9636 Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 

TABLE 51—ESTIMATED IMPACT OF THE CY 2015 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS

FOR SELECTED PROCEDURES—Continued 

CPT/HCPCS code Short descriptor 

Estimated CY 

2014 ASC 

payments (in 

millions) 

Estimated CY 

2015 percent 

change 

(1) (2) (3) (4) 

64635 ......................... Destroy lumb/sac facet jnt ............................................................................................... 45 ¥5 

63650 ......................... Implant neuroelectrodes .................................................................................................. 41 4 

G0121 ........................ Colon ca scrn not hi rsk ind ............................................................................................ 41 1 

64590 ......................... Insrt/redo pn/gastr stimul ................................................................................................. 38 ¥1 

15823 ......................... Revision of upper eyelid .................................................................................................. 35 2 

63685 ......................... Insrt/redo spine n generator ............................................................................................ 34 29 

29827 ......................... Arthroscop rotator cuff repr ............................................................................................. 34 1 

64721 ......................... Carpal tunnel surgery ...................................................................................................... 32 ¥1 

29881 ......................... Knee arthroscopy/surgery ................................................................................................ 30 ¥1 

29824 ......................... Shoulder arthroscopy/surgery .......................................................................................... 27 1 

29880 ......................... Knee arthroscopy/surgery ................................................................................................ 25 ¥1 

43235 ......................... Uppr gi endoscopy diagnosis .......................................................................................... 23 10 

62310 ......................... Inject spine c/t .................................................................................................................. 23 0 

29823 ......................... Shoulder arthroscopy/surgery .......................................................................................... 22 1 

52000 ......................... Cystoscopy ...................................................................................................................... 22 1 

G0260 ........................ Inj for sacroiliac jt anesth ................................................................................................. 21 0 

45384 ......................... Lesion remove colonoscopy ............................................................................................ 21 7 

67042 ......................... Vit for macular hole ......................................................................................................... 21 1 

26055 ......................... Incise finger tendon sheath ............................................................................................. 19 ¥2 

Dated: February 18, 2015. 

C’Reda Weeden, 

Executive Secretary to the Department, 

Department of Health and Human Services. 

[FR Doc. 2015–03760 Filed 2–23–15; 8:45 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 600 

[CMS–2391–FN] 

RIN 0938–ZB18 

Basic Health Program; Federal 

Funding Methodology for Program 

Year 2016 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final methodology. 

SUMMARY: This document provides the 

methodology and data sources necessary 

to determine federal payment amounts 

made in program year 2016 to states that 

elect to establish a Basic Health Program 

under the Affordable Care Act to offer 

health benefits coverage to low-income 

individuals otherwise eligible to 

purchase coverage through Affordable 

Insurance Exchanges. 

DATES: These regulations are effective 

on January 1, 2016. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Truffer, (410) 786–1264; 

Stephanie Kaminsky (410) 786–4653. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. Summary of Proposed Provisions and 

Analysis of and Responses to Public 

Comments on the Proposed Methodology 

A. Background 

B. Overview of the Funding Methodology 

and Calculation of the Payment Amount 

C. Required Rate Cells 

D. Sources and State Data Considerations 

E. Discussion of Specific Variables Used in 

Payment Equations 

F. Adjustments for American Indians and 

Alaska Natives 

G. State Option to Use 2015 QHP 

Premiums for BHP Payments 

H. State Option To Include Retrospective 

State-Specific Health Risk Adjustment in 

Certified Methodology 

III. Provisions of the Final Methodology 

A. Overview of the Funding Methodology 

and Calculation of the Payment Amount 

B. Federal BHP Payment Rate Cells 

C. Sources and State Data Considerations 

D. Discussion of Specific Variables Used in 

Payment Equations 

E. Adjustments for American Indians and 

Alaska Natives 

F. State Option To Use 2015 QHP 

Premiums for BHP Payments 

G. State Option To Include Retrospective 

State-Specific Health Risk Adjustment in 

Certified Methodology 

IV. Collection of Information Requirements 

V. Regulatory Impact Statement 

A. Overall Impact 

B. Unfunded Mandates Reform Act 

C. Regulatory Flexibility Act 

D. Federalism 

Acronyms 

To assist the reader, the following 

acronyms are used in this document. 

DAV Change in Actuarial Value 

APTC Advance payment of the premium 

tax credit 

ARP Adjusted reference premium 

AV Actuarial value 

BHP Basic Health Program 

CCIIO CMS’ Center for Consumer 

Information and Insurance Oversight 

CDC Centers for Disease Control and 

Prevention 

CHIP Children’s Health Insurance Program 

CPI–U Consumer price index for all urban 

consumers 

CSR Cost-sharing reduction 

EHB Essential Health Benefit 

FPL Federal poverty line 

FRAC Factor for removing administrative 

costs 

IRF Income reconciliation factor 

IRS Internal Revenue Service 

IUF Induced utilization factor 

QHP Qualified health plan 

OTA Office of Tax Analysis [of the U.S. 

Department of Treasury] 

PHF Population health factor 

PTC Premium tax credit 

PTCF Premium tax credit formula 

PTF Premium trend factor 

RP Reference premium 

SBM State Based Marketplace 

TRAF Tobacco rating adjustment factor 

I. Background 

The Patient Protection and Affordable 

Care Act (Pub. L. 111–148, enacted on 

March 23, 2010), together with the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152, enacted on March 30, 2010) 

(collectively referred as the Affordable 


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Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 9637 

Care Act) provides for the establishment 

of Affordable Insurance Exchanges 

(Exchanges, also called the Health 

Insurance Marketplace) that provide 

access to affordable health insurance 

coverage offered by qualified health 

plans (QHPs). Individuals who enroll, or 

whose family member enrolls, in a QHP 

cannot be eligible for health coverage 

under other federally supported health 

benefits programs or through affordable 

employer-sponsored insurance coverage 

and have incomes above 100 percent but 

no more than 400 percent of the federal 

poverty line (FPL), or have income 

below that level but be lawfully present 

non-citizens ineligible for Medicaid 

because of immigration status. 

Individuals enrolled through 

Marketplaces in coverage offered by 

QHPs may qualify for the federal 

premium tax credit (PTC) or federallyfunded cost-sharing reductions (CSRs) 

based on their household income, to 

make coverage affordable. 

In the states that elect to operate a 

Basic Health Program (BHP), BHP will 

make affordable health benefits coverage 

available for individuals under age 65 

with household incomes between 133 

percent and 200 percent of the FPL who 

are not otherwise eligible for Medicaid, 

the Children’s Health Insurance 

Program (CHIP), or affordable employersponsored coverage. (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).) Federal 

funding will be available for BHP based 

on the amount of PTC and CSRs that 

BHP enrollees would have received had 

they been enrolled in QHPs through 

Marketplaces. 

In the March 12, 2014 Federal 

Register (79 FR 14112), we published a 

final rule entitled the ‘‘Basic Health 

Program; State Administration of Basic 

Health Programs; Eligibility and 

Enrollment in Standard Health Plans; 

Essential Health Benefits in Standard 

Health Plans; Performance Standards for 

Basic Health Programs; Premium and 

Cost Sharing for Basic Health Programs; 

Federal Funding Process; Trust Fund 

and Financial Integrity’’ (hereinafter 

referred to as the BHP final rule) 

implementing section 1331 of the 

Affordable Care Act), which directs the 

establishment of BHP. The BHP final 

rule establishes the standards for state 

and federal administration of BHP, 

including provisions regarding 

eligibility and enrollment, benefits, costsharing requirements and oversight 

activities. While the BHP final rule 

codifies 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 

BHP programs, as well as the operation 

of the Marketplaces. For this reason, the 

BHP final rule indicated that the 

development and publication of the 

funding methodology, including any 

data sources, would be addressed in a 

separate annual BHP Payment Notice. 

In the BHP final rule, we specified 

that the BHP Payment Notice process 

would include the annual publication of 

both a proposed and final BHP Payment 

Notice. The proposed BHP Payment 

Notice would be published in the 

Federal Register each October, and 

would describe the proposed 

methodology for the upcoming BHP 

program year, including how the 

Secretary considered the factors 

specified in section 1331(d)(3) of the 

Affordable Care Act, along with the 

proposed data sources used to 

determine the federal BHP payment 

rates. The final BHP Payment Notice 

would be published in the Federal 

Register in February, and would include 

the final BHP funding methodology, as 

well as the federal BHP payment rates 

for the next BHP program year. For 

example, payment rates published in 

February 2015 would apply to BHP 

program year 2016, beginning in January 

2016. As discussed in section III.C of 

this methodology, state data needed to 

calculate the federal BHP payment rates 

for the final BHP Payment Notice must 

be submitted to CMS. 

As described in the BHP final rule, 

once the final methodology has been 

published, we will only 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 

payment notice. 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 

Affordable Care Act, the funding 

methodology and payment rates are 

expressed as an amount per 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 in coverage through 

the state BHP. A state that is approved 

to implement BHP must provide data 

showing quarterly enrollment in the 

various federal BHP payment rate cells. 

The data submission requirements 

associated with this will be published 

subsequent to the proposed 

methodology. 

II. Summary of Proposed Provisions 

and Analysis of and Responses to 

Public Comments on the Proposed 

Methodology 

The following sections, arranged by 

subject area, include a summary of the 

public comments that we received, and 

our responses. For a complete and full 

description of the BHP proposed 

funding methodology, see the ‘‘Basic 

Health Program; Federal Funding 

Methodology for Program Year 2016’’ 

proposed methodology published in the 

October 23, 2014 Federal Register (79 

FR 63363). 

We received a total of 3 timely 

comments from individuals and groups 

advocating on behalf of consumers and 

health care providers. The public 

comments received ranged from general 

support or opposition to the proposed 

methodology and BHP to specific 

comments regarding the proposed 

methodological factors. 

A. Background 

In the October 23, 2014 (79 FR 63363) 

proposed methodology, we specified the 

methodology of how the federal BHP 

payments would be calculated. For 

specific discussions, please refer to the 

October 23, 2014 proposed methodology 

(79 FR 63363). 

We received the following comments 

on the background information included 

in the proposed methodology: 

Comment: Some commenters 

expressed general opposition to BHP 

and the payment methodology. 

Response: The comments were 

outside the scope of the BHP program 

and payment methodology. 

Final Decision: After careful 

consideration of the public comments, 

we are finalizing our proposed 

methodology for how the federal BHP 

payments will be calculated. 


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B. Overview of the Funding 

Methodology and Calculation of the 

Payment Amount 

We proposed in the overview of the 

funding methodology to calculate the 

PTC and CSR as consistently as possible 

and in general alignment with the 

methodology used by Marketplaces to 

calculate the advance payments of the 

PTC and CSR, and by the Internal 

Revenue Service (IRS) to calculate the 

final PTC. We proposed in this section 

four equations that comprise the overall 

BHP funding methodology. For specific 

discussions, please refer to the October 

23, 2014 proposed methodology (79 FR 

63363). 

We received no comments regarding 

the overview of the funding 

methodology and calculation of the 

payment amount. We are finalizing the 

BHP overview of the funding 

methodology and the payment amount 

for FY 2016. 

C. Required Rate Cells 

In this section, we proposed that a 

state implementing BHP provide us 

with an estimate of the number of BHP 

enrollees it will enroll in the upcoming 

BHP program, by applicable rate cell, to 

determine the federal BHP payment 

amounts. For each state, we proposed 

using rate cells that separate the BHP 

population into separate cells based on 

the following five factors: age; 

geographic rating area; coverage status; 

household size; and income. For 

specific discussions, please refer to the 

October 23, 2014 proposed methodology 

(79 FR 63363). 

We received the following comment 

on the proposed rate cells: 

Comment: One commenter expressed 

concern that defining geographic rating 

areas as counties would not capture 

potential differences in health care costs 

and qualified health plan premiums in 

different parts of the county, and 

recommended defining the rating area 

by zip code instead. 

Response: We believe that this is 

unlikely to have a significant impact on 

the federal BHP payment. In addition, 

we believe that it would make state 

operation of the program substantially 

more challenging. 

Final Decision: After careful 

consideration of the comments, we are 

finalizing the criteria and definitions of 

the rate cells to determine the federal 

BHP payment amounts for FY 2016. 

D. Sources and State Data 

Considerations 

We proposed in this section to use, to 

the extent possible, data submitted to 

the federal government by QHP issuers 

seeking to offer coverage through a 

Marketplace to determine the federal 

BHP payment cell rates. However, in 

states operating a State Based 

Marketplace (SBM), we proposed that 

such states submit required data for 

CMS to calculate the federal BHP 

payment rates in those states. For 

specific discussions, please refer to the 

October 23, 2014 proposed methodology 

(79 FR 63363). 

We did not receive any comments on 

the ‘‘Sources and State Data 

Considerations’’ section and are 

finalizing the BHP methodology as 

proposed. 

E. Discussion of Specific Variables Used 

in Payment Equations 

In this section, we proposed 11 

specific variables to use in the payment 

equations that comprise the overall BHP 

funding methodology. (10 variables are 

described in section III.D of this 

document, and the premium trend 

factor is described in section III.F.) For 

each proposed variable, we included a 

discussion on the assumptions and data 

sources used in developing the 

variables. For specific discussions, 

please refer to the October 23, 2014 

proposed methodology (79 FR 63363). 

We did not receive any comments on 

the ‘‘Specific Variables Used in Payment 

Equations’’ section and are finalizing 

the BHP methodology as proposed. 

F. Adjustments for American Indians 

and Alaska Natives 

We proposed to make several 

adjustments for American Indians and 

Alaska Natives when calculating the 

CSR portion of the federal BHP payment 

rate to be consistent with the 

Marketplace rules. For specific 

discussions, please refer to the October 

23, 2014 proposed methodology (79 FR 

63363). 

We did not receive any comments on 

the ‘‘Adjustments for American Indians 

and Alaska Natives’’ section and are 

finalizing the BHP methodology as 

proposed. 

G. State Option to Use 2015 QHP 

Premiums for BHP Payments 

In this section, we proposed to 

provide states implementing BHP with 

the option to use the 2015 QHP 

premiums multiplied by a premium 

trend factor to calculate the federal BHP 

payment rates instead of using the 2016 

QHP premiums. For specific 

discussions, please refer to the October 

23, 2014 proposed methodology (79 FR 

63363). 

We did not receive any comments on 

the ‘‘State Option to Use 2015 QHP 

Premiums for BHP Payments’’ section 

and are finalizing the BHP methodology 

as proposed. 

H. State Option To Include 

Retrospective State-Specific Health Risk 

Adjustment in Certified Methodology 

In this section, we proposed to 

provide states implementing BHP the 

option to develop a methodology to 

account for the impact that including 

the BHP population in the Marketplace 

would have had on QHP premiums 

based on any differences in health status 

between the BHP population and 

persons enrolled through the 

Marketplace. For specific discussions, 

please refer to the October 23, 2014 

proposed methodology (79 FR 63363). 

We did not receive any comments on 

the ‘‘State Option to Include 

Retrospective State-specific Health Risk 

Adjustment in Certified Methodology’’ 

section and are finalizing the BHP 

methodology as proposed. 

III. Provisions of the Final Methodology 

A. Overview of the Funding 

Methodology and Calculation of the 

Payment Amount 

Section 1331(d)(3) of the Affordable 

Care Act directs the Secretary to 

consider several factors when 

determining the federal BHP payment 

amount, which, as specified in the 

statute, must equal 95 percent of the 

value of the PTC and CSRs that BHP 

enrollees would have been provided 

had they enrolled in a QHP through a 

Marketplace. 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 Marketplaces 

to calculate the advance payments of the 

PTC and CSRs, and by the IRS to 

calculate final PTCs. In general, we rely 

on values for factors in the payment 

methodology specified in statute or 

other regulations as available, and we 

have developed values for other factors 

not otherwise specified in statute, or 

previously calculated in other 

regulations, to simulate the values of the 

PTC and CSRs that BHP enrollees would 

have received if they had enrolled in 

QHPs offered through a Marketplace. In 

accordance with section 

1331(d)(3)(A)(iii) of the Affordable Care 

Act, the final funding methodology 

must be certified by CMS’ Chief 

Actuary, 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 Affordable Care 

Act. 

Section 1331(d)(3)(A)(ii) of the 

Affordable Care Act specifies that the 


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Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 9639 

payment determination ‘‘shall take into 

account all relevant factors necessary to 

determine the value of the premium tax 

credits and cost-sharing reductions that 

would have been provided to eligible 

individuals . . . including 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 qualified health plan through a 

Marketplace, and whether any 

reconciliation of the credit or costsharing reductions would have occurred 

if the enrollee had been so enrolled.’’ 

The payment methodology takes each of 

these factors into account. This 

methodology is the same as the 2015 

payment methodology, with updated 

values but no changes in methods. 

We have developed a methodology 

that the total federal BHP payment 

amount would be based on multiple 

‘‘rate cells’’ in each state. Each ‘‘rate 

cell’’ represents a unique combination 

of age range, geographic area, coverage 

category (for example, self-only or twoadult coverage through BHP), household 

size, and income range as a percentage 

of FPL. Thus, there are distinct rate cells 

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. We note that the 

development of the BHP payment rates 

will be consistent with each state’s rules 

on age rating. Thus, in the case of a state 

that does not use age as a rating factor 

on the Marketplace, the BHP payment 

rates would not vary by age. 

The rate for each rate cell will be 

calculated in two parts. The first part (as 

described in Equation (1)) will equal 95 

percent of the estimated PTC that would 

have been paid if a BHP enrollee in that 

rate cell had instead enrolled in a QHP 

in the Marketplace. The second part (as 

described in Equation (2)) will equal 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 the Marketplace. 

These 2 parts will be added together and 

the total rate for that rate cell will be 

equal to the sum of the PTC and CSR 

rates. 

To calculate the total federal BHP 

payment, Equation (1) will be used to 

calculate the estimated PTC for 

individuals in each rate cell and 

Equation (2) will be used to calculate 

the estimated CSR payments for 

individuals in each rate cell. By 

applying the equations separately to rate 

cells based on age, income and other 

factors, we effectively take those factors 

into account in the calculation. In 

addition, the equations take into 

account additional relevant variables 

that are needed to determine the 

estimated PTC and CSR payments for 

individuals in each rate cell. Each of the 

variables in the equations is defined 

below, and further detail is provided 

later in this section of the payment 

notice. 

In addition, we describe how we will 

calculate the adjusted reference 

premium (described later in this section 

of the payment methodology) that is 

used in Equations (1) and (2). This is 

defined in Equation (3a) and Equation 

(3b). 

Equation 1: Estimated PTC by Rate Cell 

The estimated PTC, on a per enrollee 

basis, will be calculated for each rate 

cell for each state based on age range, 

geographic area, coverage category, 

household size, and income range. The 

PTC portion of the rate will be 

calculated in a manner consistent with 

the methodology used to calculate the 

PTC for persons enrolled in a QHP, with 

3 adjustments. First, the PTC portion of 

the rate for each rate cell will represent 

the mean, or average, expected PTC that 

all persons in the rate cell would 

receive, rather than being calculated for 

each individual enrollee. Second, the 

reference premium used to calculate the 

PTC (described in more detail later in 

the section) will be adjusted for BHP 

population health status, and in the case 

of a state that elects to use 2015 

premiums for the basis of the BHP 

federal payment, for the projected 

change in the premium from the 2015 to 

2016, to which the rates announced in 

the final payment methodology would 

apply. These adjustments are described 

in Equation (3a) and Equation (3b). 

Third, the PTC will be adjusted 

prospectively to reflect the mean, or 

average, net expected impact of income 

reconciliation on the combination of all 

persons enrolled in BHP; this 

adjustment, as described in section 

III.D.5 of this methodology, will 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 

Affordable Care Act. We note that in the 

situation where the average income 

contribution of an enrollee would 

exceed the adjusted reference premium, 

we will calculate the PTC to be equal to 

0 and would not allow the value of the 

PTC to be negative. 

Consistent with this description, 

equation (1) is defined as: 

PTCa,g,c,h,i = Premium tax credit portion of 

BHP payment rate 

a = Age range 

g = Geographic area 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

h = Household size 

i = Income range (as percentage of FPL) 

ARPa,g,c = Adjusted reference premium 

Ih,i,j = Income (in dollars per month) at each 

1 percentage-point increment of FPL 

j = jth percentage-point increment FPL 

n = Number of income increments used to 

calculate the mean PTC 

PTCFh,i,j = Premium Tax Credit Formula 

percentage 

IRF = Income reconciliation factor 

Equation 2: Estimated CSR Payment by 

Rate Cell 

The CSR portion of the rate will be 

calculated for each rate cell for each 

state based on age range, geographic 

area, coverage category, household size, 

and income range defined as a 

percentage of FPL. The CSR portion of 

the rate will be calculated in a manner 

consistent with the methodology used to 

calculate the CSR advance payments for 

persons enrolled in a QHP, as described 

in the final rule we published in the 

Federal Register on March 11, 2014 

entitled ‘‘HHS Notice of Benefit and 

Payment Parameters for 2015’’ final rule 

(79 FR 13744), with 3 principal 

adjustments. (We will make a separate 

calculation that includes different 

adjustments for American Indian/Alaska 

Native BHP enrollees, as described in 

section III.D.1 of this methodology.) For 

the first adjustment, the CSR rate, like 

the PTC rate, will represent the mean 

expected CSR subsidy that would be 

paid on behalf of all persons in the rate 

cell, rather than being calculated for 

each individual enrollee. Second, this 


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calculation will be based on the 

adjusted reference premium, as 

described in section III.A.3 of this 

methodology. Third, this equation uses 

an adjusted reference premium that 

reflects premiums charged to nontobacco users, rather than the actual 

premium that is charged to tobacco 

users to calculate CSR advance 

payments for tobacco users enrolled in 

a QHP. Accordingly, the equation 

includes a tobacco rating adjustment 

factor that would account for BHP 

enrollees’ estimated tobacco-related 

health costs that are outside the 

premium charged to non-tobacco-users. 

Finally, the rate will be multiplied by 95 

percent, as provided in section 

1331(d)(3)(A)(i) of the Affordable Care 

Act. 

Consistent with the methodology 

described above, equation (2) is defined 

as: 

CSRa,g,c,h,i = Cost-sharing reduction subsidy 

portion of BHP payment rate 

a = Age range 

g = Geographic area 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

h = Household size 

i = Income range (as percentage of FPL) 

ARPa,g,c = Adjusted reference premium 

TRAF = Tobacco rating adjustment factor 

FRAC = Factor removing administrative costs 

AV = Actuarial value of plan (as percentage 

of allowed benefits covered by the 

applicable QHP without a cost-sharing 

reduction subsidy) 

IUFh,i = Induced utilization factor 

DAVh,i = Change in actuarial value (as 

percentage of allowed benefits) 

Equation 3a and Equation 3b: Adjusted 

Reference Premium Variable (Used in 

Equations 1 and 2) 

As part of these calculations for both 

the PTC and CSR components, the value 

of the adjusted reference premium as 

described below. Consistent with the 

approach last year, we will allow states 

to choose between using the actual 2016 

QHP premiums or the 2015 QHP 

premiums multiplied by the premium 

trend factor (as described in section III.F 

of this methodology). Therefore, we 

describe below how we would calculate 

the adjusted reference premium under 

each option. 

In the case of a state that elects to use 

the reference premium based on the 

2016 premiums, we will calculate the 

value of the adjusted reference premium 

as specified in Equation (3a). The 

adjusted reference premium will be 

equal to the reference premium, which 

will be based on the second lowest cost 

silver plan premium in 2016, multiplied 

by the BHP population health factor 

(described in section III.D of this 

methodology), which will reflect the 

projected impact that enrolling BHPeligible individuals in QHPs on a 

Marketplace would have had on the 

average QHP premium. 

ARPa,g,c = Adjusted reference premium 

a = Age range 

g = Geographic area 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

RPa,g,c = Reference premium 

PHF = Population health factor 

In the case of a state that elects to use 

the reference premium based on the 

2015 premiums (as described in section 

III.F of this methodology), we will 

calculate the value of the adjusted 

reference premium as specified in 

Equation (3b). The adjusted reference 

premium will be equal to the reference 

premium, which will be based on the 

second lowest cost silver plan premium 

in 2015, multiplied by the BHP 

population health factor (described in 

section III.D of this methodology), 

which will reflect the projected impact 

that enrolling BHP-eligible individuals 

in QHPs on a Marketplace would have 

had on the average QHP premium, and 

by the premium trend factor, which will 

reflect the projected change in the 

premium level between 2015 and 2016 

(including the estimated impact of 

changes resulting from the transitional 

reinsurance program established in 

section 1341 of the Affordable Care Act). 

ARPa,g,c = Adjusted reference premium 

a = Age range 

g = Geographic area 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

RPa,g,c = Reference premium 

PHF = Population health factor 

PTF = Premium trend factor 

Equation 4: Determination of Total 

Monthly Payment for BHP Enrollees in 

Each Rate Cell 

In general, the rate for each rate cell 

will 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 4 

below. 

PMT = Total monthly BHP payment 

PTCa,g,c,h,i = Premium tax credit portion of 

BHP payment rate 

CSRa,g,c,h,i = Cost-sharing reduction subsidy 

portion of BHP payment rate 

Ea,g,c,h,i = Number of BHP enrollees 

a = Age range 

g = Geographic area 


tkelley on DSK3SPTVN1PROD with RULESER24FE15.001</GPH> ER24FE15.002</GPH> ER24FE15.003</GPH> ER24FE15.004</GPH>
Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 9641 

1This curve is used to implement the Affordable 

Care Act’s 3:1 limit on age-rating in states that do 

not create an alternative rate structure to comply 

with that limit. The curve applies to all individual 

market plans, both within and outside the 

Exchange. The age bands capture the principal 

allowed age-based variations in premiums as 

permitted by this curve. More information can be 

found at http://www.cms.gov/CCIIO/Resources/

Files/Downloads/market-reforms-guidance-2-25- 

2013.pdf. Both children and adults under age 21 are 

charged the same premium. For adults age 21–64, 

the age bands in this methodology divide the total 

age-based premium variation into the three most 

equally-sized ranges (defining size by the ratio 

between the highest and lowest premiums within 

the band) that are consistent with the age-bands 

used for risk-adjustment purposes in the HHSDeveloped Risk Adjustment Model. For such age 

bands, see Table 5, ‘‘Age-Sex Variables,’’ in HHSDeveloped Risk Adjustment Model Algorithm 

Software, June 2, 2014, http://www.cms.gov/CCIIO/ 

Resources/Regulations-and-Guidance/Downloads/

ra-tables-03-27-2014.xlsx. 

2For 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 qualified health plans, 

as described in 45 CFR 155.1055, except that 

service areas smaller than counties are addressed as 

explained below. 

3The three lowest income ranges would be 

limited to lawfully present immigrants who are 

ineligible for Medicaid because of immigration 

status. 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

h = Household size 

i = Income range (as percentage of FPL) 

B. Federal BHP Payment Rate Cells 

We will require that a state 

implementing BHP provide us an 

estimate of the number of BHP enrollees 

it projects will enroll in the upcoming 

BHP program year, by applicable rate 

cell, prior to the first quarter of program 

operations. Upon our approval of such 

estimates as reasonable, they will be 

used to calculate the prospective 

payment for the first and subsequent 

quarters of program operation until the 

state has provided us actual enrollment 

data. These data will be 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. In subsequent 

quarters, quarterly deposits to the state’s 

trust fund will be based on the most 

recent actual enrollment data submitted 

to us. 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, 

geographic area, coverage status, 

household size, and income range, as 

explained above. 

We will require the use of certain rate 

cells as part of the methodology. For 

each state, we will use rate cells that 

separate the BHP population into 

separate cells based on the five factors 

described below. 

Factor 1—Age: We will separate 

enrollees into rate cells by age, using the 

following age ranges that capture the 

widest variations in premiums under 

HHS’s Default Age Curve: 1

• Ages 0–20. 

• Ages 21–34. 

• Ages 35–44. 

• Ages 45–54. 

• Ages 55–64. 

Factor 2—Geographic area: For each 

state, we will separate enrollees into 

rate cells by geographic areas within 

which a single reference premium is 

charged by QHPs offered through the 

state’s Marketplace. Multiple, noncontiguous geographic areas will be 

incorporated within a single cell, so 

long as those areas share a common 

reference premium.2

Factor 3—Coverage status: We will 

separate 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 BHP, as 

provided in section 1331(d)(3)(A)(ii) of 

the Affordable Care Act. Among 

recipients of family coverage through 

BHP, separate rate cells, as explained 

below, will apply based on whether 

such coverage involves two adults alone 

or whether it involves children. 

Factor 4—Household size: We will 

separate enrollees into rate cells by 

household size that states use to 

determine BHP enrollees’ income as a 

percentage of the FPL under 42 CFR 

600.320. We will require separate rate 

cells for several specific household 

sizes. For each additional member above 

the largest specified size, we will 

publish instructions for how we will 

develop additional rate cells and 

calculate an appropriate payment rate 

based on data for the rate cell with the 

closest specified household size. We 

will publish separate rate cells for 

household sizes of 1, 2, 3, 4, and 5, as 

unpublished analyses of American 

Community Survey data conducted by 

the Urban Institute, which take into 

account unaccepted offers of employersponsored insurance, as well as income, 

Medicaid and CHIP eligibility, 

citizenship and immigration status, and 

current health coverage status, find that 

less than 1 percent of all BHP-eligible 

persons live in households of size 5 or 

greater. 

Factor 5—Income: For households of 

each applicable size, we will create 

separate rate cells by income range, as 

a percentage of FPL. The PTC that a 

person would receive if enrolled in a 

QHP varies by income, both in level and 

as a ratio to the FPL, and the CSR varies 

by income as a percentage of FPL. Thus, 

separate rate cells will be used to 

calculate federal BHP payment rates to 

reflect different bands of income 

measured as a percentage of FPL. We 

will use the following income ranges, 

measured as a ratio to the FPL: 

• 0 to 50 percent of the FPL. 

• 51 to 100 percent of the FPL. 

• 101 to 138 percent of the FPL.3

• 139 to 150 percent of the FPL. 

• 151 to 175 percent of the FPL. 

• 176 to 200 percent of the FPL. 

These rate cells will only be used to 

calculate the federal BHP payment 

amount. A state implementing BHP will 

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 BHP or to 

help define BHP enrollees’ covered 

benefits, premium costs, or out-ofpocket cost-sharing levels. 

We will use averages to define federal 

payment rates, both for income ranges 

and age ranges, rather than varying such 

rates to correspond to each individual 

BHP enrollee’s age and income level. 

We believe that this 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 

believe that this approach will not 

significantly change federal payment 

amounts, since within applicable 

ranges; the BHP-eligible population is 

distributed relatively evenly. 

C. Sources and State Data 

Considerations 

To the extent possible, we will use 

data submitted to the federal 

government by QHP issuers seeking to 

offer coverage through a Marketplace to 

perform the calculations that determine 

federal BHP payment cell rates. 

States operating a State Based 

Marketplace in the individual market, 

however, must provide certain data, 

including premiums for second lowest 

cost silver plans, by geographic area, in 

order for CMS to calculate the federal 

BHP payment rates in those states. We 

will require that a state operating a State 

Based Marketplace and interested in 

obtaining the applicable federal BHP 

payment rates for its state must submit 


tkelley on DSK3SPTVN1PROD with RULES
9642 Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 

4CMCS. ‘‘State Medicaid and CHIP Income 

Eligibility Standards Effective January 1, 2014.’’ 

such data accurately, completely, and as 

specified by CMS, by no later than 

October 15, 2015, for CMS to calculate 

the applicable rates for 2016. 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 CMS to 

support the development and timely 

release of annual BHP payment notices. 

The specifications for data collection to 

support the development of BHP 

payment rates for 2016 were published 

in CMS guidance and are available at 

http://www.medicaid.gov/FederalPolicy-Guidance/Federal-PolicyGuidance.html. 

If a state operating a SBM provides 

the necessary data accurately, 

completely, and as specified by CMS, 

but after the date specified above, we 

anticipate publishing federal payment 

rates for such a state in a subsequent 

Payment Notice. As noted in the BHP 

final rule, a state may elect to 

implement its BHP after a program year 

has begun. In such an instance, we 

require that the state, if operating a 

SBM, submit its data no later than 30 

days after the Blueprint submission for 

CMS to calculate the applicable federal 

payment rates. We further require that 

the BHP Blueprint itself must be 

submitted for Secretarial certification 

with an effective date of no sooner than 

120 days after submission of the BHP 

Blueprint. In addition, the state must 

ensure that its Blueprint includes a 

detailed description of how the state 

will coordinate with other insurance 

affordability programs to transition and 

transfer BHP-eligible individuals out of 

their existing QHP coverage, consistent 

with the requirements set forth in 42 

CFR 600.330 and 600.425. We believe 

that this 120-day period is necessary to 

establish the requisite administrative 

structures and ensure that all statutory 

and regulatory requirements are 

satisfied. 

D. Discussion of Specific Variables Used 

in Payment Equations 

1. Reference Premium (RP) 

To calculate the estimated PTC that 

would be paid if individuals enrolled in 

QHPs through the Marketplace, we must 

calculate a reference premium (RP) 

because the PTC is based, in part, on the 

premiums for the applicable second 

lowest cost silver plan as explained in 

section III.C.4 of this methodology, 

regarding the Premium Tax Credit 

Formula (PTCF). Accordingly, for the 

purposes of calculating the BHP 

payment rates, the reference premium, 

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, which is 

offered through the same Marketplace. 

We will use the adjusted monthly 

premium for an applicable second 

lowest cost silver plan in 2016 as the 

reference premium (except in the case of 

a state that elects to use the 2015 

premium as the basis for the federal 

BHP payment, as described in section 

III.F of this methodology). 

The reference premium will 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 pursuant to 42 U.S.C. 

300gg(a)(1)(A)(iv). 

Consistent with the policy set forth in 

26 CFR 1.36B–3(f)(6) to calculate the 

PTC for those enrolled in a QHP through 

a Marketplace, we will not update the 

payment methodology, and 

subsequently the federal BHP payment 

rates, in the event that the second 

lowest cost silver plan used as the 

reference premium, 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, geographic area, and self-only or 

applicable category of family coverage 

obtained through BHP. 

American Indians and Alaska Natives 

in households with incomes below 300 

percent of the FPL are eligible for a full 

cost sharing subsidy regardless of the 

plan they select (as described in 

sections 1402(d) and 2901(a) of the 

Affordable Care Act). We assume that 

American Indians and Alaska Natives 

would be more likely to enroll in bronze 

plans as a result; thus, for American 

Indian/Alaska Native BHP enrollees, we 

will use the lowest cost bronze plan as 

the basis for the reference premium for 

the purposes of calculating the CSR 

portion (but not the PTC portion) of the 

federal BHP payment as described 

further in section III.E of this 

methodology. 

The applicable age bracket will be one 

dimension of each rate cell. We will 

assume a uniform distribution of ages 

and estimate the average premium 

amount within each rate cell. We 

believe that assuming a uniform 

distribution of ages within these ranges 

is a reasonable approach and would 

produce a reliable determination of the 

PTC and CSR components. 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 will use geographic areas based on 

the rating areas used in the 

Marketplaces. We will define each 

geographic area so that the reference 

premium is the same throughout the 

geographic area. When the reference 

premium varies within a rating area, we 

will define geographic areas as 

aggregations of counties with the same 

reference premium. Although plans are 

allowed to serve geographic areas 

smaller than counties after obtaining our 

approval, no geographic area, for 

purposes of defining BHP payment rate 

cells, will be smaller than a county. We 

do not believe that this assumption will 

have a significant impact on federal 

payment levels and it would likely 

simplify both the calculation of BHP 

payment rates and the operation of BHP. 

Finally, in terms of the coverage 

category, federal payment rates will 

only recognize self-only and two-adult 

coverage, with exceptions that account 

for children who are potentially eligible 

for 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), children in 

households with incomes between that 

threshold and 200 percent of FPL would 

be potentially eligible for BHP. 

Currently, the only states in this 

category are Arizona, Idaho, and North 

Dakota.4 Second, BHP would include 

lawfully present immigrant children 

with incomes at or below 200 percent of 

FPL in states that have not exercised the 

option under the 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. In 

other states, BHP eligibility will 

generally be restricted to adults, since 

children who are citizens or lawfully 

present immigrants and who live in 

households with incomes at or below 

200 percent of FPL will qualify for 

Medicaid or CHIP and thus be ineligible 


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Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 9643 

5See 45 CFR 153.400(a)(2)(iv) (BHP standard 

health plans are not required to submit reinsurance 

contributions), 153.20 (definition of ‘‘Reinsuranceeligible 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’’). 

6These income ranges and this analysis of 

income apply to the calculation of the PTC. Many 

fewer income ranges and a much simpler analysis 

apply in determining the value of CSRs, as specified 

below. 

7See Table IV A1 from the 2014 reports in 

http://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/

ReportsTrustFunds/Downloads/TR2014.pdf. 

for BHP under section 1331(e)(1)(C) of 

the Affordable Care Act, which limits 

BHP to individuals who are ineligible 

for minimum essential coverage (as 

defined in section 5000A(f) of the 

Internal Revenue Code of 1986). 

2. Population Health Factor (PHF) 

We include the population health 

factor in the methodology to account for 

the potential differences in the average 

health status between BHP enrollees 

and persons enrolled in the 

Marketplace. To the extent that BHP 

enrollees would have been enrolled in 

the Marketplace in the absence of BHP 

in a state, the inclusion of those BHP 

enrollees in the Marketplace 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 Marketplace population. 

At this time, there is a lack of 

experience available in the Marketplace 

that limits the ability to analyze the 

health differences between these groups 

of enrollees. In addition, differences in 

population health may vary across 

states. Thus, at this time, we believe that 

it is not feasible to develop a 

methodology to make a prospective 

adjustment to the population health 

factor that is reliably accurate. 

Given these analytic challenges and 

the limited data about Marketplace 

coverage and the characteristics of BHPeligible consumers that will be available 

by the time we establish federal 

payment rates for 2016, we believe that 

the most appropriate adjustment for 

2016 would be 1.00. 

In the 2015 payment methodology, we 

included an option for states to include 

a retrospective population health status 

adjustment. Similarly, we will provide 

the states with the same option for the 

2016 payment methodology, as 

described further in section III.G of this 

methodology, to include a retrospective 

population health status adjustment in 

the certified methodology, which is 

subject to CMS review and approval. 

While the statute requires 

consideration of risk adjustment 

payments and reinsurance payments 

insofar as they would have affected the 

PTC and CSRs that would have been 

provided to BHP-eligible individuals 

had they enrolled in QHPs, we will not 

require that a BHP program’s standard 

health plans receive such payments. As 

explained in the BHP final rule, BHP 

standard health plans are not included 

in the risk adjustment program operated 

by HHS on behalf of states. Further, 

standard health plans do not qualify for 

payments from the transitional 

reinsurance program established under 

section 1341 of the Affordable Care 

Act.5 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. 

3. Income (I) 

Household income is a significant 

determinant of the amount of the PTC 

and CSRs that are provided for persons 

enrolled in a QHP through the 

Marketplace. Accordingly, the BHP 

payment methodology incorporates 

income into the calculations of the 

payment rates through the use of 

income-based rate cells. We define 

income in accordance with the 

definition of modified adjusted gross 

income in 26 U.S.C. 36B(d)(2)(B) and 

consistent with the definition in 45 CFR 

155.300. Income would be measured 

relative to the FPL, which is updated 

periodically in the Federal Register by 

the Secretary under the authority of 42 

U.S.C. 9902(2), based on annual changes 

in the consumer price index for all 

urban consumers (CPI–U). In this 

methodology, household size and 

income as a percentage of FPL would be 

used as factors in developing the rate 

cells. We will use the following income 

ranges measured as a percentage of 

FPL: 6

• 0–50 percent. 

• 51–100 percent. 

• 101–138 percent. 

• 139–150 percent. 

• 151–175 percent. 

• 176–200 percent. 

We will assume a uniform income 

distribution for each federal BHP 

payment cell. We believe that assuming 

a uniform income distribution for the 

income ranges would be reasonably 

accurate for the purposes of calculating 

the PTC and CSR components of 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 BHP within rate cells that may be 

relatively small. Thus, when calculating 

the mean, or average, PTC for a rate cell, 

we will 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 will rely on the PTC 

formula described below in section III.4 

of this methodology. 

As the PTC for persons enrolled in 

QHPs will be calculated based on their 

income during the open enrollment 

period, and that income will be 

measured against the FPL at that time, 

we will adjust the FPL by multiplying 

the FPL by a projected increase in the 

CPI–U between the time that the BHP 

payment rates are published and the 

QHP open enrollment period, if the FPL 

is expected to be updated during that 

time. The projected increase in the CPI– 

U would be based on the intermediate 

inflation forecasts from the most recent 

OASDI and Medicare Trustees Reports.7

4. Premium Tax Credit Formula (PTCF) 

The PTC amount for a person enrolled 

in a QHP through a Marketplace 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 

(the enrollment premiums) or adjusted 

premium for the applicable second 

lowest cost silver plan minus the 

contribution amount. 

In Equation 1 described in section 

III.A.1 of this methodology, we will use 

the formula described in 26 U.S.C. 

36B(b) to calculate the contribution 

amount, which is needed to estimate the 

PTC for a person enrolled in a QHP on 

a Marketplace. This formula determines 

the contribution amount as a percentage 

of household income. The percentage is 

based on the FPL for the household 

income and family size, and is shown in 

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 for the applicable second 

lowest cost silver plan is the estimated 

amount of the PTC that would be 

provided for the enrollee (assuming that 

this amount is less than the enrollment 

premiums). 

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 


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9644 Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 

applies to a taxpayer’s household 

income that is within an income tier 

specified in the table, increasing on a 

sliding scale in a linear manner from an 

initial premium percentage to a final 

premium percentage specified in the 

table (see Table 1): 

TABLE 1—HOUSEHOLD INCOME

[Expressed as a percent of poverty line] 

In the case of household income (expressed as a percent of poverty line) within the following income 

tier: 

The initial 

premium 

percentage is— 

The final premium 

percentage is— 

Up to 133% .................................................................................................................................................. 2.01 2.01 

133% but less than 150% ........................................................................................................................... 3.02 4.02 

150% but less than 200% ........................................................................................................................... 4.02 6.34 

200% but less than 250% ........................................................................................................................... 6.34 8.10 

250% but less than 300% ........................................................................................................................... 8.10 9.56 

300% but not more than 400% ................................................................................................................... 9.56 9.56 

These are the applicable percentages 

for CY 2015. The applicable percentages 

will be updated in future years in 

accordance with 26 U.S.C. 

36B(b)(3)(A)(ii). 

5. Income Reconciliation Factor (IRF) 

For persons enrolled in a QHP 

through a Marketplace who receive an 

advance payment of the premium tax 

credit (APTC), there will be an annual 

reconciliation following the end of the 

year to compare the advance payments 

to the correct amount of PTC based on 

household circumstances shown on the 

federal income tax return. Any 

difference between the latter amounts 

and the advance payments made during 

the year would either be paid to the 

taxpayer (if too little APTC was paid) or 

charged to the taxpayer as additional tax 

(if too much APTC was made, subject to 

any limitations in statute or regulation), 

as provided in 26 U.S.C. 36B(f). 

Section 1331(e)(2) of the Affordable 

Care Act specifies that an individual 

eligible for BHP may not be treated as 

a qualified individual under section 

1312 eligible for enrollment in a QHP 

offered through a Marketplace. We are 

defining ‘‘eligible’’ to mean anyone for 

whom the state agency or the Exchange 

assesses or determines, based on the 

single streamlined application or 

renewal form, as eligible for enrollment 

in the BHP. Because enrollment in a 

QHP is a requirement for PTC for the 

enrolled individual’s coverage, 

individuals determined or assessed as 

eligible for a BHP are not eligible to 

receive APTC assistance for coverage in 

the Marketplace. Because they do not 

receive APTC assistance, BHP enrollees, 

on whom the 2016 payment 

methodology is based, are not subject to 

the same income reconciliation as 

Marketplace consumers. Nonetheless, 

there may still be differences between a 

BHP enrollee’s household income 

reported at the beginning of the year and 

the actual income over the year. These 

may include small changes (reflecting 

changes in hourly wage rates, hours 

worked per week, and other fluctuations 

in income during the year) and large 

changes (reflecting significant changes 

in employment status, hourly wage 

rates, or substantial fluctuations in 

income). There may also be changes in 

household composition. Thus, we 

believe that using unadjusted income as 

reported prior to the BHP program year 

may result in calculations of estimated 

PTC that are inconsistent with the 

actual incomes of BHP enrollees during 

the year. Even if the BHP program 

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 a 

Marketplace and received APTC 

assistance. 

Therefore, we are including in 

Equation 1 an income adjustment factor 

that would account for the difference 

between calculating estimated PTC 

using: (a) Income relative to FPL as 

determined at initial application and 

potentially revised mid-year, under 

600.320, for purposes of determining 

BHP eligibility and claiming federal 

BHP payments; and (b) actual income 

relative to FPL received during the plan 

year, as it would be reflected on 

individual federal income tax returns. 

This adjustment will prospectively 

estimate the average effect of income 

reconciliation aggregated across the BHP 

population had those BHP enrollees 

been subject to tax reconciliation after 

receiving APTC assistance for coverage 

provided through QHPs. For 2016, we 

will estimate reconciliation effects 

based on tax data for 2 years, reflecting 

income and tax unit composition 

changes over time among BHP-eligible 

individuals. 

The OTA maintains a model that 

combines detailed tax and other data, 

including Marketplace enrollment and 

PTC claimed, to project Marketplace 

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 BHP. The ratio of the 

reconciled PTC to the initial estimation 

of PTC will be used as the income 

reconciliation factor in Equation (1) for 

estimating the PTC portion of the BHP 

payment rate. 

For 2016, OTA has estimated that the 

income reconciliation factor for states 

that have implemented the Medicaid 

eligibility expansion to cover adults up 

to 133 percent of the FPL will be 100.25 

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 100.24 

percent. For 2015, we used the average 

of the factors for the two groups of 

states. For 2016, the values of the factors 

for the two groups of states are within 

0.01 percentage point of each other. 

Because the values are within 0.01 

percentage point, we will use the greater 

of two factors (100.25 percent) rather 

than the average. 

6. Tobacco Rating Adjustment Factor 

(TRAF) 

As previously described, the reference 

premium is estimated, for purposes of 

determining both the PTC and related 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 9645 

8Centers for Disease Control and Prevention, 

Tobacco Control State Highlights 2012: http://

www.cdc.gov/tobacco/data_statistics/state_data/

state_highlights/2012/index.htm. 

federal BHP payments, based on 

premiums charged for non-tobacco 

users, including in states that allow 

premium variations based on tobacco 

use, as provided in 42 U.S.C. 300gg 

(a)(1)(A)(iv). In contrast, as described in 

45 CFR 156.430, the CSR advance 

payments are based on the total 

premium for a policy, including any 

adjustment for tobacco use. 

Accordingly, we will incorporate a 

tobacco rating adjustment factor into 

Equation 2 that reflects the average 

percentage increase in health care costs 

that results from tobacco use among the 

BHP-eligible population and that would 

not be reflected in the premium charged 

to non-users. This factor will also take 

into account the estimated proportion of 

tobacco users among BHP-eligible 

consumers. 

To estimate the average effect of 

tobacco use on health care costs (not 

reflected in the premium charged to 

non-users), we will calculate the ratio 

between premiums that silver level 

QHPs charge for tobacco users to the 

premiums they charge for non-tobacco 

users at selected ages. To calculate 

estimated proportions of tobacco users, 

we will use data from the Centers for 

Disease Control and Prevention (CDC) to 

estimate tobacco utilization rates by 

state and relevant population 

characteristic.8 For each state, we will 

calculate the tobacco usage rate based 

on the percentage of persons by age who 

use cigarettes and the percentage of 

persons by age that use smokeless 

tobacco, and calculate the utilization 

rate by adding the two rates together. 

The data is available for 3 age intervals: 

18–24; 25–44; and 45–64. For the BHP 

payment rate cell for persons ages 21– 

34, we will calculate the factor as (4/14 

* the utilization rate of 18–24 year olds) 

plus (10/14 * the utilization rate of 25– 

44 year olds), which would be the 

weighted average of tobacco usage for 

persons 21–34 assuming a uniform 

distribution of ages; for all other age 

ranges used for the rate cells, we will 

use the age range in the CDC data in 

which the BHP payment rate cell age 

range is contained. 

We will provide tobacco rating factors 

that may vary by age and by geographic 

area within each state. To the extent that 

the second lowest cost silver plans have 

a different ratio of tobacco user rates to 

non-tobacco user rates in different 

geographic areas, the tobacco rating 

adjustment factor may differ across 

geographic areas within a state. In 

addition, to the extent that the second 

lowest cost silver plan has a different 

ratio of tobacco user rates to nontobacco user rates by age, or that there 

is a different prevalence of tobacco use 

by age, the tobacco rating adjustment 

factor may differ by age. 

7. Factor for Removing Administrative 

Costs (FRAC) 

The Factor for Removing 

Administrative Costs represents the 

average proportion of the total premium 

that covers allowed health benefits, and 

we include this factor in our calculation 

of estimated CSRs in Equation 2. The 

product of the reference premium and 

the Factor for Removing Administrative 

Costs would approximate the estimated 

amount of Essential Health Benefit 

(EHB) claims that would be expected to 

be paid by the plan. This step is needed 

because the premium also covers such 

costs as taxes, fees, and QHP 

administrative expenses. We are setting 

this factor equal to 0.80, which is the 

same percentage for the factor to remove 

administrative costs for calculating CSR 

advance payments for established in the 

2015 HHS Notice of Benefit and 

Payment Parameters. 

8. Actuarial Value (AV) 

The actuarial value is defined as the 

percentage paid by a health plan of the 

total allowed costs of benefits, as 

defined under 45 CFR 156.20. (For 

example, if the average health care costs 

for enrollees in a health insurance plan 

were $1,000 and that plan has an 

actuarial value of 70 percent, the plan 

would be expected to pay on average 

$700 ($1,000 × 0.70) for health care 

costs per enrollee, on average.) By 

dividing such estimated costs by the 

actuarial value in the methodology, we 

will calculate the estimated amount of 

total EHB-allowed claims, including 

both the portion of such claims paid by 

the plan and the portion paid by the 

consumer for in-network care. (To 

continue with that same example, we 

would divide the plan’s expected $700 

payment of the person’s EHB-allowed 

claims by the plan’s 70 percent actuarial 

value to ascertain that the total amount 

of EHB-allowed claims, including 

amounts paid by the consumer, is 

$1,000.) 

For the purposes of calculating the 

CSR rate in Equation 2, we will use the 

standard actuarial value of the silver 

level plans in the individual market, 

which is equal to 70 percent. 

9. Induced Utilization Factor (IUF) 

The induced utilization factor will be 

used as a factor in calculating estimated 

CSRs in Equation 2 to account for the 

increase in health care service 

utilization associated with a reduction 

in the level of cost sharing a QHP 

enrollee would have to pay, based on 

the cost-sharing reduction subsidies 

provided to enrollees. 

The 2015 HHS Notice of Benefit and 

Payment Parameters provided induced 

utilization factors for the purposes of 

calculating cost-sharing reduction 

advance payments for 2015. In that rule, 

the induced utilization factors for silver 

plan variations ranged from 1.00 to 1.12, 

depending on income. Using those 

utilization factors, the induced 

utilization factor for all persons who 

would qualify for BHP based on their 

household income as a percentage of 

FPL is 1.12; this would include persons 

with household income between 100 

percent and 200 percent of FPL, 

lawfully present non-citizens below 100 

percent of FPL who are ineligible for 

Medicaid because of immigration status, 

and persons with household income 

under 300 percent of FPL, not subject to 

any cost-sharing. Thus, consistent with 

last year, we will set the induced 

utilization factor equal to 1.12 for the 

BHP payment methodology. 

10. Change in Actuarial Value (DAV) 

The increase in actuarial value would 

account for the impact of the costsharing reduction subsidies on the 

relative amount of EHB claims that 

would be covered for or paid by eligible 

persons, and we include it as a factor in 

calculating estimated CSRs in 

Equation 2. 

The actuarial values of QHPs for 

persons eligible for cost-sharing 

reduction subsidies are defined in 45 

CFR 156.420(a), and eligibility for such 

subsidies is defined in 45 CFR 

155.305(g)(2)(i) through (iii). For QHP 

enrollees with household incomes 

between 100 percent and 150 percent of 

FPL, and those below 100 percent of 

FPL who are ineligible for Medicaid 

because of their immigration status, 

CSRs increase the actuarial value of a 

QHP silver plan from 70 percent to 94 

percent. For QHP enrollees with 

household incomes between 150 

percent and 200 percent of FPL, CSRs 

increase the actuarial value of a QHP 

silver plan from 70 percent to 87 

percent. 

We will apply this factor by 

subtracting the standard AV from the 

higher AV allowed by the applicable 

cost-sharing reduction. For BHP 

enrollees with household incomes at or 

below 150 percent of FPL, this factor 

will be 0.24 (94 percent minus 70 

percent); for BHP enrollees with 

household incomes more than 150 

percent but not more than 200 percent 


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9646 Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 

of FPL, this factor will be 0.17 (87 

percent minus 70 percent). 

E. Adjustments for American Indians 

and Alaska Natives 

There are several exceptions made for 

American Indians and Alaska Natives 

enrolled in QHPs through a Marketplace 

to calculate the PTC and CSRs. Thus, we 

will make adjustments to the payment 

methodology described above to be 

consistent with the Marketplace rules. 

We will make the following 

adjustments: 

1. The adjusted reference premium for 

use in the CSR portion of the rate will 

be the lowest cost bronze plan instead 

of the second lowest cost silver plan, 

with the same adjustment for the 

population health factor (and in the case 

of a state that elects to use the 2015 

premiums as the basis of the federal 

BHP payment, the same adjustment for 

the premium trend factor). American 

Indians and Alaska Natives are eligible 

for CSRs with any metal level plan, and 

thus we believe that eligible persons 

would be more likely to select a bronze 

level plan instead of a silver level plan. 

(It is important to note that the 

assumption that American Indians and 

Alaska Natives would enroll in a bronze 

plan would not necessarily change the 

PTC, as the PTC amount calculated as 

part of the BHP payment methodology 

is the maximum possible PTC payment, 

which is always based on the applicable 

second lowest cost silver plan. In 

actuality, the PTC payment that would 

be made in for an individual enrolled in 

a QHP cannot exceed the total premium. 

It is possible that some bronze plan 

premiums would be less than the 

maximum PTC payment, but we have 

not made any adjustment in the 

methodology for this. We believe that 

this assumption would have a negligible 

impact on the BHP payment.) 

2. The actuarial value for use in the 

CSR portion of the rate will be 0.60 

instead of 0.70, which is consistent with 

the actuarial value of a bronze level 

plan. 

3. The induced utilization factor for 

use in the CSR portion of the rate will 

be 1.15, which is consistent with the 

2015 HHS Notice of Benefit and 

Payment Parameters induced utilization 

factor for calculating advance CSR 

payments for persons enrolled in bronze 

level plans and eligible for CSRs up to 

100 percent of actuarial value. 

4. The change in the actuarial value 

for use in the CSR portion of the rate 

will be 0.40. This reflects the increase 

from 60 percent actuarial value of the 

bronze plan to 100 percent actuarial 

value, as American Indians and Alaska 

Natives are eligible to receive CSRs up 

to 100 percent of actuarial value. 

F. State Option To Use 2015 QHP 

Premiums for BHP Payments 

In the interest of allowing states 

greater certainty in the total BHP federal 

payments for 2016, we will provide 

states the option to have their final 2016 

federal BHP payment rates calculated 

using the projected 2016 adjusted 

reference premium (that is, using 2015 

premium data multiplied by the 

premium trend factor defined below), as 

described in Equation (3b). 

For a state that elects to use the 2015 

premium as the basis for the 2016 BHP 

federal payment, the state must inform 

CMS no later than May 15, 2015. 

For Equation (3b), we define the 

premium trend factor as follows: 

Premium Trend Factor (PTF): In 

Equation (3b), we calculate an adjusted 

reference premium (ARP) based on the 

application of certain relevant variables 

to the RP, including a PTF. In the case 

of a state that would elect to use the 

2015 premiums as the basis for 

determining the 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 plan year. 

We define this as the premium trend 

factor in the BHP payment 

methodology. This factor will 

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 provides an estimate of 

the adjusted monthly premium for the 

applicable second lowest cost silver 

plan that would be more accurate and 

reflective of health care costs in the BHP 

program year, which will be the year 

following issuance of the final federal 

payment notice. In addition, we believe 

that it would be appropriate to adjust 

the trend factor for the estimated impact 

of changes to the transitional 

reinsurance program on the average 

QHP premium. 

We will use the annual growth rate in 

private health insurance expenditures 

per enrollee from the National Health 

Expenditure projections, developed by 

CMS’ Office of the Actuary (http://

www.cms.gov/Research-Statistics-Dataand-Systems/Statistics-Trends-andReports/NationalHealthExpendData/

NationalHealthAccountsProjected.html, 

Table 17—Health Insurance Enrollment 

and Enrollment Growth Rates). For 

2016, the projected increase in private 

health insurance premiums per enrollee 

is 3.9 percent. 

The adjustment for changes in the 

transitional reinsurance program is 

developed from analysis by CMS’ Center 

for Consumer Information and 

Insurance Oversight (CCIIO). In 

unpublished analysis, CCIIO estimated 

that the transitional reinsurance 

program would reduce QHP premiums 

in 2015 on average by 7.9 percent and 

in 2016 by 4.4 percent, as the amount 

of funding in the reinsurance program 

decreases. Based on these analyses, we 

estimate that the changes in the 

transitional reinsurance program would 

lead to an increase of 3.8 percent in 

average QHP premiums between 2015 

and 2016: (1¥0.044)/(1¥0.079)¥1 = 

3.8 percent. 

Combining these two factors together, 

we calculate that the premium trend 

factor for 2016 would be 7.8 percent (1 

+ 0.039) × (1 + 0.038)¥1 = 7.8 percent. 

States may want to consider that the 

increase in premiums for QHPs from 

2015 to 2016 may differ from the 

premium trend factor developed for the 

BHP funding methodology for several 

reasons. In particular, states may want 

to consider that the second lowest cost 

silver plan for 2015 may not be the same 

as the second lowest cost silver plan in 

2016. This may lead to the premium 

trend factor being greater than or less 

than the actual change in the premium 

of the second lowest cost silver plan in 

2015 compared to the premium of the 

second lowest cost silver plan in 2016. 

G. 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 the 

Marketplace would affect the PTC, 

CSRs, risk adjustment and reinsurance 

payments that would have otherwise 

been made had BHP enrollees been 

enrolled in coverage on the 

Marketplace, we will provide states 

implementing the BHP the option to 

propose and to implement, as part of the 

certified methodology, a retrospective 

adjustment to the federal BHP payments 

to reflect the actual value that would be 

assigned to the population health factor 

(or risk adjustment) based on data 

accumulated during program year 2016 

for each rate cell. 

We acknowledge that there is 

uncertainty with respect to this factor 

due to the lack of experience of QHPs 

on the Marketplace and other payments 

related to the Marketplace, which is 

why, absent a state election, we will use 

a value for the population health factor 

to determine a prospective payment rate 

which assumes no difference in the 

health status of BHP enrollees and QHP 


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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, and the potential effect such risk 

would have had on PTC, CSRs, risk 

adjustment and reinsurance payments 

that would have otherwise been made 

had BHP enrollees been enrolled in 

coverage on the Marketplace. To the 

extent, however, that a state would 

develop an approved protocol to collect 

data and effectively measure the relative 

risk and the effect on federal payments, 

we will 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, we require 

that the state submit a proposed 

protocol to CMS, which will be subject 

to approval by CMS and would be 

required to be certified by CMS’ Chief 

Actuary, in consultation with the OTA, 

as part of the BHP payment 

methodology. We described the protocol 

for the population health status 

adjustment in guidance in 

Considerations for Health Risk 

Adjustment in the Basic Health Program 

in Program Year 2015 (http://

www.medicaid.gov/Basic-HealthProgram/Downloads/Risk-Adjustmentand-BHP-White-Paper.pdf). We require 

a state to submit its proposed protocol 

by August 1, 2015 for CMS approval. 

This submission must 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 will provide technical 

assistance to states as they develop their 

protocols. In order to implement the 

population health status, we must 

approve the state’s protocol no later 

than December 31, 2015. Finally, the 

state will be required to complete the 

population health status adjustment at 

the end of 2016 based on the approved 

protocol. After the end of the 2016 

program year, and once data is made 

available, we will review the state’s 

findings, consistent with the approved 

protocol, and make any necessary 

adjustments to the state’s federal BHP 

payment amount. If we determine that 

the federal BHP payments were less 

than they would have been using the 

final adjustment factor, we would apply 

the difference to the state’s 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. 

IV. Collection of Information 

Requirements 

The 2016 funding methodology is 

unchanged from the 2015 final 

methodology that published on March 

12, 2014 (79 FR 13887). The 2016 

methodology does not impose any new 

or revised reporting, recordkeeping, or 

third-party disclosure requirements, and 

therefore, does not require additional 

OMB review under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). The methodology’s 

information collection requirements and 

burden estimates are approved by OMB 

under control number 0938–1218 

(CMS–10510). 

Consistent with the Basic Health 

Program’s proposed and final rules 

(September 25, 2013 at 78 FR 59122 and 

March 12, 2014 at 79 FR 14112, 

respectively) we continue to estimate 

less than 10 annual respondents for 

completing the Blueprint. Consequently, 

the Blueprint is exempt from formal 

OMB review and approval under 5 CFR 

1320.3(c). 

Finally, this action does not impose 

any additional reporting, recordkeeping, 

or third-party disclosure requirements 

on qualified health plans or on states 

operating State Based Marketplaces. 

V. Regulatory Impact Statement 

A. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Act, section 

202 of the Unfunded Mandates Reform 

Act of 1995 (Pub. L. 104–4, March 22, 

1995) (UMRA), Executive Order 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 

economically significant effects ($100 

million or more in any 1 year). As noted 

in the BHP final rule, BHP provides 

states the flexibility to establish an 

alternative coverage program for lowincome individuals who would 

otherwise be eligible to purchase 

coverage through the Marketplace. We 

are uncertain as to whether the effects 

of the final rulemaking, and 

subsequently, this methodology, will be 

‘‘economically significant’’ as measured 

by the $100 million threshold, and 

hence not a major rule under the 

Congressional Review Act. The impact 

may depend on several factors, 

including the number of and which 

particular states choose to implement or 

continue BHP in 2016, the level of QHP 

premiums in 2015 and 2016, the 

number of enrollees in BHP, and the 

other coverage options for persons who 

would be eligible for BHP. In particular, 

while we generally expect that many 

enrollees would have otherwise been 

enrolled in a QHP through the 

Marketplace, some persons may have 

been eligible for Medicaid under a 

waiver or a state health coverage 

program. For those who would have 

enrolled in a QHP and thus would have 

received PTCs or CSRs, the federal 

expenditures for BHP would be 

expected to be more than offset by a 

reduction in federal expenditures for 

PTCs and CSRs. For those who would 

have been enrolled in Medicaid, there 

would likely be a smaller offset in 

federal expenditures (to account for the 

federal share of Medicaid expenditures), 

and for those who would have been 

covered in non-federal programs or 

would have been uninsured, there likely 

would be an increase in federal 


tkelley on DSK3SPTVN1PROD with RULES
9648 Federal Register / Vol. 80, No. 36 / Tuesday, February 24, 2015 / Rules and Regulations 

expenditures. In accordance with the 

provisions of Executive Order 12866, 

this methodology was reviewed by the 

Office of Management and Budget. 

1. Need for the Methodology 

Section 1331 of the Affordable Care 

Act (codified at 42 U.S.C. 18051) 

requires the Secretary to establish a 

BHP, and section (d)(1) specifically 

provides that if the Secretary finds that 

a state ‘‘meets the requirements of the 

program established under section (a) 

[of section 1331 of the Affordable Care 

Act], the Secretary shall transfer to the 

State’’ federal BHP payments described 

in section (d)(3). This methodology 

provides for the funding methodology to 

determine the federal BHP payment 

amounts required to implement these 

provisions in program year 2016. 

2. Alternative Approaches 

Many of the factors in this 

methodology are specified in statute; 

therefore, we are limited in the 

alternative approaches we could 

consider. One area in which we had a 

choice was in selecting the data sources 

used to determine the factors included 

in the methodology. Except for statespecific reference premiums and 

enrollment data, we are using national 

rather than state-specific data. This is 

due to the lack of currently available 

state-specific data needed to develop the 

majority of the factors included in the 

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. To 

reference premiums and enrollment 

data, we are using state-specific data 

rather than national data as we believe 

state-specific data will produce more 

accurate determinations than national 

averages. 

In addition, we considered whether or 

not to provide states the option to 

develop a protocol for a retrospective 

adjustment to the population health 

factor in 2016 as we did in the 2015 

payment methodology. We believe that 

providing this option again in 2016 is 

appropriate and likely to improve the 

accuracy of the final payments. 

We also considered whether or not to 

require the use of 2015 or 2016 QHP 

premiums to develop the 2016 federal 

BHP payment rates. We believe that the 

payment rates can still be developed 

accurately using either the 2015 or 2016 

QHP premiums and that it is 

appropriate to provide the states the 

option, given the interests and specific 

considerations each state may have in 

operating the BHP. 

3. Transfers 

The provisions of this 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 premium 

and cost-sharing reductions for coverage 

purchased on the Marketplace. 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 varying nature of state 

composition. For example, total federal 

BHP payment amounts may be greater 

in more populous states simply by 

virtue of the fact that they have a larger 

BHP-eligible population and total 

payment amounts are based on actual 

enrollment. Alternatively, total federal 

BHP payment amounts may be lower in 

states with a younger BHP-eligible 

population as the reference premium 

used to calculate the federal BHP 

payment will be lower relative to older 

BHP enrollees. While state composition 

will cause total federal BHP payment 

amounts to vary from state to state, we 

believe that the methodology accounts 

for these variations to ensure accurate 

BHP payment transfers are made to each 

state. 

B. Unfunded Mandates Reform Act 

Section 202 of the UMRA 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 

2014, that threshold is approximately 

$141 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 Affordable Care 

Act or its implementing regulations. 

Thus, this payment methodology does 

not mandate expenditures by state 

governments, local governments, or 

tribal governments. 

C. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) requires 

agencies to prepare an initial regulatory 

flexibility analysis to describe the 

impact of the proposed rule on small 

entities, unless the head of the agency 

can certify that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The Act generally defines a ‘‘small 

entity’’ as (1) a proprietary firm meeting 

the size standards of the Small Business 

Administration (SBA); (2) a not-forprofit organization that is not dominant 

in its field; or (3) a small government 

jurisdiction with a population of less 

than 50,000. Individuals and states are 

not included in the definition of a small 

entity. Few of the entities that meet the 

definition of a small entity as that term 

is used in the RFA would be impacted 

directly by this methodology. 

Because this methodology is focused 

on the funding methodology that will be 

used to determine federal BHP payment 

rates, it does not contain provisions that 

would have a significant direct impact 

on hospitals, and other health care 

providers that are designated as small 

entities under the RFA. We cannot 

determine whether this methodology 

would 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 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. As indicated in the 

preceding discussion, there may be 

indirect positive effects from reductions 

in uncompensated care. Again, we 

cannot determine whether this 

methodology would have a significant 

economic impact on a substantial 

number of small rural hospitals, and we 

request public comment on this issue. 

D. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent 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. 

Dated: February 4, 2015. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: February 13, 2015. 

Sylvia M. Burwell, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2015–03662 Filed 2–19–15; 11:15 am] 

BILLING CODE 4120–01–P 


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