DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland 21244-1850 
CMCS Informational bulletin 
DATE:  November 10, 2021 
FROM:  Daniel Tsai, Deputy Administrator and Director 
Center for Medicaid & CHIP Services (CMCS) 
SUBJECT:   Basic Health Program; Revised Federal Funding Methodologies for Program 
Years 2020 and 2021 and Operational QAs 
The Centers for Medicare & Medicaid Services (CMS) is responsible for developing the formula 
to calculate the amount of federal funding available for a states Basic Health Program (BHP). 
This Center for Medicaid and CHIP Services (CMCS) Informational Bulletin (CIB) specifies 
updated values for factors needed to calculate the federal BHP payment rates for 2020 and 2021, 
as a result of the American Rescue Plan Act of 2021 (ARP) (Pub. L. 117-2). In addition, this CIB 
provides several questions and answers related to the states implementation of the ARP. 
Background 
CMS published the Basic Health Program; Federal Funding Methodology for Program Years 
2019 and 2020 in the Federal Register on November 5, 2019 (84 FR 59529) (hereinafter referred 
to as the 2019 and 2020 BHP Payment Notice). CMS published the Basic Health Program; 
Federal Funding Methodology for Program Year 2021 in the Federal Register on August 13, 
2020 (85 CFR 49264) (hereinafter referred to as the 2021 BHP Payment Notice).  
Additional information on the funding formula, including the specific methodologies and the full 
explanation of all factors that go into the methodologies can be found in the 2019 and 2020 BHP 
Payment Notice (84 FR 59529) and the 2021 BHP Payment Notice (85 CFR 49264).  
American Rescue Plan Act 
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARP) (Pub. 
L.117-2). The ARP contains three provisions that impact state operations and federal payments
for a BHP. These provisions, which are outlined below, have an impact on the values of certain
factors used within the BHP payment methodologies for program years 2020 and 2021. The
updated values of these factors can be found in Section Updated Values for Variables Used in
Payment Equations beginning on page 3 of this CIB.
Section 9661  Improving Affordability by Expanding Premium Assistance for Consumers.  
This provision temporarily modifies for 2021 and 2022 the percentage of income an individual is 
expected to pay for the second lowest cost silver plan on the exchange (known as the applicable  percentage). This percentage is used to calculate premium tax credits (PTC) for individuals 
enrolled in a QHP.  The difference between the maximum amount of an individuals household 
income that can be charged in premiums and the cost of the second lowest cost silver plan is paid 
to the individual as PTC. The applicable percentages are factored into the equation for 
calculating the amount of PTC owed to states. Because section 9661 of the ARP modifies for 
2021 and 2022 the applicable percentages, CMS must use the updated applicable percentages to 
recalculate the federal payments owed to states for their BHPs in 2021.  
 
Section 9662  Temporary Modification of Limitations on Reconciliation of Tax Credits for 
Coverage Under a Qualified Health Plan with Advance Payments of Such Credits.   
In the Marketplace, the difference between the maximum amount of an individual's household 
income that can be charged in premiums and the cost of the second lowest cost silver plan is paid 
to the individual as a PTC. For individuals who purchase coverage on the exchange, the advance 
payments of the PTC (APTC) that they received throughout the course of the year based on 
projected income is reconciled at tax time with the individuals actual reported income. If their 
income is more than projected at the time their APTC was calculated, they repay APTC through 
a reduction in their tax refund or by paying additional taxes. Section 9662 suspends 
reconciliation of excess APTC for individuals enrolled in a Qualified Health Plan in the 
Marketplace for the 2020 Tax year.  
 
There is no reconciliation process for BHP enrollees. Instead, the BHP payment methodology 
includes an Income Reconciliation Factor (IRF), to account for the differences in BHP enrollees 
income at initial application and the actual income over the year. The 2019 and 2020 BHP 
Payment Notice finalized an IRF for program year 2020. The Office of Tax Analysis (OTA) of 
the Department of the Treasury has calculated an updated IRF for 2020, which takes into account 
the suspension of reconciliation for QHP enrollees.  CMS must retroactively apply the updated 
IRF in order to adjust the BHP payments made to states for 2020.  
Section 9663  Application of Premium Tax Credit in Case of Individuals Receiving 
Unemployment Compensation During 2021.  
This provision disregards any household income of a taxpayer in excess of 133% of the Federal 
Poverty Level (FPL) in 2021 for purposes of calculating the PTC for which the taxpayer is 
eligible, if the taxpayer received or was approved to receive unemployment compensation (UC) 
for any week beginning during 2021. The result is that all taxpayers who received or were 
approved to receive any UC in 2021 are eligible for the maximum amount of PTC provided for 
Marketplace enrollment; those who purchase the second-lowest cost silver plan on the Exchange 
will incur $0 in premiums for essential health benefits. 
 
This provision impacts BHP payments for 2021 by increasing the amount of PTC BHP enrollees 
who received or were approved to receive UC would have received had they enrolled in the 
Marketplace. In the Marketplace, if an individual received or was approved to receive UC 
partway through the year, they may be entitled to greater PTC at the end of year. As stated 
above, there is no reconciliation process for BHP enrollees. Therefore, OTA has calculated an 
updated IRF for 2021, which takes into account the increased PTC amounts received by 
individuals who receive or were approved to receive UC in 2021. CMS must apply the updated 
IRF to payments to states for 2021. 
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Updated Values for Variables Used in Payment Equations 
 
1. Premium Tax Credit Formula (PTCF)  
 
As described in section III.E.5 of the 2021 BHP Payment Notice, CMS will use the formula 
described in 26 USC 36B(b) to calculate the estimated PTC that would be paid on behalf of a 
person enrolled in a QHP in the Marketplace as part of the BHP payment methodology. In the 
2021 BHP Payment Notice, we stated that applicable percentages, as then defined in 26 USC 
36B(b)(3)(A) and 26 CFR 1.36B-3(g), for calendar year 2020 would be effective for BHP 
program year 2021. We finalized the use of the prior years applicable percentages to calculate 
BHP payments because those were the most recently published percentages at the time the 
methodology was finalized. However, because the applicable percentages have since been 
amended for 2021 by the ARP, we will now use updated applicable percentages to calculate 
payments to states for their BHPs for 2021. The updated applicable percentages, which are 
described in Table 1 below, increase on a sliding scale in a linear manner from the premium 
percentage applicable to individuals with income at the lowest end of the premium band to the 
premium percentage applicable to individuals with income at the highest end of the premium 
band. 
 
TABLE 1:  Applicable Percentage Table for CY 2021 
Under Section 9661 of the ARPa  
 
In the case of household income (expressed as a  The initial premium  The final premium 
percent of poverty line) within the following  percentage is  percentage is 
income tier: 
Up to 150%  0.0%  0.0% 
150.0% percent up to 200.0%  0.0%  2.0% 
200.0% up to 250.0%  2.0%  4.0% 
250.0% up to 300.0%  4.0%  6.0% 
300.0 percent up to 400.0%  6.0%  8.5% 
400.0% percent and higher  8.5%  8.5% 
 
2. Income Reconciliation Factor (IRF)  
 
As described in section III.D.7 of the 2019 and 2020 BHP Payment Notice and section III.E.7 of 
the 2021 BHP Payment Notice, the income reconciliation factor (IRF) accounts for (a) the 
difference between calculating estimated PTC (which is based on income relative to FPL as 
determined at initial application for enrollment in a QHP and potentially revised mid-year) and 
(b) actual income relative to FPL received during the plan year, as reflected on individual federal 
income tax returns following the end of the plan year. States may not have access to BHP 
enrollees actual income relative to FPL during the plan year. The IRF is used to estimate the 
reconciliation that otherwise would happen for individuals receiving advance payments of the 
premium tax credit (APTC) for enrollment in a QHP through an Exchange. The IRF values used 
in the payment methodologies for 2019 and 2020 were equal to the average of the value of the 
IRF for states that have implemented the Medicaid eligibility expansion to cover adults up to 133 
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  percent of the FPL and the value of the IRF for states that have not implemented the Medicaid 
eligibility expansion, for each respective year.  
 
We originally finalized in the 2019 and 2020 BHP Payment Notice that the IRF for program year 
2020 would be equal to 98.50 percent. For 2020 and as a result of the ARP, the OTA has 
estimated that the IRF for states that have implemented the Medicaid eligibility expansion to 
cover adults up to 133 percent of the FPL will be 101.23 percent, and for states that have not 
implemented the Medicaid eligibility expansion and do not cover adults up to 133 percent of the 
FPL will be 101.82 percent. Therefore, we are updating the value of the IRF for 2020 to 101.53 
percent, which is the average of the factors, rounded to the nearest hundredth of one-percent. 
 
Under the 2021 final BHP Payment Notice, we calculated the IRF using only the value for states 
that have implemented the Medicaid eligibility expansion to cover adults up to 133 percent of the 
FPL, which was 99.23 percent. For 2021 and as a result of the ARP, OTA has estimated that the 
IRF for states that have implemented the Medicaid eligibility expansion will be 100.61 percent. 
Therefore, we are updating the value of the IRF for 2021 to be 100.61 percent.  
 
Recalculating Payments to States 
 
Federal payments to states for their BHPs are made on a prospective, quarterly basis. As 
described in section III.B of the 2019 and 2020 BHP Payment Notice and section III.B of the 
2021 BHP Payment Notice, a state implementing a BHP must provide CMS with an estimate of 
the number of BHP enrollees the state projects will enroll in the upcoming BHP program quarter, 
by applicable rate cell. 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. These enrollment 
estimates by rate cell are used to calculate prospective payments, to be received by the states in 
advance of the applicable quarter. Following the end of the quarter, states must submit actual 
enrollment data to CMS, and the actual enrollment data is used to calculate the final BHP 
payment amount and make any necessary reconciliation adjustments to the prior quarters 
prospective payment amount due to differences between projected and actual enrollment.  
 
As of the date of publication of this bulletin, CMS has not received actual enrollment data for 
any quarters of 2020 or 2021 from states that operate a BHP. Recognizing that the changes to the 
IRF for 2020 and 20201 and applicable percentages for 2021 will increase federal payments to 
states, CMS will issue updated payments to states based on the estimated enrollment data 
submitted by the states to CMS. CMS will notify states as to when the updated payments will be 
issued.  
 
For more information on the Basic Health Program or for questions related to the BHP funding 
methodology please contact Chris Truffer at Christopher.Truffer@cms.hhs.gov or Cassie 
Lagorio at Cassandra.Lagorio@cms.hhs.gov.  
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  Appendix: Impact of the American Rescue Plan Act on the Basic Health Program 
Operational Q&As for States 
 
Question 1: What are the maximum monthly premiums BHP enrollees can be charged in 2021 
and 2022, under Section 9661 of the ARP? 
 
Answer 1: Section 1331(a)(2)(A)(i) of the Affordable Care Act requires that the amount of the 
monthly premium an eligible individual pays for coverage under a BHP standard health plan 
must not exceed the amount of the monthly premium the individual would have been required to 
pay had the individual instead enrolled in the second-lowest cost silver plan through the 
Exchange. Section 9661 of the ARP modifies the applicable percentages of income used to 
calculate the amount of PTC individuals are eligible to receive in the Exchange. Specifically, it 
specifies that individuals with income below 150 percent of the FPL are not required to 
contribute to premiums for essential health benefits in the Exchange. Therefore, states cannot 
charge monthly premiums to BHP enrollees with household income below 150% of the FPL.  
 
Section 9661 of ARP also reduced the amount which individuals with household income 
between 150 percent and 200 percent of the FPL need to contribute to the cost of coverage in the 
Exchange. For BHP enrollees with income between 150 percent of the FPL and 200 percent of 
the FPL, the BHP monthly premiums cannot exceed the premiums that may be charged for an 
individual enrolled in the second-lowest cost silver plan in the individuals area on the Exchange 
after the application of premium tax credits. The specific premium amounts will vary based on 
the individuals household income and size. CMS will work directly with states to determine the 
maximum premium amounts.  
 
Question 2: Do BHP states need to reimburse any premiums already collected in 2021, for 
enrollees with income below 150% FPL?  
 
Answer 2: Yes. As described above, Section 9661 of ARP modifies the applicable percentages of 
income used to calculate the amount of PTC individuals are eligible to receive in the Exchange, 
and thus modifies the premiums that individuals would have been required to pay for the second-
lowest cost silver plan on the Exchange.  Because the effective date of Section 9661 is January 1, 
2021, states may not collect any BHP premiums from enrollees with income below 150% FPL 
effective January 1, 2021. Thus, states must reimburse BHP enrollees with income below 150% 
FPL for any premium amounts collected for any months in 2021.  
 
As described above, states also may not collect premiums from BHP enrollees with income 
between 150% FPL and 200% FPL that exceed the premiums amounts owed by individuals 
enrolled in coverage through the Exchange for the second-lowest cost silver plan in the 
individuals area on the Exchange after application of premium tax credits. If a state has 
collected higher than authorized premiums for these BHP enrollees for any months in 2021, 
those excess premium amounts would need to be reimbursed as well.  
 
Question 3: Do BHP states need to retroactively enroll individuals with income below 150% FPL 
who have been determined eligible for BHP since January 1, 2021, but have not been enrolled 
because they havent paid their initial premium?  
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Answer 3: Yes. If the state determined an individual eligible to enroll in the BHP for 2021, but 
the individual has not been enrolled due to nonpayment of the initial premium, the state must 
now enroll the individual with coverage effective January 1, 2021. The state should also work 
with the individual to ensure any unpaid claims that can now be covered under BHP are 
processed. 
 
Question 4: Can the state charge BHP premiums to enrollees who received Unemployment 
Compensation in 2021?  
 
Answer 4: No, states cannot charge BHP premiums to enrollees who received or are approved to 
receive Unemployment Compensation in 2021, regardless of their income. States also cannot 
charge BHP premiums to enrollees if a tax filer in the enrollee's tax household received or was 
approved to receive Unemployment Compensation in 2021. Section 9663 of ARP disregards any 
household income of a taxpayer in excess of 133% FPL in 2021, if the taxpayer attests to having 
received or being approved to receive Unemployment Compensation for any week beginning 
during 2021, subject to documentation as the Secretary may prescribe. Individuals with income 
of 133% FPL (including those whose income is effectively 133% due to the disregard in section 
9663 of the ARP) pay $0 for the essential health benefits portion of the second lowest cost silver 
plan on the Exchange, after the application of PTC. Therefore, BHP enrollees who receive 
Unemployment Compensation (or whose tax filing household member receives Unemployment 
Compensation) may not be charged any premiums, as any premium charge would exceed the 
cost to the individual of purchasing the second lowest cost silver plan on the Exchange. 
 
Question 5: If Unemployment Compensation begins midway through the year, does the state 
need to reimburse premiums paid during the first part of the year?  
 
Answer 5: Yes. States must reimburse any BHP premiums collected since January 1, 2021 from 
BHP enrollees who receive or are approved to receive Unemployment Compensation in 2021, 
even if the premiums were collected prior to the receipt of Unemployment Compensation.  
 
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