 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.
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 Equation
(1) for estimating the PTC portion of the BHP payment rate.
We believe that it is appropriate to distinguish between the IRF
for Medicaid expansion States and non-Expansion States to remove data
for those with incomes under 138 percent of FPL for Medicaid expansion
States. This is the same approach that we finalized in the 2021 and
2022 final BHP Payment Notices. Therefore, we propose to set the value
of the IRF for States that have expanded Medicaid equal to the value of
the IRF for incomes between 138 and 200 percent of FPL and the value of
the IRF for States that have not expanded Medicaid equal to the value
of the IRF for incomes between 100 and 200 percent of FPL. This gives
an IRF of 100.66 percent for States that have expanded Medicaid and
101.63 percent for States that have not expanded Medicaid for program
year 2023. Both current States operating a BHP have expanded Medicaid
eligibility, and therefore we propose an IRF of 100.66 percent.
We propose to use these values for the IRF in Equations (1) for
calculating the PTC portion of the BHP payment rate.
7. Section 1332 Waiver Factor (WF)
Section 1332 of the ACA permits States to apply for a waiver from
certain ACA requirements to pursue innovative strategies for providing
their residents with access to high quality, affordable health
insurance coverage while retaining the basic protections of the ACA.
Section 1332 of the ACA authorizes the Secretary of HHS and the
Secretary of the Treasury (collectively, the Secretaries) to approve a
State's request to waive all or any of the following requirements
falling under their respective jurisdictions for health insurance
coverage within a State for plan years beginning on or after January 1,
2017: (1) Part I of subtitle D of Title I of the ACA (relating to the
establishment of QHPs); (2) Part II of subtitle D of Title I of the ACA
(relating to consumer choices and insurance competition through Health
Benefit Exchanges); (3) Section 1402 of the ACA (relating to reduced
cost sharing for individuals enrolling in QHPs); and (4) Sections 36B
(relating to refundable credits for coverage under a QHP), 4980H
(relating to shared responsibility for employers regarding health
coverage), and 5000A (relating to the requirement to maintain minimum
essential coverage) of the Internal Revenue Code (Code).
Under section 1332 of the ACA, the Secretaries may exercise their
discretion to approve a request for a section 1332 waiver only if the
Secretaries determine that the proposal for the section 1332 waiver
meets the following four requirements, referred to as the statutory
guardrails: (1) The proposal will provide coverage that is at least as
comprehensive as coverage defined in section 1302(b) of the ACA and
offered through Exchanges established under title I of the ACA, as
certified by the Office of the Actuary of CMS, based on sufficient data
from the State and from comparable States about their experience with
programs created by the ACA and the provisions of the ACA that would be
waived; (2) the proposal will provide coverage and cost-sharing
protections against excessive out-of-pocket spending that are at least
as affordable for the State's residents as would be provided under
title I of the ACA; (3) the proposal will provide coverage to at least
a comparable number of the State's residents as would be provided under
title I of the ACA; and (4) the proposal will not increase the Federal
deficit.\19\ The Secretaries retain their discretionary authority under
section 1332 of the ACA to deny waivers when appropriate given
consideration of the application as a whole, even if an application
meets the four statutory guardrails. Sixteen (16) States are operating
approved section 1332 waivers in plan year 2022.\20\
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\19\ See section 1332(b)(1)(A) through (D) of the ACA, 45 CFR
155.1308(f)(3)(iv)(A) through (D), and 31 CFR 33.108(f)(3)(iv)(A)
through (D).
\20\ See the CMS section 1332 waiver website for information on
approved waivers: <a href="https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-">https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-</a>.
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Section 1332(a)(3) of the ACA directs the Secretaries to pay pass-
through funding to the State for the purpose of implementing the
State's section 1332 waivers. Under an approved section 1332 waiver, a
State may receive pass-through funding associated with the resulting
reductions in Federal spending on Exchange financial assistance (PTC,
CSRs, and small business tax credits (SBTC)) consistent with the
statute and reduced as necessary to ensure deficit neutrality. These
payments are made in compliance with the applicable waiver plans, the
specific terms and conditions governing the waiver, and accompanying
statutory and regulatory requirements. Specifically, section 1332(a)(3)
of the ACA provides that pass-through funding shall be paid to States
for purposes of implementing the States' waiver plans. The specific
impacts of the waivers on premiums and PTCs vary across States and plan
years, depending, in part, on the State's approved section 1332 waiver
plan and the design of the State's program.\21\ 31 CFR 33.122 and 45
CFR 155.1322 specify that pass-through funding amounts will be
calculated annually by the Departments for States with approved
waivers.\22\ Additionally, section 1332(a)(4)(B)(v) of the ACA requires
that the Secretaries issue regulations that provide a process for
periodic evaluations by the Secretaries of the program under the
waiver.\23\ As implemented by the Departments, the periodic evaluations
include evaluation of pass-through funding and associated reporting and
methodologies. Information on the pass-through funding amounts is made
available publicly on the CMS website.\24\
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\21\ For example, some State reinsurance programs under a
section 1332 waiver have reduced Statewide average QHP premiums by 4
percent to 40 percent compared to what premiums would have been
without the waiver. See Data Brief on Section 1332 waivers: State-
based reinsurance programs available here <a href="https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/1332-Data-Brief-Aug2021.pdf">https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/1332-Data-Brief-Aug2021.pdf</a>.
\22\ See section 1332(a)(3) of the ACA. See also Patient
Protection and Affordable Care Act; Updating Payment Parameters and
Improving Health Insurance Markets for 2022 and Beyond; Final Rule,
86 FR 53412 at 53482-53483 (Sep 27, 2021).
\23\ See 31 CFR 33.128 and 45 CFR 155.1328.
\24\ See the CMS section 1332 website for information on pass-
through funding here: <a href="https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-">https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-</a>.

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[[Page 31826]]

With regard to a State that operates a BHP and an approved section
1332 waiver, the Federal BHP program can have an impact on section 1332
waiver pass-through funding for that State. For example, the existence
of a Federal BHP program impacts aggregate PTC amounts in the State
because BHP moves some individuals, who would otherwise be eligible for
PTC, out of Exchange coverage. Similarly, as the section 1332 waiver
may impact the benchmark QHP premiums and the PTCs in a State, the
waiver may also have an effect on the calculation of Federal BHP
payments in a State operating a BHP.
If the section 1332 waiver reduces premiums for eligible enrollees,
then this can lead to a reduction in the amount of PTC available for
eligible enrollees (in particular, if the second lowest-cost silver QHP
premium is reduced). While this may not have an effect on particular
subsidized QHP enrollees, as their share of the premium would remain
unchanged, it would reduce the amount of Federal outlays for PTC. With
respect to a State's approved section 1332 waiver, the amount of
Federal pass-through funding would equal the difference between (1) the
amount, determined annually by the Secretaries, of PTC under section
36B of the Code, the SBTC under section 45R of the Code, or CSRs under
part I of subtitle E of the ACA (collectively referred to as Exchange
financial assistance) that individuals and small employers in the State
would otherwise be eligible for had the State not received approval for
its section 1332 waiver and (2) the amount of Exchange financial
assistance that individuals and small employers are eligible for with
the approved section 1332 waiver in place. The section 1332 waiver
pass-through amount would not be increased to account for any savings
or decreases in Federal spending other than the reduction in Exchange
financial assistance. This pass-through amount for the section 1332
waiver would be reduced by any net increase in Federal spending or net
decrease in Federal revenue if necessary to ensure deficit neutrality.
The State must use this pass-through funding only for purposes of
implementing the plan associated with the State's approved section 1332
waiver. Therefore, in States that operate only an approved section 1332
waiver, the net expected Federal spending is the same, even though the
amount of PTC paid by the Federal government is lower.
However, for a State that operates a BHP and a section 1332 waiver,
a reduction in the expected Federal PTC payments due to the operation
of the waiver leads directly to a reduction in Federal BHP funding to
the State under the current BHP methodology. The amount of PTC and CSRs
individuals are eligible for in the Exchange is dependent on the cost
of the SLCSP premium, and the cost of the SLCSP premium is the basis
for determining the amount of Federal funding for its BHP program.
Therefore, a reduction in SLCSP premium due to a section 1332 waiver,
also reduces the Federal BHP payment. These reductions may be
substantial. For example, in Minnesota in 2021, the State's section
1332 waiver resulted in a State-wide average premium reduction of 21.3
percent compared to without the waiver. This led to a similar reduction
in PTC paid, and thus a similar reduction in Federal BHP funding. While
the PTC allowed for persons eligible for subsidized coverage in the
Exchange is lower with the section 1332 waiver in place, the reduction
in premiums means that the net benefit to those individuals has not
decreased--rather, Federal funding has been shifted from PTC in part to
pass-through payments made to the State.
On January 28, 2021, President Biden issued Executive Order (E.O.)
14009 directing HHS, and the heads of all other executive departments
and agencies with authorities and responsibilities related to Medicaid
and the ACA, to review all existing regulations, orders, guidance
documents, policies, and any other similar agency actions to determine
whether such agency actions are inconsistent with the policy set forth
in section 1 of E.O. 14009 to protect and strengthen the ACA.\25\ As
part of this review, we considered the impact of approved section 1332
waivers on Federal BHP funding and vice versa in States that elect to
operate both a BHP and an approved section 1332 waiver, including the
impact in Minnesota, cited above.
---------------------------------------------------------------------------

\25\ 86 FR 7793 (February 2, 2021).
---------------------------------------------------------------------------

We determined it is appropriate to account for the impact of an
approved section 1332 waiver when calculating Federal BHP payments.
This proposal is necessary for consistency with E.O. 14009 and this
Administration's goal of protecting and strengthening the ACA and
making high-quality, affordable health care accessible for every
American. We believe that it is appropriate to consider the amount of
pass-through funding associated with the section 1332 waiver as part of
the PTC for the purpose of determining the BHP payments. As described
previously, while the PTC allowed may be reduced under the section 1332
waiver, the benefit to the persons eligible for such subsidized
coverage has not decreased. Considering the section 1332 pass-through
funding as part of the PTC for purposes of determining the BHP payment
also counteracts the reduction in Federal BHP funding for States that
lawfully exercise the flexibility Congress provided to implement both
of the alternative State programs under sections 1331 and 1332 of the
ACA. Therefore, we are proposing to add the section 1332 WF for the
2023 BHP payment methodology. We propose that this factor would be
calculated as the ratio of (1) the SLCSP premium that would have been
in place without the waiver in place for the plan year to (2) the SLCSP
in place with the waiver in place for the plan year, as determined for
the purposes of calculating the section 1332 waiver pass-through
payment.\26\ This factor would be calculated specific to each State and
geographic area, to the extent that the factor may vary across
geographic areas. The SLCSP premiums with and without the waiver, as
provided by the State as part of the section 1332 waiver information
submitted to the Secretaries, would be reviewed by CMS and used to
calculate the factor. In the event that the State's section 1332 waiver
SLCSP with- and without-waiver information is not available prior to
the calculation of the Federal BHP payments in the fall prior to the
start of the BHP program year, we propose to temporarily use values
from the prior year's waiver reporting, and then update the payment
rates and payments once the values for the applicable plan year are
known.\27\ In the case that prior-year data is not available, such as
in the case of a new waiver or waiver amendment that could delay the
timeline by which the State would receive BHP funding, we propose to
initially calculate the rates without adjustment for the section 1332
WF, and then to adjust payment rates and payments using the updated
waiver data once it becomes available.\28\
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\26\ Office of Tax Analysis, Department of Treasury, ``Method
for Calculation of Section 1332 Reinsurance Waiver 2021 Premium Tax
Credit Pass-through Amounts,'' March 2021.
\27\ 42 CFR 600.610(c)(2)(iii).
\28\ 42 CFR 600.610(c)(2)(iii).
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We seek public comment on this proposal.

[[Page 31827]]

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 adjusted reference premium (that is, using premium data from
the prior program year multiplied by the 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
adjusted reference premium 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 notice. Because we are publishing this
proposed rule after May 15, 2022, we propose that States be required to
inform CMS in writing of their election for the 2023 program year by 60
days after the publication of the final notice.
With the addition of the section 1332 WF, there is the possibility
that using the previous year's QHP premiums multiplied by the PTF could
lead to unexpected results if there are significant changes to the
State's approved section 1332 waiver, including changes that could
occur at the start or the end of the waiver. For example, if a State
were to implement a section 1332 waiver in 2023 that lowered premiums
significantly, and the State then chose to use the prior year's
premiums (that is, 2022 plan year premiums) multiplied by the PTF, this
could lead to BHP payment well in excess of what would have been paid
in the Exchanges when the WF is added to the methodology. Similarly, if
a State were to end its section 1332 waiver and choose to use the prior
year's premiums, the BHP payment could be less than what would
otherwise be expected.
Therefore, we also propose that in the following cases, the current
year QHP premiums would have to be used for calculating BHP payments
with regard to section 1332 waivers: (1) A State implements a new
section 1332 waiver that begins at the start of the BHP program year;
(2) a State ends a section 1332 waiver in the year prior to the start
of the BHP program year; or (3) the percentage difference between the
with and without waiver premiums used to determine the section 1332
waiver pass-through funding amount (and used to determine the WF)
changes by 5 or more percentage points from the prior year. The
percentage difference would be measured based on the enrollment-
weighted average of the with and without waiver premiums. We believe
that these three scenarios (the start of a new waiver, the end of a
waiver, and a significant change to a waiver) reflect all relevant
scenarios in which changes to a section 1332 waiver would lead to a
significant error in the calculation of BHP payments if the prior year
premiums were used in the BHP payment methodology. We believe that this
proposed requirement to use the current year QHP premiums in these
limited circumstances would avoid an incorrect calculation of BHP
payments due to changes related to the section 1332 waiver.
We seek public comments on this proposal.
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 2022
premiums as the basis for determining the 2023 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 SLCSP 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
of CMS (<a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected">https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected</a>). Based on these projections, for BHP
program year 2023, we propose that the PTF would be 4.6 percent.
We note that the increase in premiums for QHPs from one 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 1 year to the next. This may lead to
the PTF being greater than or less than the actual change in the
premium of the SLCSP.

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
allowed 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 PHF (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 rule) 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. However, to the extent that a State would develop an
approved protocol to collect data and effectively measure the relative
risk and the effect on Federal payments of PTC 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 CMS 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 (<a href="https://www.medicaid.gov/sites/default/files/2019-11/risk-adjustment-and-bhp-white-paper.pdf">https://www.medicaid.gov/sites/default/files/2019-11/risk-adjustment-and-bhp-white-paper.pdf</a>).
We propose requiring a State to submit its proposed protocol for the
2023 program year by the later of

[[Page 31828]]

August 1, 2022, or 60 days after the publication of the final notice.
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 will approve the State's protocol by December 31, 2022,
for the 2023 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 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 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. Revisions to Basic Health Program Regulations

The calculation of BHP payment amounts is set forth in Sec.
600.610 and is a prospective quarterly calculation of rates based on
estimated or known enrollment data prior to the beginning of the
quarter for which the rates are calculated, adjusted by actual
enrollment data submitted by States after the end of the quarter.
Currently, Sec. 600.610(a) commits the Secretary to publish an annual
proposed payment notice in October, and Sec. 600.610(b) requires the
Secretary to publish an annual final payment notice the following
February, setting forth the BHP payment methodology for the following
year.
Over the past several years, minimal changes to the payment
methodology have been required, and we no longer view an annual
publication of a payment methodology as necessary. Specifically,
between 2015 and 2022, only two factors (the PAF and the MTSF) were
added to the payment methodology, and one of the factors (the MTSF) was
subsequently removed. For 2023, we are proposing to add the section
1332 WF. Other than this year's addition of the proposed section 1332
WF, if finalized, we do not believe that additional factors will be
added or removed on an annual basis as this program has now been in
operation for several years. Therefore, we are proposing to revise
Sec. 600.610(a)(1) to provide for issuance of payment notices that may
be effective for only one or multiple program years, as determined by
and subject to the discretion of the Secretary, beginning with the 2023
BHP payment methodology and then going forward. We believe this will be
beneficial to States that operate a BHP, as it will provide greater
certainty regarding the payment methodology for a given year.
In addition, we are proposing at Sec. 600.610(a)(1) and (b)(1) to
change the schedule of publication dates for the proposed and final BHP
payment notices. Under the current regulation, CMS must publish a
proposed payment notice annually in October and a final notice annually
in February. As stated above, we do not believe that the publication of
an annual payment notice is necessary. In addition, we do not believe
that this schedule allows for adequate time for States and other
stakeholders to provide comments and for CMS to carefully consider
comments received. Therefore, we propose to revise Sec. 600.610(a)(1)
and (b)(1) to remove the specific months in which the proposed and
final payment methodologies must be published. We note that in years in
which the Secretary determines a new payment methodology needs to be
proposed and published, if finalized, we would publish a proposed
payment methodology with an opportunity for public comment. We would
also publish a final payment methodology in advance of the effective
date of the payment methodology. If this proposal is finalized, the
2023 final BHP payment methodology would be in effect until we propose
and finalize a revised payment methodology. We would also release
subregulatory guidance updating the values of factors needed to
calculate the Federal BHP payments in years in which a revised payment
methodology is not proposed and finalized.
We are proposing these changes under the authority in section
1331(d)(3)(A)(iii) of the ACA, which requires that the Chief Actuary of
CMS, in consultation with OTA, shall certify whether the methodology
used to make payments to the States meets the requirements of section
1331(d)(3)(A)(ii) of the ACA.
Under Sec. 600.610(c)(2)(ii), the Secretary will recalculate a
State's BHP payment amount upon determination that a mathematical error
occurred during the application of the BHP funding methodology. Under
this current regulation, it is not permissible to recalculate a State's
BHP payment amount upon determining that a mathematical error occurred
during the development of the applicable BHP funding methodology.
Examples of mathematical errors in the application and/or
development of the BHP funding methodology include using the incorrect
value of a factor within the BHP payment methodology or using incorrect
data to calculate a factor within the BHP payment methodology. Examples
of changes that are not mathematical errors under this regulation
include the addition or removal of a factor in the BHP payment
methodology or a change in the approach for calculating a factor.
As an example of mathematical error in the development of the BHP
payment methodology, we recently became aware of an error in
calculating the Income Reconciliation Factor (IRF) for program year
2019, resulting in an underpayment of Federal funds to States for their
BHPs. In reviewing the model used to calculate the IRF, CMS and OTA
found an error in the computation of the IRF. Working with OTA, we have
developed a new value for the IRF for 2019. Previously, the IRF for the
2019 BHP payment methodology was 98.03 percent. The corrected value for
the IRF for program year 2019 was recalculated as the median of the
impact of income reconciliation on PTC for persons with incomes between
100 percent and 200 percent of FPL (102.36 percent) and the impact for
persons with incomes between 133 percent and 200 percent of FPL (101.66
percent), which is 102.01 percent. Using the median of the two values
is the same approach as we used to calculate the original IRF value in
2019, and the difference between the values is attributable to a
mathematical error made during the development of the BHP payment
methodology for program year 2019.
Therefore, we are proposing to revise Sec. 600.610(c)(2)(ii) such
that a State's payment amount may be retroactively revised due to a
mathematical error in the development or application of the BHP funding
methodology. If finalized, we would then be able to recalculate Federal
payments to States for 2019 using the updated value of the IRF. We
propose this change under the authority in section 1331(d)(3)(B) of the
ACA, which requires the Secretary to adjust payments for any fiscal
year to reflect any error in the payment amounts under section
1331(d)(3)(A) of the ACA.

[[Page 31829]]

We seek public comment on these proposals.

IV. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.), we are required to provide 60-day notice in the Federal Register
and solicit public comment before a ``collection of information''
requirement is submitted to the Office of Management and Budget (OMB)
for review and approval. For the purposes of the PRA and this section
of the preamble, collection of information is defined under 5 CFR
1320.3(c) of OMB's implementing regulations.
To fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comment on the following issues:
<bullet> The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
<bullet> The accuracy of our estimate of the information collection
burden.
<bullet> The quality, utility, and clarity of the information to be
collected.
<bullet> Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain proposed collection of
information requirements.

A. Wage Estimates

To derive average costs for individuals, we used data from the U.S.
Bureau of Labor Statistics' (BLS) May 2021 National Occupational
Employment and Wage Estimates for our salary estimates (<a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a>). In this regard, Table 1 presents
BLS' mean hourly wage, our estimated cost of fringe benefits and
overhead, and our adjusted hourly wage.

Table 1--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupation Mean hourly benefits and Adjusted
Occupation title code wage ($/hr) overhead ($/ hourly wage ($/
hr) hr)
----------------------------------------------------------------------------------------------------------------
Business Operations Specialists................. 13-1000 38.64 38.64 77.25
General and Operations Managers................. 11-1021 55.41 55.41 110.82
----------------------------------------------------------------------------------------------------------------

To derive our proposed cost estimates, we adjusted BLS' mean hourly
wage by a factor of 100 percent. This is necessarily a rough
adjustment, both because fringe benefits and overhead costs vary
significantly from employer to employer, and because methods of
estimating these costs vary widely from study to study. Therefore, we
believe that doubling the hourly wage to estimate total cost is a
reasonably accurate and conservative estimation method.

B. Proposed Information Collection Requirements (ICRs)

The following proposed changes will be submitted to OMB for review
under control number 0938-1218 (CMS-10510). We also propose to
reinstate that control number as our previous approval was discontinued
on August 31, 2017, based on our estimated number of respondents. We
are proposing to reinstate the control number based on 5 CFR
1320.3(c)(4)(i) using the standard non-rule PRA process which includes
the publication of 60- and 30-day Federal Register notices. We
anticipate that the initial 60-day notice will publish within 10
business days from the date of publication of this proposed rule.
1. ICRs Regarding the Submission of Estimated and Actual Quarterly
Enrollment Data
In sections I.A. and II.B. of this proposed rule, we propose that a
State that is approved to implement a BHP must provide CMS with 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
after actual enrollment data is available. Enrollment data must be
submitted by age range (if applicable), geographic area, coverage
status, household size, and income range.
We estimate that it would take a business operations specialist 10
hours at $77.25/hr and a general manager 2 hours at $110.82/hr to
compile and submit the quarterly estimated enrollment data to CMS. For
2023, we estimate that two States will operate a BHP and will submit
the required estimated enrollment data to CMS. In aggregate, we
estimate an annual burden of 96 hours (2 States x 12 hr/response x 44
U.S.C. 35014 responses/yr) at a cost of $7,953 [2 States x 4 responses/
yr ((10 hr x $77.25/hr) + (2 hr x $110.82/hr)).
In sections I.A. and II.B. of this proposed rule, we also propose
that following each BHP program quarter, a State operating a BHP must
submit actual enrollment data to CMS. 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. Actual
enrollment data must include a personal identifier, date of birth,
county of residence, Indian status, family size, household income,
number of persons in the household enrolled in BHP, family identifier,
months of coverage, plan information, and any other data required by
CMS to properly calculate the payment. This may include the collection
of data related to eligibility for other coverage, marital status (for
calculating household composition), or more precise residence location.
We estimate that it would take a business operations specialist 100
hours at $77.25/hr and a general manager 10 hours at $110.82/hr to
compile and submit the quarterly actual enrollment data to CMS. For
2023, we estimate that two States will operate a BHP and will submit
the required actual enrollment data to CMS. In aggregate, we estimate
an annual burden of 880 hours (2 States x 110 hr/response x 4
responses/yr) at a cost of $70,666 [2 States x 4 responses/yr ((100 hr
x $77.25/hr) + (10 hr x $110.82/hr)).
2. ICRs Regarding Submission of Qualified Health Plan Data
In section II.C. of this proposed rule, we specify that States
operating an SBE in the individual market must provide certain data,
including premiums for SLCSPs, by geographic area, for CMS to calculate
the Federal BHP payment rates in those States. States operating BHPs
interested in obtaining the applicable 2023 program year Federal BHP
payment rates for its State must submit the data to CMS by October 15,
2022.
We estimate that it would take a business operations specialist 20
hours at $77.25/hr and a general manager 2

[[Page 31830]]

hours at $110.82/hr to compile and submit the required data to CMS. In
aggregate, we estimate an annual burden of 44 hours (2 States x 22 hr/
response) at a cost of $3,533 [2 States x ((20 hr x $77.25/hr) + (2 hr
x $110.82/hr))].

C. Summary of Proposed Requirements and Annual Burden Estimates

--------------------------------------------------------------------------------------------------------------------------------------------------------
OMB control No. Number of Total Time per response Total time
Section under Title 42 of the CFR (CMS ID No.) respondents responses (hr) (hr) Labor cost ($/hr) Total cost ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
600.610........................... 0938-1218 (CMS- 2 8 Varies.............. 96 Varies.............. 7,953
10510)
600.610........................... 0938-1218 (CMS- 2 8 Varies.............. 880 Varies.............. 70,666
10510)
600.610........................... 0938-1218 (CMS- 2 2 Varies.............. 44 Varies.............. 3,533
10510)
--------------------------------------------------------------------------------------------------
Total......................... 2 18 Varies.............. 1,020 Varies.............. 82,152
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Submission of PRA-Related Comments

We have submitted a copy of this proposed rule to OMB for its
review of the rule's information collection requirements and burden.
The requirements are not effective until they have been approved by
OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed above, please visit the CMS
website at <a href="https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRAListing">https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRAListing</a>, or call the Reports Clearance
Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you comment, please submit your comments
electronically as specified in the DATES and ADDRESSES sections of this
proposed rule.

V. 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.

VI. Regulatory Impact Analysis

A. Statement of Need

Section 1331 of the ACA (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 ACA, the Secretary shall
transfer to the State Federal BHP payments described in section
1331(d)(3) of the ACA. This proposed methodology provides for the
funding methodology to determine the Federal BHP payment amounts
required to implement these provisions for program year 2023.

B. Overall Impact

We have examined the impacts of this rule as required by E.O. 12866
on Regulatory Planning and Review (September 30, 1993), E.O. 13563 on
Improving Regulation and Regulatory Review (January 18, 2011), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96354),
section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform
Act of 1995 (March 22, 1995; Pub. L. 104-4), E.O. 13132 on Federalism
(August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Section
3(f) of Executive Order 12866 defines a ``significant regulatory
action'' as an action that is likely to result in a rule: (1) Having an
annual effect on the economy of $100 million or more in any 1 year, or
adversely and materially affecting a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local or tribal governments or communities (also
referred to as ``economically significant''); (2) creating a serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially altering the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raising novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.
A regulatory impact analysis (RIA) must be prepared for major rules
with significant regulatory action(s) or with economically significant
effects ($100 million or more in any 1 year). Based on our estimates,
OMB's Office of Information and Regulatory Affairs has determined this
rulemaking is ``economically significant'' as measured by the $100
million threshold. Accordingly, we have prepared a Regulatory Impact
Analysis that to the best of our ability presents the costs and
benefits of the rulemaking.

C. Detailed Economic Analysis

The aggregate economic impact of this proposed payment methodology
is estimated to be $357 million in transfers for calendar years (CY)
2022 and 2023 (measured in real 2022 dollars), which would be an
increase in Federal payments to the State BHPs. For the purposes of
this analysis, we have assumed that two States would implement BHPs in
2023. This assumption is based on the fact that two States have
established a BHP to date, and we do not have any indication that
additional States may implement a BHP in CY 2023. Of these two States,
only one (Minnesota) currently has an approved section 1332 waiver.
Projected BHP enrollment and expenditures under the previous
payment methodology were calculated using the most recent 2022 QHP
premiums and State estimates for BHP enrollment. We projected
enrollment for 2023 using the projected increase in the number of
adults in the U.S. from 2022 to 2023 (0.4 percent), and we projected
premiums using the NHE projection of premiums for private health
insurance (4.6 percent). Prior to any changes made in the 2023 BHP
payment methodology, Federal BHP expenditures are projected to be
$8,340 million in 2023, which are described in detail below. This
projection serves as our baseline scenario when estimating the net
impact of the 2023 proposed methodology on Federal BHP expenditures.
The incorporation of the WF is the most significant change in this
proposed

[[Page 31831]]

methodology from the final 2022 payment methodology. To calculate the
impact of adding the WF to the methodology, we took the following
steps. First, we calculated the estimated value of the WF using the
most recently available section 1332 waiver premium data for 2021.\29\
In Minnesota, the average percentage difference between the ``with
waiver'' SLCSP premiums and the ``without waiver'' SLCSP premiums for
2021 is 27.3 percent (calculated as the average of the ``without
waiver'' SLCSP premium divided by the ``with waiver'' SLCSP premium,
averaged across all rating areas). We then increased the RPs in the
model for Minnesota by 27.3 percent, which represents the impact of the
WF. The resulting Federal BHP payments were 28.2 percent higher
incorporating this adjustment. The projected BHP expenditures after
these changes are $8,154 million, which is the sum of the prior
estimate ($8,021 million) and the impacts of the changes to the
methodology ($133 million). For Minnesota, estimated payments would
increase from $470 million to $603 million in 2023.
---------------------------------------------------------------------------

\29\ <a href="https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/1332-State-Specific-Premium-Data-Feb-2021.xlsx">https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Downloads/1332-State-Specific-Premium-Data-Feb-2021.xlsx</a>.

Table 2--Estimated Federal Impacts for the Basic Health Program 2023
Payment Methodology To Add Waiver Factor
[Millions of 2022 dollars]
------------------------------------------------------------------------

------------------------------------------------------------------------
Projected Federal BHP Payments under 2022 Final Methodology.... $8,021
Projected Federal BHP Payment under 2023 Proposed Methodology.. 8,154
Federal costs.................................................. 133
------------------------------------------------------------------------
Totals may not add due to rounding.

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. In this case, the exact value of the
WF and the effects of the section 1332 waiver in 2023 are currently
unknown. The value of the WF could be higher or lower than estimated
here as a result. In addition, projected BHP expenditures and
enrollment may also differ from our current estimates, which may also
lead to costs being higher or lower than estimated here.
In addition, the proposed methodology would allow for a
retrospective correction to the BHP payment methodology for errors that
occurred during the development or application of the BHP funding
methodology. For 2019, we propose to correct the value of the IRF from
98.03 percent to 102.01 percent. Actual Federal BHP expenditures in
2019 were $5,591 million, including payment reconciliations that have
occurred as of March 2022. Calculating the payments with the corrected
IRF value increases the payments by about $224 million. The actual
amount may differ as we continue to reconcile 2019 payments based on
actual enrollment.

Table 3--Estimated Federal Impacts for the Basic Health Program 2023
Payment Methodology To Apply Retrospective Corrections
[Millions of 2022 dollars]
------------------------------------------------------------------------

------------------------------------------------------------------------
Actual Federal BHP Payment (2019).............................. $5,591
Projected Federal BHP Payment with Correction (2019)........... 5,815
Federal costs.................................................. 224
------------------------------------------------------------------------
Totals may not add due to rounding.

The total estimated impact of this proposed methodology is $357
million ($133 million for the addition of the section 1332 waiver
factor, and $224 million for the correction to the income
reconciliation factor for 2019).

D. Alternative Approaches

We considered several alternatives in developing the BHP payment
methodology for 2023, and we discuss some of these alternatives below.
We considered alternatives as to how to calculate the PAF in the
final methodology for 2023. The value for the PAF is 1.188, which is
the same as was used for 2018, 2019, 2020, 2021, and 2022. 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 2023. 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 whether to continue to provide States the option
to develop a protocol for a retrospective adjustment to the 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.
We also considered whether or not to include a factor to address
the impacts of State Innovation Waivers. In previous methodologies, we
have not addressed the potential impacts of State Innovation Waivers on
BHP payments. We believe it is appropriate to include such a factor for
this payment methodology. We also considered other approaches to
calculating the factor, including whether or not to use each State's
experience separately or to look at the impacts across all States. We
believe it is more accurate to use each State's experience separately,
as applicable.
Many of the factors in the final methodology are specified in
statute; therefore, for these factors we are limited in the alternative
approaches we could consider. We do have some choices in selecting the
data sources used to determine the factors included in the methodology.
We will continue to use national rather than State-specific data, with
the exception of State-specific RPs and enrollment data. This is due to
the lack of currently available State-specific data needed to develop
the majority of the factors included in the methodology. We believe the
national data will produce sufficiently accurate determinations of
payment rates. In addition, we believe that this approach will be less
burdensome on States. 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

[[Page 31832]]

will use State-specific data rather than national data, as we believe
State-specific data will produce more accurate determinations than
national averages.

E. Accounting Statement and Table

Table 4--Accounting Statement: Federal Transfers to States
[$ millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units
Primary -----------------------------------------------
Category estimate Low estimate High estimate Period
Year dollars Discount rate covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers from Federal Government $180 $163 $197 2022 7% 2022-2023
to States..............................................
179 162 196 2022 3% 2022-2023
--------------------------------------------------------------------------------------------------------------------------------------------------------

As required by OMB Circular A-4 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf">https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf</a>), we have prepared an accounting statement in
Table 4 showing the classification of the transfer payments from the
Federal government to States associated with the provisions of this
proposed rule. Table 4 provides our best estimates of the transfer
payments outlined in the section C. Detailed Economic Analysis above.
These estimates assume that costs in 2022 could be 5 percent above and
below the primary estimate ($224 million in 2022 dollars) and that
costs in 2023 could be 18 percent above and below the primary estimate
($133 million in 2022 dollars, which reflects a waiver factor that
could be 5 percentage points higher or lower than assumed in the
analysis).

F. Regulatory Flexibility Act (RFA)

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA)
requires agencies to analyze options for regulatory relief of small
entities, if a rule has a significant impact on a substantial number of
small entities. For purposes of the RFA, we estimate that no small
entities will be impacted as that term is used in the RFA (include
small businesses, nonprofit organizations, and small governmental
jurisdictions). The great majority of hospitals and most other health
care providers and suppliers are small entities, either by being
nonprofit organizations or by meeting the SBA definition of a small
business (having revenues of less than $8.0 million to $41.5 million).
Individuals and States are not included in the definition of a small
entity. As its measure of significant economic impact on a substantial
number of small entities, HHS uses a change in revenue of more than 3
to 5 percent. We do not believe that this threshold will be reached by
the requirements in this proposed rule.
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.
Therefore, the Secretary has determined that this rule will not have a
significant economic impact on a substantial number of small entities.
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a 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.
Therefore, the Secretary has determined that this rule will not have a
significant impact on the operations of a substantial number of small
rural hospitals.

G. Unfunded Mandates Reform Act (UMRA)

Section 202 of the Unfunded Mandates Reform Act (UMRA) of 2005
(Pub. L. 104-4) 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 2022, that threshold is approximately $165 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 ACA or its implementing
regulations. Thus, neither the current nor the proposed payment
methodologies mandate expenditures by State governments, local
governments, or tribal governments.

H. Federalism

E.O. 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 E.O. 13132 do not apply to this proposed rule.

I. Conclusion

We believe that this proposed BHP payment methodology is
effectively the same methodology as finalized for 2022, with the
exception of the addition of the WF. In addition, we propose to update
the regulation to clarify that errors in the application and the
development of the methodology may be corrected retroactively. BHP
payment rates may change as the values of the factors change, most
notably the QHP premiums for 2022 or 2023. We do not anticipate this
proposed methodology to have any significant effect on BHP enrollment
in 2023.
In accordance with the provisions of E.O. 12866, this regulation
was reviewed by the Office of Management and Budget.
Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
Medicaid Services, approved this document on May 13, 2022.

List of Subjects in 42 CFR Part 600

Administrative practice and procedure, Health care, health

[[Page 31833]]

insurance, Intergovernmental relations, Penalties, Reporting and
recordkeeping requirements.

For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR part 600 as set forth
below:

PART 600--ADMINISTRATION, ELIGIBILITY, ESSENTIAL HEALTH BENEFITS,
PERFORMANCE STANDARDS, SERVICE DELIVERY REQUIREMENTS, PREMIUM AND
COST SHARING, ALLOTMENTS, AND RECONCILIATION

0
1. The authority citation for part 600 continues to read as follows:

Authority: Section 1331 of the Patient Protection and Affordable
Care Act of 2010 (Pub. L. 111-148, 124 Stat. 119), as amended by the
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152, 124 Stat 1029).

0
2. Amend Sec. 600.610--
0
a. By revising paragraphs (a)(1) and (b)(1); and
0
b. In paragraph (c)(2)(ii), by removing the phrase ``during the
application of the BHP funding methodology'' and adding in its place
the phrase ``during the application or development of the BHP funding
methodology''.
The revisions read as follows:

Sec. 600.610 Secretarial determination of BHP payment amount.

(a) * * *
(1) Beginning in FY 2015, the Secretary will determine and publish
in a Federal Register document the BHP payment methodology for the next
calendar year, or for multiple calendar years beginning in calendar
year 2022, as determined by the Secretary. Beginning in calendar year
2023, in years in which the Secretary does not publish a new BHP
methodology, the Secretary will update the values of factors needed to
calculate the Federal BHP payments via subregulatory guidance, as
appropriate. Beginning in calendar year 2023, in years that the
Secretary publishes a revised payment methodology, the Secretary will
publish a proposed BHP payment methodology upon receiving certification
from the Chief Actuary of CMS.
* * * * *
(b) * * *
(1) Beginning in calendar year 2023, in years that the Secretary
publishes a revised payment methodology, the Secretary will determine
and publish the final BHP payment methodology and BHP payment amounts
in a Federal Register document.
* * * * *

Dated: May 18, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2022-11047 Filed 5-23-22; 11:15 am]
BILLING CODE 4120-01-P

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