Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 77399 

and therefore would not have a 

significant economic impact on a 

substantial number of small entities. 

Congressional Review Act 

The Congressional Review Act, 5 

U.S.C. 801 et seq., as amended by the 

Small Business Regulatory Enforcement 

Fairness Act of 1996, generally provides 

that before a rule may take effect, the 

agency promulgating the rule must 

submit a rule report, which includes a 

copy of the rule, to each House of the 

Congress and to the Comptroller General 

of the United States. We will submit a 

report containing this rule and other 

required information to the U.S. Senate, 

the U.S. House of Representatives, and 

the Comptroller General of the United 

States. A major rule cannot take effect 

until 60 days after it is published in the 

Federal Register. This rule is not a 

‘‘major rule’’ as defined by 5 U.S.C. 

804(2). 

List of Subjects in 33 CFR Part 208 

Dams, Flood control, 

Intergovernmental relations, Reservoirs. 

For the reasons set out in the 

preamble, the Corps proposes to amend 

33 CFR part 208 as follows: 

PART 208—FLOOD CONTROL 

REGULATIONS 

■ 1. The authority citation for 33 CFR 

part 208 continues to read as follows: 

Authority: Sec. 7, 58 Stat. 890; 33 U.S.C. 

709. 

■ 2. Amend § 208.11(e) as follows: 

■ a. Revise the entry for Marshall Ford 

Dam and Reservoir on the ‘‘List of 

Projects’’ table; and 

■ b. Revise footnote 4. 

§ 208.11 Regulations for use of storage 

allocated for flood control or navigation 

and/or project operation at reservoirs 

subject to prescription of rules and 

regulations by the Secretary of the Army in 

the interest of flood control and navigation. 

* * * * * 

(e) * * * 

LIST OF PROJECTS

[Non-Corps projects with Corps regulation requirements] 

Project name 1

(1) 

State 

(2) 

County 

(3) 

Stream 1

(4) 

Project 

purpose 2

(5) 

Storage 

1000 AF 

(6) 

Elev limits feet M.S.L. Area in acres Authorizing 

legis. 3

(11) 

Proj. 

owner 4

(12) Upper 

(7) 

Lower 

(8) 

Upper 

(9) 

Lower 

(10) 

*******

Marshall Ford 

Dam & Res.

TX ............ Travis ....... Colorado R F ...............

NEIM ........

779.8 

810.5 

714.0 

681.0 

681.0 

618.0 

29060 

18955 

18955 

8050 

PL 73–392 ....

PL 78–534 ....

LCRA. 

* * * * * * * 

1 Cr—Creek; CS—Control Structure; Div—Diversion; DS—Drainage Structure; FG—Floodgate; Fk—Fork; GIWW—Gulf Intercoastal Waterway; Lk—Lake; L&D— 

Lock & Dam; PS—Pump Station; R—River; Res—Reservoir. 2F—Flood Control; N—Navigation; P—Corps Hydropower; E—Non Corps Hydropower; I—Irrigation; M—Municipal and/or Industrial Water Supply; C—Fish and 

Wildlife Conservation; A—Low Flow Augmentation or Pollution Abatement; R—Recreation; Q—Water Quality or Silt Control. 3FCA—Flood Control Act; FERC—Federal Energy Regulatory Comm; HD—House Document; PL—Public Law; PW—Public Works; RHA—River & Harbor Act; 

SD—Senate Document; WSA—Water Supply Act. 4Appl Pwr—Appalachian Power; Chln PUD—Chelan Cnty PUD 1; CLPC—CT Light & Power Co; Dgls PUD—Douglas Cnty PUD 1; DWR—Department of Water 

Resources; EB–MUD—East Bay Municipal Utility Dist; GRD—Grand River Dam Auth; Grnt PUD—Grant Cnty PUD 2; Hnbl—city of Hannibal; LCRA—Lower Colorado 

River Authority; M&T Irr—Modesto & Turlock Irr; Mrcd Irr—Merced Irr; NEPC—New England Power Co; Pgnt P&L—Pugent Sound Power & Light; Ptmc Comm— 

Upper Potomac R Comm; Rclm B—Reclamation Board; Rkfd—city of Rockford; Sttl—city of Seattle; Tac—City of Tacoma; Vale USBR—50% Vale Irr 50% USBR; 

WF&CWID—City of Wichita Falls and Wichita Cnty Water Improvement District No. 2; WMEC—Western MA Electric Co; YCWA—Yuba City Water Auth; Yolo 

FC&W—Yolo Flood Control & Water Conserv Dist. 

* * * * * 

■ 3. Revise § 208.19 to read as follows: 

§ 208.19 Marshall Ford Dam and Reservoir 

(Mansfield Dam and Lake Travis), Colorado 

River, Texas. 

In the interest of flood control, the 

Lower Colorado River Authority (LCRA) 

shall operate the Marshall Ford Dam 

and Reservoir in accordance with the 

water control plan of regulation most 

recently approved by the U.S. Army 

Corps of Engineers (USACE), effective 

on the date specified in the approval. 

Information regarding the most recently 

approved water control plan of 

regulation may be obtained by 

contacting the LCRA offices in Austin, 

Texas, or the offices of the U.S. Army 

Corps of Engineers, Fort Worth Engineer 

District, in Fort Worth, Texas. 

Dated: December 13, 2013. 

James C. Dalton, 

Chief of Engineering and Construction, U.S. 

Army Corps of Engineers. 

[FR Doc. 2013–30497 Filed 12–20–13; 8:45 am] 

BILLING CODE 3720–58–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 600 

[CMS–2380–PN] 

Basic Health Program: Proposed 

Federal Funding Methodology for 

Program Year 2015 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed methodology. 

SUMMARY: This document provides the 

methodology and data sources necessary 

to determine federal payment amounts 

made to states that elect to establish a 

Basic Health Program certified by the 

Secretary under section 1331 of the 

Patient Protection and Affordable Care 

Act (the Affordable Care Act) to offer 

health benefits coverage to low-income 

individuals otherwise eligible to 

purchase coverage through Affordable 

Insurance Exchanges. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on January 22, 2014. 

ADDRESSES: In commenting, refer to file 

code CMS–2380–PN. Because of staff 

and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–2380–PN, P.O. Box 8016, 

Baltimore, MD 21244–8016. 


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Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–2380–PN, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written ONLY to the following 

addresses: a. For delivery in 

Washington, DC—Centers for Medicare 

& Medicaid Services, Department of 

Health and Human Services, Room 445– 

G, Hubert H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–7195 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Truffer, (410) 786–1264; or 

Jessica Schubel, (410) 786–3032. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Background 

II. Provisions of the Proposed Methodology 

A. Overview of the Funding Methodology 

and Calculation of the Federal Payment 

Amount 

1. Equation 1: Estimated PTC by Rate Cell 

2. Equation 2: Estimated CSR by Rate Cell 

3. Equation 3: Adjusted Reference 

Premium Variable 

4. Equation 4: Determination of Total 

Monthly Payment for BHP Enrollees in 

Each Rate Cell 

B. Required Rate Cells 

C. Sources and State Data Considerations 

D. Discussion of Specific Variables Used in 

Payment Equations 

1. Reference Premium (RP) 

2. Premium Trend Factor (PTF) 

3. Population Health Factor (PHF) 

4. Income (I) 

5. Premium Tax Credit Formula (PTCF) 

6. Income Reconciliation Factor (IRF) 

7. Tobacco Rating Adjustment Factor 

(TRAF) 

8. Factor for Removing Administrative 

Costs (FRAC) 

9. Actuarial Value (AV) 

10. Induced Utilization Factor (IUF) 

11. Change in Actuarial Value (DAV) 

E. Adjustments for American Indians and 

Alaska Natives 

F. Example Application of the BHP 

Funding Methodology 

III. Collection of Information 

IV. Response to Comments 

V. Regulatory Impact Statement 

A. Overall Impact 

1. Need for Notice 

2. Alternative Approaches 

3. Transfers 

B. Unfunded Mandates Reform Act 

C. Regulatory Flexibility Act 

D. Federalism 

I. Background 

The Affordable Care Act provides for 

the establishment of state Affordable 

Insurance Exchanges (Exchanges, also 

called the Health Insurance 

Marketplace) that provide access to 

affordable health insurance coverage 

offered by qualified health plans (QHPs) 

for most individuals under age 65 who 

are not eligible for health coverage 

under other federally supported health 

benefits programs or through affordable 

employer-sponsored insurance 

coverage, and who have incomes above 

100 percent of the federal poverty line 

(FPL), or whose income is below that 

level but are lawfully present noncitizens ineligible for Medicaid because 

of immigration status. Individuals 

enrolled through Exchanges in coverage 

offered by QHPs with incomes below 

400 percent of the FPL may qualify for 

the federal premium tax credit (PTC) 

and federally-funded cost-sharing 

reductions (CSRs) based on their 

household income, to ensure that such 

coverage meets certain standards for 

affordability. 

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 employer 

sponsored coverage. (For many states, 

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.) Federal 

funding would 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 

Exchanges. 

In the September 25, 2013 Federal 

Register (78 FR 59122), we published a 

proposed 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’’ proposed rule 

(hereinafter referred to as the BHP 

proposed rule) implementing section 

1331 of 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 

Care Act, which requires the 

establishment of BHP. The BHP 

proposed rule proposes to establish the 

requirements for state and federal 

administration of BHP, including 

provisions regarding eligibility and 

enrollment, benefits, cost-sharing 

requirements and oversight activities. 

While the BHP proposed rule proposed 

to codify 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 


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Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 77401 

data and assumptions that would reflect 

ongoing operations and experience of 

BHP programs as well as the operation 

of the Exchanges. For this reason, the 

BHP proposed rule indicated that the 

development and publication of the 

funding methodology, including any 

data sources, would be addressed in a 

separate annual Payment Notice 

process. 

In the BHP proposed rule, we 

proposed 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. State data, as discussed further 

below, needed to calculate the federal 

BHP payment rates for the final BHP 

Payment Notice must be submitted to 

CMS. 

Once the final methodology has been 

published, no modifications to the 

methodology will occur during the 

program year. As described in the BHP 

proposed rule, we will only make 

modifications to the BHP funding 

methodology on a prospective basis. 

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, 

and could 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 will be required to 

provide data showing quarterly 

enrollment corresponding to the federal 

BHP payment rate cells. The data 

submission requirements associated 

with this will be provided in a future 

CMS notice. 

Given that BHP will be available for 

states to implement effective January 1, 

2015, we intend to modify the 

publication dates of the BHP Payment 

Notices for the first year of BHP 

implementation. Specifically, we intend 

to publish the final BHP Payment 

Notice, which will contain the final 

2015 BHP funding methodology and 

payment rates, concurrently with our 

intended schedule to publish the final 

BHP regulation in March 2014. 

II. Provisions of the Proposed 

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 an 

Exchange. Thus, the proposed BHP 

funding methodology is designed to 

calculate the PTC and CSRs as 

consistently as possible and in general 

alignment with the methodology used 

by Exchanges to calculate the advance 

payments of the PTC and CSRs, and by 

the Internal Revenue Service (IRS) to 

calculate final PTCs. In general, we 

propose to rely on values for factors in 

the payment methodology specified in 

statute or other regulations as available, 

and we propose to develop values for 

other factors not otherwise specified in 

statute, or previously calculated in other 

regulations, to simulate the values of the 

PTC and CSRs that BHP enrollees would 

have received if they had enrolled in 

QHPs offered through an Exchange. In 

accordance with section 

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

Act, the final funding methodology 

must be certified by the Chief Actuary 

of CMS, in consultation with the Office 

of Tax Analysis 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 

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 an 

Exchange, and whether any 

reconciliation of the credit or costsharing reductions would have occurred 

if the enrollee had been so enrolled.’’ 

The proposed payment methodology 

takes each of these factors into account. 

We propose that the total federal BHP 

payment amount would be based on 

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

‘‘rate cell’’ would represent a unique 

combination of age range, geographic 

area, coverage category (for example, 

self-only or two-adult coverage through 

BHP), household size, and income range 

as a percentage of FPL. Thus, there 

would be distinct rate cells for 

individuals in each coverage category 

within a particular age range who reside 

in a specific geographic rating area and 

are in households of the same size and 

income range. We note that for states 

that do not use age as a rating factor on 

the Exchange, the BHP payment rates 

would be consistent with those states’ 

Exchange rules. Thus, for a state that 

does not use age as a rating factor on the 

Exchange, the BHP payment rates would 

not vary by age. 

The proposed rate for each rate cell 

would be calculated in two parts. The 

first part would 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 

Exchange. The second part would 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 

Exchange. These two parts would be 

added together and the total rate for that 

rate cell would be equal to the sum of 

the PTC and CSR rates. 

We propose that Equation (1) would 

be used to calculate the estimated PTC 

for individuals in each rate cell and 

Equation (2) would 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 would effectively take those 

factors into account in the calculation. 

In addition, the equations would reflect 

the estimated experience of individuals 

in each rate cell if enrolled in coverage 

through the Exchange, taking into 

account additional relevant variables. 

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 

propose to calculate the adjusted 

reference premium (described later in 

this section of the payment notice) that 


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77402 Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 

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

defined below in Equation (3). This 

calculation would take into account a 

number of variables, including a 

premium trend factor to adjust currently 

available premium rates to estimate the 

rate for the applicable BHP program 

year. 

1. Equation 1: Estimated PTC by Rate 

Cell 

We propose that the estimated PTC, 

on a per enrollee basis, would 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 would be calculated in a 

manner consistent with the 

methodology used to calculate the PTC 

for persons enrolled in a QHP, with 

three adjustments. First, the PTC 

portion of the rate for each rate cell 

would represent the mean, or average, 

expected PTC that all persons in the rate 

cell would receive, rather than being 

calculated for each individual enrollee. 

Second, the reference premium used to 

calculate the PTC (described in more 

detail later in the section) would be 

adjusted for BHP population health 

status and for the projected change in 

the premium from the current year (that 

is, the year of the final payment notice) 

to the following year, to which the rates 

announced in the final payment notice 

would apply. These adjustments are 

described in Equation (3) below. Third, 

the PTC would be adjusted 

prospectively to reflect the mean, or 

average, net expected impact of income 

reconciliation on the combination of all 

persons enrolled in BHP; this 

adjustment, as described further below, 

would account for the impact on the 

PTC that would have occurred had such 

reconciliation been performed. Finally, 

the rate is multiplied by 95 percent, 

consistent with section 1331(d)(3)(A)(i) 

of the Affordable Care Act. We note that 

in the situation where the average 

income contribution of an enrollee 

would exceed the adjusted reference 

premium, we would calculate the PTC 

to be equal to 0 and not let the PTC be 

negative. 

We are soliciting comments regarding 

the methodology that we are proposing 

to calculate the value of PTC rate, which 

is defined in Equation (1): 

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 

2. Equation 2: Estimated CSR Payment 

by Rate Cell 

We propose that the CSR portion of 

the rate would 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 would be 

calculated in a manner consistent with 

the methodology used to calculate the 

prospective CSR advance payments for 

persons enrolled in a QHP, as described 

in the HHS Notice of Benefit and 

Payment Parameters for 2015 proposed 

rule, with three principal adjustments. 

(We further propose a separate 

calculation that includes different 

adjustments for American Indian/Alaska 

Native BHP enrollees, as described in 

section E.) For the first adjustment, the 

CSR rate, like the PTC rate, would 

represent the mean, or average, expected 

CSR subsidy that would be paid on 

behalf of all persons in the rate cell, 

instead of the CSR subsidy being 

calculated for each individual enrollee. 

Second, this calculation would be based 

on the adjusted reference premium, as 

described below. Third, as explained 

earlier, this equation uses an adjusted 

reference premium that reflects 

premiums charged to non-tobacco 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, 

we propose that the equation include 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. As a practical matter, 

this would only affect states that allow 

tobacco use as a rating factor. Finally, 

the rate would be multiplied by 95 

percent, as provided in section 

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

Act. We propose using Equation (2) to 

calculate the CSR rate, consistent with 

the methodology described above. 

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) 

3. Equation 3: Adjusted Reference 

Premium Variable (Used in Equations 1 

and 2) 

As part of these calculations for both 

the PTC and CSR components, we 

propose to calculate the value of the 

adjusted reference premium, described 

below, as specified in Equation (3). The 

adjusted reference premium would be 

equal to the reference premium, which 

would be based on the second lowest 

cost silver plan premium, multiplied by 

the premium trend factor, which would 

reflect the projected change in the 

premium level between the current year 

and the next year (including the 

estimated impact of changes resulting 

from the transitional reinsurance 

program established in section 1341 of 

the Affordable Care Act), and the BHP 

population health factor, described 


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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 document divide the total agebased 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, May 7, 2013, http://www.cms.gov/CCIIO/ 

Resources/Regulations-and-Guidance/Downloads/

ra_tables_04_16_2013xlsx.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 

rating 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. 

below in section D, which would reflect 

the projected impact that enrolling BHPeligible individuals in QHPs on an 

Exchange 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 

PTF = Premium trend factor 

PHF = Population health factor 

4. Equation 4: Determination of Total 

Monthly Payment for BHP Enrollees in 

Each Rate Cell 

In general, the rate for each rate cell 

would be multiplied by the number of 

BHP enrollees in that cell (that is, the 

number of enrollees that meet the 

criteria for each rate cell) to calculate 

the total monthly BHP payment. This 

calculation is shown in Equation 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 

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. Required Rate Cells 

We propose 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 would 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 would 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. Subsequent 

quarterly deposits to the state’s trust 

fund would 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 propose requiring the use of 

certain rate cells as part of the proposed 

methodology. For each state, we 

propose using rate cells that separate the 

BHP population into separate cells 

based on the five factors described 

below. 

Factor 1—Age: We propose separating 

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 21–44. 

• Ages 45–54. 

• Ages 55–64. 

Factor 2—Geographic area: For each 

state, we propose separating enrollees 

into rate cells by geographic areas 

within which a single reference 

premium is charged by QHPs offered 

through the state’s Exchange. Multiple, 

non-contiguous geographic rating areas 

would be incorporated within a single 

cell, so long as those areas share a 

common reference premium.2

Factor 3—Coverage status: We 

propose separating enrollees into rate 

cells by coverage status, reflecting 

whether an individual is enrolled in 

self-only coverage or persons are 

enrolled in family coverage through 

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, would apply 

based on whether such coverage 

involves two adults alone or whether it 

involves children. 

Factor 4—Household size: We 

propose separating enrollees into rate 

cells by household size that states use 

to determine BHP enrollees’ income as 

a percentage of the FPL under proposed 

42 CFR 600.320. We are proposing to 

require separate rate cells for several 

specific household sizes. For each 

additional member above the largest 

specified size, we propose to publish 

instructions for how to develop 

additional rate cells and calculate an 

appropriate payment rate based on data 

for the rate cell with the closest 

specified household size. We are 

currently proposing to publish separate 

rate cells for household sizes 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 

employer-sponsored 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 


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3The three lowest income ranges would be 

limited to lawfully present immigrants who are 

ineligible for Medicaid because of immigration 

status. 

all BHP-eligible persons live in 

households of size 5 or greater. 

Factor 5—Income: For households of 

each applicable size, we propose 

creating 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, we propose that separate rate cells 

would be used to calculate federal BHP 

payment rates to reflect different bands 

of income measured as a percentage of 

FPL. We propose using the following 

income ranges, measured as a 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 would only be used 

to calculate the federal BHP payment 

amount. A state implementing BHP 

would not be required to use these rate 

cells or any of the factors in these rate 

cells as part of the state payment to the 

standard health plans participating in 

BHP or to help define BHP enrollees’ 

covered benefits, premium costs, or outof-pocket cost-sharing levels. 

We propose using 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 the 

proposed approach will increase the 

administrative feasibility of making 

federal BHP payments and reduce the 

likelihood of inadvertently erroneous 

payments resulting from highly complex 

methodologies. We believe that this 

approach should not significantly 

change federal payment amounts, as 

within applicable ranges, the BHPeligible population is distributed 

relatively evenly. 

We welcome comments on whether 

these are the appropriate factors for 

developing rate cells, whether there are 

other factors that should be considered 

as part of developing the rate cells, 

whether the ranges or categories 

specified above (including the width of 

the age bands) are appropriate, and 

whether (as proposed) we should 

assume even distributions, by age and 

income, in each cell or modify those 

distributions to reflect data about the 

precise distribution of BHP-eligible 

individuals. We also welcome 

comments on the form in which federal 

payment rates are displayed. Given the 

number of rating factors used to 

calculate the BHP payments, we would 

welcome comments if producing a 

smaller subset of tables would be more 

useful than a more complete set of 

tables; in no case would the choices 

about the list of rates to publish affect 

the actual calculation of the payment 

rate. 

C. Sources and State Data 

Considerations 

To the extent possible, we intend to 

use data submitted to the federal 

government by QHP issuers seeking to 

offer coverage through an Exchange to 

perform the calculations that determine 

federal BHP payment cell rates. 

States operating a State Based 

Exchange (SBE) in the individual 

market, however, must provide certain 

data, including premiums for second 

lowest cost silver plans, by geographic 

area, in order for CMS to calculate the 

federal BHP payment rates in those 

states. An SBE state interested in 

obtaining the applicable federal BHP 

payment rates for its state must submit 

such data accurately, completely, and as 

specified by CMS, by no later than 

January 20, 2014, in order for CMS to 

calculate the applicable rates and 

include them in the intended 

publication of the final BHP Payment 

Notice for 2015. 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 2015 will be 

published in a separate CMS notice. 

If a state operating a SBE 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 proposed 

rule, a state may elect to implement its 

BHP after a program year has begun. In 

such an instance, we propose that the 

state, if operating a SBE, submit its data 

no later than 30 days after the Blueprint 

submission for CMS to calculate the 

applicable federal payment rates. We 

further propose 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 

include 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 proposed 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) 

In order to calculate the estimated 

PTC that would be paid if individuals 

enrolled in QHPs through the Exchange, 

we must calculate a reference premium 

(RP) because the PTC is based, in part, 

on the premiums for the second lowest 

cost silver plan as explained below in 

section II.C.5 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 Exchange. 

The reference premium would be the 

premium applicable to non-tobacco 

users. This is consistent with the 

provision in 26 U.S.C. 36B (b)(3)(C) that 

bases the PTC on premiums that are 

adjusted for age alone, without regard to 

tobacco use, even for states that allow 

insurers to vary premiums based on 

tobacco use 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 

an Exchange, we propose not to update 

the payment methodology, and 

subsequently the federal BHP payment 

rates, in the event that the second 

lowest cost silver plan used as the 

reference premium 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. 

We would note that the choice of the 

second lowest cost silver plan for 


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4CMCS. ‘‘State Medicaid and CHIP Income 

Eligibility Standards Effective January 1, 2014.’’ 

calculating BHP payments would rely 

on several simplifying assumptions in 

its selection. For the purposes of 

determining the second lowest cost 

silver plan for calculating PTC for a 

person enrolled in a QHP through an 

Exchange, the applicable plan may 

differ for various reasons. For example, 

a different second lowest cost silver 

plan may apply to a family consisting of 

two adults, their child, and their niece 

than to a family with two adults and 

their children, because one or more 

QHPs in the family’s geographic area 

might not offer family coverage that 

includes the niece. We believe that it 

would not be possible to replicate such 

variations for calculating the BHP 

payment and believe that in aggregate 

they would not result in a significant 

difference in the payment. Thus, we 

propose to use the second lowest cost 

silver plan available to any enrollee for 

a given age, geographic area, and 

coverage category. 

This choice of reference premium 

relies on two assumptions about 

enrollment in the Exchanges. First, we 

assume that all persons enrolled in BHP 

would have elected to enroll in a silver 

level plan if they had instead enrolled 

in a QHP through the Exchanges. It is 

possible that some persons would have 

chosen not to enroll at all or would have 

chosen to enroll in a different metallevel plan (in particular, a bronze level 

plan with a premium that is less than 

the PTC for which the person was 

eligible). We do not believe it is 

appropriate to adjust the payment for an 

assumption that some BHP enrollees 

would not have enrolled in QHPs for 

purposes of calculating the BHP 

payment rates, since Affordable Care 

Act section 1331(d)(3)(A)(ii) requires the 

calculation of such rates as ‘‘if the 

enrollee had enrolled in a qualified 

health plan through an Exchange.’’ 

Second, we assume that, among all 

available silver plans, all persons 

enrolled in BHP would have selected 

the second-lowest cost plan. Both this 

and the prior assumption allow an 

administratively feasible determination 

of federal payment levels. They also 

have some implications for the CSR 

portion of the rate. If persons were to 

have enrolled in a bronze level plan 

through the Exchange, they would not 

be eligible for the CSR, unless they were 

an eligible American Indian or Alaska 

Native; thus, assuming that all persons 

enroll in silver level plan, rather than a 

plan with a different metal level, would 

increase the BHP payment. Assuming 

that all persons enroll in the second 

lowest cost silver plan for the purposes 

of calculating the CSR portion of the 

rate may result in a different level of 

CSR payments than would have been 

paid if the persons were enrolled in 

different silver level plans on the 

Exchanges (with either lower or higher 

premiums). We believe it would not be 

reasonable at this point to estimate how 

BHP enrollees would have enrolled in 

different silver level QHPs, and thus 

propose to use the second lowest cost 

silver plan as the basis for the reference 

premium and calculating the CSR 

portion of the rate. For American 

Indian/Alaska Native BHP enrollees, we 

propose to use the lowest cost bronze 

plan as the basis for the reference 

premium as described further in section 

E. 

The applicable age bracket will be one 

dimension of each rate cell. We propose 

to assume a uniform distribution of ages 

and estimate the average premium 

amount within each rate cell. We 

believe that assuming a uniform 

distribution of ages within these ranges 

is a reasonable approach and would 

produce a reliable determination of the 

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 propose to use 

the same geographic areas as specified 

for the Exchanges in each state within 

which the same second lowest cost 

silver level premium is charged. 

Although plans are allowed to serve 

geographic areas smaller than counties 

after obtaining our approval, we propose 

that no geographic area, for purposes of 

defining BHP payment rate cells, will be 

smaller than a county. We do not 

believe that this assumption will have a 

significant impact on federal payment 

levels and it would likely simplify both 

the calculation of BHP payment rates 

and the operation of BHP. 

Finally, in terms of the coverage 

category, we propose that federal 

payment rates only recognize self-only 

and two-adult coverage, with exceptions 

that account for children who are 

potentially eligible for 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 Social Security Act 

(the Act) to qualify all otherwise 

eligible, lawfully present immigrant 

children for Medicaid and CHIP. States 

that fall within these exceptions would 

be identified based on their Medicaid 

and CHIP State Plans, and the rate cells 

would include appropriate categories of 

BHP family coverage for children. For 

example, Idaho’s Medicaid and CHIP 

eligibility is limited to families with 

MAGI at or below 185 percent FPL. If 

Idaho implemented BHP, Idaho children 

with incomes between 185 and 200 

percent could qualify. In other states, 

BHP eligibility will generally be 

restricted to adults, since children who 

are citizens or lawfully present 

immigrants and who live in households 

with incomes at or below 200 percent of 

FPL will qualify for Medicaid or CHIP 

and thus be ineligible 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. Premium Trend Factor (PTF) 

In Equation 3, we calculate an 

adjusted reference premium (ARP) 

based on the application of certain 

relevant variables to the reference 

premium (RP), including a premium 

trend factor (PTF). At the time we issue 

the final federal payment notice, the 

adjusted monthly premium for the 

applicable second lowest cost silver 

plan will be known only for the year 

prior to the applicable BHP program 

year. For example, when federal 

payments are set for the 2015 BHP 

program year, the adjusted monthly 

premium for the applicable second 

lowest cost silver plan will be known 

only for 2014. It is 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 are defining this as the 

premium trend factor in the BHP 

payment methodology. This factor 

should approximate the change in 

health care costs per enrollee, which 

would include, but is not limited to, 

changes in the price of health care 

services and changes in the utilization 

of health care services. This would 

provide an estimate of the adjusted 

monthly premium for the applicable 

second lowest cost silver plan that 

would be more accurate and reflective 

of health care costs in the BHP program 

year, which will be the year following 


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issuance of the final federal payment 

notice. 

There are several ways to develop this 

factor. One option would be to use a 

projection of national health care cost 

trends on a per capita or a per enrollee 

basis. Other options include using 

historical trends from Exchanges once 

available—for example, the average 

annual rate of growth of the applicable 

second lowest cost silver plans over the 

last 5 years, or the projected change in 

national health care cost trends, 

adjusted for observed differences 

between growth rates experienced by 

such silver plans and those for private 

health insurance expenditures overall. 

In addition, we believe that it is 

appropriate to adjust the trend factor for 

the estimated impact of changes to the 

transitional reinsurance program on the 

average QHP premium. To the extent 

that changes in the operation of that 

program will affect QHP premiums in 

predictable ways that go beyond private 

insurance cost trends as a whole, such 

changes will be incorporated into the 

premium trend factor. 

We believe that for the 2015 BHP 

program year the most reliable and 

appropriate approach would use 

projected national health care cost 

trends. Therefore, we propose to use the 

annual growth rate in private health 

insurance expenditures per enrollee 

from the National Health Expenditure 

projections. The National Health 

Expenditure Accounts and Projections 

are developed annually by the Office of 

the Actuary of CMS. Over the last 10 

years, the average annual increase in 

private health insurance premiums per 

enrollee has been 6.55 percent per year, 

ranging from 3.22 percent to 11.55 

percent. 

Future changes in private health 

insurance premiums per enrollee may 

differ from historical experience for 

many reasons, including changes in use 

of health care services, provider 

reimbursement rates, net costs of 

insurance, the health status of the 

people with private health insurance, 

and the demographics of the U.S. 

population. Moreover, the change in the 

cost of the premium of the second 

lowest cost silver plan may differ from 

the increase in the average private 

health insurance premium; in 

particular, the second lowest cost silver 

plan in a region may be offered by 

different insurers year to year. There 

may also be some differences between 

the rate of premium increases in QHPs 

on the Exchanges and other forms of 

private health insurance (for example, 

employer-sponsored insurance). In 

addition, there may be regional 

differences in the change in health care 

premiums (that is, different regions of 

the country may see premium increases 

smaller or larger than the national 

average). 

In future years, we propose to 

evaluate whether historical data and 

projections related specifically to the 

QHPs offered on the Exchanges at a 

national level could produce a more 

reliable estimate of future changes to 

QHP reference premiums, compared to 

historical data and projections for 

private insurance in general. 

We particularly invite comments 

concerning methods for addressing 

significant changes in the cost of the 

second lowest cost silver plan premium 

in a geographic rating area from one 

year to the next, due to changes in local 

Exchange structure rather than broader 

trends in health insurance costs. For 

example, if a certain second lowest cost 

silver plan offered on an Exchange 

serves a particular geographic rating 

area in one year but not the next, the 

identity of the second lowest cost plan 

in that area could change, with 

potentially significant effects on PTC 

amounts. Such changes would not be 

captured using the kind of premium 

trend factor discussed here. 

3. Population Health Factor (PHF) 

We considered including an explicit 

population health factor in each rate cell 

that varies based on the characteristics 

of BHP enrollees within that cell, but we 

are not proposing such a variable, for 

several reasons. We believe that because 

BHP-eligible consumers’ are eligible to 

enroll in QHPs in 2014, the 2014 QHP 

premiums already account for the health 

status of BHP-eligible consumers, as 

explained in further detail below. Also, 

the function of this factor is to provide 

a reference premium amount that 

reflects the premiums that QHPs would 

have charged without the 

implementation of BHP, taking into 

account both the risk profile of BHPeligible consumers in the state and the 

operation of risk-adjustment and 

reinsurance mechanisms in the 

Exchanges. Our proposed approach to 

the population health factor seeks to 

achieve this goal based on the 

characteristics of the state’s BHP-eligible 

consumers as a whole. 

In the BHP proposed rule, we 

described in preamble what we believed 

to be the most appropriate approach to 

account for potential differences in 

health status between BHP enrollees 

and consumers in the individual 

market, including those obtaining 

coverage through the Exchange—that is, 

including a risk adjustment factor in the 

BHP funding methodology. We believe 

that it is appropriate to consider 

whether or not to develop a population 

health adjustment to account for 

potential differences in health status 

between persons eligible for BHP and 

those enrolled in the individual market, 

as the two populations may not have the 

same average health status. 

Accordingly, we have considered 

applying a population-wide adjustment 

for health status in the BHP payment 

calculation to account for the impact on 

a state’s Exchange premiums, hence the 

PTC and the value of CSRs, of changes 

to average risk levels in the state’s 

individual market that result from BHP 

implementation. Our proposed 

approach to the adjustment for 

population health status seeks to have 

the federal BHP payment reflect the 

premium that would have been charged 

if BHP-eligible consumers were allowed 

to purchase QHPs in their state’s 

Exchange, rather than the premium that 

is being charged in the Exchange 

without the inclusion of BHP 

consumers. This factor would be greater 

than 1.00 if BHP enrollees in a state are, 

on average, in poorer health status than 

those covered through the state’s 

individual market, and thus Exchange 

premiums would have been higher had 

the state not implemented BHP. This 

factor would be less than 1.00 if BHP 

enrollees in a state are, on average, in 

better health status than those covered 

through the state’s individual market, 

and thus Exchange premiums would 

have been lower if the state had not 

implemented BHP. 

We propose that the population 

health adjustment for the 2015 BHP 

program year would equal 1.00. Most 

BHP-eligible consumers will be able to 

purchase coverage in the individual 

market during 2014, or the 

‘‘measurement year’’—that is, the year 

that precedes implementation of BHP 

and that provides the basis for 

estimating unadjusted reference 

premiums; thus, making no adjustment 

to the premiums for differences in BHPeligible enrollees’ health would be 

appropriate. As a result, BHP-eligible 

consumers’ health status is already 

included in the premiums that would be 

used to calculate the federal BHP 

payment rates. 

In states where significant numbers of 

BHP-eligible persons are covered 

outside of the individual market in 

2014, it may be possible to estimate 

differences in expected health status 

between persons who are eligible for 

BHP and persons otherwise eligible for 

coverage in the individual market. 

However, we believe that the different 

levels of federal subsidies based on 

household income for coverage for 

persons enrolled in a QHP through an 


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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 2013 reports in 

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

ReportsTrustFunds/Downloads/TR2013.pdf. 

Exchange may have a substantial 

influence on the participation rate of 

enrollees. This may result in relatively 

healthier persons with higher levels of 

subsidies enrolling in coverage, and this 

effect may partially or entirely offset 

some other differences in the health 

status between BHP-eligible persons and 

those otherwise covered in the 

individual market. 

On the Exchanges, premiums in most 

states will vary based on age, which 

research has shown is directly 

correlated to average health cost. 

Because the reference premium used to 

calculate BHP federal payment rates 

will vary by age, some of the difference 

in average health costs would be 

addressed by this approach to 

calculating the BHP payment. However, 

this does not further simplify the task of 

estimating the remaining adjustment 

needed to compensate for any impact of 

BHP implementation on average risk 

levels in the state’s individual market. 

Given these analytic challenges, the 

existing role played by age-rated 

premiums in compensating for risk, and 

the limited data about Exchange 

coverage and the characteristics of BHPeligible consumers that will available by 

the time we establish federal payment 

rates for 2015, we believe that the most 

appropriate adjustment for 2015 would 

be 1.00, including in states that cover 

BHP-eligible persons outside the 

individual market in 2014. We 

anticipate that, in future years, when 

additional data become available about 

Exchange coverage and the 

characteristics of BHP enrollees, we may 

estimate this factor differently. We 

invite comment on whether methods are 

currently available to accurately and 

reliably estimate this factor for 2015, in 

general and in states that will cover 

BHP-eligible persons outside their 

individual markets in 2014. 

Finally, 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, this does not 

mean that a BHP program’s standard 

health plans receive such payments. As 

explained in the BHP proposed 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. 

4. 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 

Exchange. Accordingly, the proposed 

BHP payment methodology incorporates 

income into the calculations of the 

payment rates through the use of 

income-based rate cells. We propose 

defining 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 of Health and Human 

Services 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 our 

proposed methodology, household size 

and income as a percentage of FPL 

would be used as factors in developing 

the rate cells. We propose using the 

following income ranges measured as a 

percentage of FPL: 6

• 0–50 percent. 

• 51–100 percent. 

• 101–138 percent. 

• 139–150 percent. 

• 151–175 percent. 

• 176–200 percent. 

We further propose to assume a 

uniform income distribution for each 

federal BHP payment cell. We believe 

that assuming a uniform income 

distribution for the income ranges 

proposed would be reasonably accurate 

for the purposes of calculating the 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 

propose to calculate the value of the 

PTC at each one percentage point 

interval of the income range for each 

federal BHP payment cell and then 

calculate the average of the PTC across 

all intervals. This calculation would 

rely on the PTC formula described 

below. 

As the PTC for persons enrolled in 

QHPs would be calculated based on 

their income during the open 

enrollment period, and that income 

would be measured against the FPL at 

that time, we propose to adjust the FPL 

by multiplying the FPL by a projected 

increase in the CPI–U between the time 

that the BHP payment rates are 

published and the QHP open enrollment 

period, if the FPL is expected to be 

updated during that time. We propose 

that the projected increase in the CPI– 

U would be based on the intermediate 

inflation forecasts from the most recent 

OASDI and Medicare Trustees Reports.7

5. Premium Tax Credit Formula (PTCF) 

In Equation 1, we propose to use the 

formula described in 26 U.S.C. 36B(b) to 

calculate the estimated PTC that would 

be paid on behalf of a person enrolled 

in a QHP on an Exchange as part of the 

BHP payment methodology. This 

formula is used to determine the 

amount of premium that an individual 

or household would be required to pay 

to enroll in a QHP on an Exchange, 

which is based on (A) the household 

income; (B) the household income 

measured as a percentage of FPL; and 

(C) the schedule specified in 26 U.S.C. 

36B(b)(3)(A) and shown below. The 

difference between the amount of 

premium a person or a household is 

required to pay 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. 

The PTC amount provided for a 

person enrolled in a QHP through an 

Exchange is calculated in accordance 

with the methodology described in 26 

U.S.C. 36B(b)(2) as the amount equal to 

the lesser of: (A) The monthly premiums 

for such month of one or more QHPs 

offered in the individual market within 

a state that cover the taxpayer, the 

taxpayer’s spouse, or any dependent (as 

defined in section 26 U.S.C. 152) of the 

taxpayer and that the taxpayer and 

spouse or dependents were enrolled in 

through an Exchange; or (B) the excess 

(if any) of (i) the adjusted monthly 

premium for such month for the 


tkelley on DSK3SPTVN1PROD with PROPOSALS
77408 Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 

applicable second lowest cost silver 

plan for the taxpayer over (ii) an amount 

equal to 1/12 of the product of the 

applicable percentage (described below) 

and the taxpayer’s household income 

for the taxable year. 

The applicable percentage is defined 

in 26 U.S.C. 36B(b)(3)(A) and 26 CFR 

1.36B–3(g) as the percentage that 

applies to a taxpayer’s household 

income that is within an income tier 

specified in 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: 

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

within the following income tier: 

The initial 

premium 

percentage 

is—(percent) 

The final 

premium 

percentage 

is—(percent) 

Up to 133% .......................................................................................................................................... 2 .0 2 .0 

133 but less than 150% ....................................................................................................................... 3 .0 4 .0 

150 but less than 200% ....................................................................................................................... 4 .0 6 .3 

200 but less than 250% ....................................................................................................................... 6 .3 8 .05 

250 but less than 300% ....................................................................................................................... 8 .05 9 .5 

300 but not more than 400% ............................................................................................................... 9 .5 9 .5 

These are the applicable percentages 

for CY 2014. The applicable percentages 

will be updated in future years in 

accordance with 26 U.S.C. 

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

6. Income Reconciliation Factor (IRF) 

For persons enrolled in a QHP 

through an Exchange who receive an 

advance payment of the PTC (APTC), 

there will be an annual reconciliation 

following the end of the year to compare 

such payment 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 credit received during 

the year would either be paid to the 

taxpayer (if the enrollee received less in 

APTC than they were entitled to 

receive) or charged to the taxpayer as 

additional tax (if the enrollee received 

more in APTC than they were entitled 

to receive, 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 individuals 

enrolled in BHP may not be treated as 

a qualified individual under section 

1312 eligible for enrollment in a QHP 

offered through an Exchange. Therefore, 

BHP enrollees are not eligible to receive 

an APTC to purchase coverage in the 

Exchange. Because they do not receive 

APTC, BHP enrollees are not subject to 

the same income reconciliation as 

Exchange consumers. Nonetheless, there 

may still be differences between a BHP 

enrollee’s household income reported at 

the beginning of the year and the actual 

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 an 

Exchange and received an APTC. 

Therefore, we propose 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 

proposed 42 CFR 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 would seek 

prospectively to capture the average 

effect of income reconciliation 

aggregated across the BHP population 

had those BHP enrollees been subject to 

tax reconciliation after receiving APTC 

for coverage provided through QHPs. 

For 2015, we propose estimating 

reconciliation effects based on tax data 

for two years, reflecting income and tax 

unit composition changes over time 

among BHP-eligible individuals. 

Specifically, the Office of Tax 

Analysis (OTA) at the Department of the 

Treasury maintains a model which 

combines detailed tax and other data, 

including Exchange enrollment and PTC 

claimed, to project Exchange premiums, 

enrollment, and tax credits. For each 

enrollee, this model compares the APTC 

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. 

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 premium tax credit to the 

initial determination of premium tax 

credit will be used as the income 

reconciliation factor in Equation (1) for 

estimating the PTC portion of the BHP 

payment rate. We invite comment on 

this approach. 

7. Tobacco Rating Adjustment Factor 

(TRAF) 

As described above, the reference 

premium is estimated, for purposes of 

determining both the PTC and related 

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 proposed in 

the HHS Notice of Benefit and Payment 

Parameters for 2015, the CSR advance 

payments are based on the total 

premium for a policy, including any 

adjustment for tobacco use. 

Accordingly, we propose to 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 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 77409 

8See http://www.cdc.gov/nchs/nhis/tobacco.htm; 

http://apps.nccd.cdc.gov/statesystem/default/ 

DataSource.aspx. 

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 propose to 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 propose to use data from the Centers 

for Disease Control and Prevention to 

estimate tobacco utilization rates by 

state and relevant population 

characteristic.8 For BHP program year 

2015, we would compare these tobacco 

utilization rates to the characteristics of 

BHP-eligible consumers, as shown by 

national and state survey data. We 

invite comments on this approach. 

We also propose to consider 

differentiating this factor by the rate cell 

factors, if there are significant variations 

in either (a) the difference in health care 

costs for tobacco users and non-tobacco 

users or (b) the prevalence of tobacco 

use along any of these dimensions 

(including age range, state, geographic 

area, and income range). For example, if 

the differences in the tobacco and nontobacco user rates in a state vary by age 

group, we would consider applying 

different adjustments to different rate 

cells by age. 

8. Factor for Removing Administrative 

Costs (FRAC) 

The Factor for Removing 

Administrative Costs (FRAC) represents 

the average proportion of the total 

premium that covers allowed health 

benefits, and we propose including this 

factor in our calculation of estimated 

CSRs in Equation 2. The product of the 

reference premium and the FRAC would 

approximate the estimated amount of 

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 

proposing to set this factor equal to 0.80, 

which is proposed for calculating CSR 

advance payments for 2015 in the HHS 

Notice of Benefit and Payment 

Parameters for 2015. 

9. 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 proposed 

methodology, we would 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 innetwork 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 EHBallowed claims, including amounts paid 

by the consumer, is $1,000.) 

For the purposes of calculating the 

CSR rate in Equation 2, we propose to 

use the standard actuarial value of the 

silver level plans in the individual 

market, which is equal to 70 percent. 

10. Induced Utilization Factor (IUF) 

The induced utilization factor is 

proposed 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. 

In the HHS Notice of Benefit and 

Payment Parameters for 2015 proposed 

rule, we proposed induced utilization 

factors for the purposes of calculating 

cost-sharing reduction advance 

payments for 2015. The induced 

utilization factor for all persons who 

would enroll in a silver plan and 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, we propose to use 

the induced utilization factor equal to 

1.12 for the BHP payment methodology. 

We would note that for CSRs for QHP, 

there will be a final reconciliation at the 

end of the year and the actual level of 

induced utilization could differ from the 

factor proposed in the rule. Our 

proposed methodology for BHP funding 

would not include any reconciliation for 

utilization and thus may understate or 

overstate the impact of the effect of the 

subsidies on health care utilization. 

11. 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 propose including 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 propose to 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 

would be 0.24 (94 percent minus 70 

percent); for BHP enrollees with 

household incomes more than 150 

percent but not more than 200 percent 

of FPL, this factor would 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 an Exchange 

to calculate the PTC and CSRs. Thus, we 

propose adjustments to the payment 

methodology described above to be 

consistent with the Exchange rules. 

We propose the following 

adjustments: 

1. We propose that the adjusted 

reference premium for use in the CSR 

portion of the rate would use the lowest 

cost bronze plan instead of the second 

lowest cost silver plan, with the same 

adjustments for the premium trend 

factor and population health 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 this would not change the PTC, as 

that is the maximum possible PTC 

payment, which is always based on the 


tkelley on DSK3SPTVN1PROD with PROPOSALS
77410 Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 

9http://www.cms.gov/Research-Statistics-Dataand-Systems/Statistics-Trends-and-Reports/

NationalHealthExpendData/Downloads/

Proj2012.pdf. 

10 If the state implements BHP in 2015, this factor 

may change as early as BHP program year 2016 if 

state or national data demonstrate, based on 

differences between average risk scores for 

individual market participants below and above 200 

percent FPL, that adding BHP-eligible consumers to 

the state’s 2015 individual market would have 

changed the reference premiums charged in the 

state’s Exchange. 

11https://www.federalregister.gov/articles/2013/

01/24/2013–01422/annual-update-of-the-hhspoverty-guidelines. 

12See Table IV A1 in http://www.cms.gov/

Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/ReportsTrustFunds/

Downloads/TR2013.pdf. This forecast involves an 

increase in the Consumer Price Index of 2.2 percent 

in 2014 and 2.4 percent in 2015. Compounded, this 

results in a 4.65 percent increase from 2013 to 2015. 

second lowest cost silver plan.) We 

invite comments as to whether other 

assumptions are warranted about the 

distribution, among bronze plans 

charging various premiums, of 

American Indian and Alaska Native 

BHP-eligible individuals. 

2. We propose that the actuarial value 

for use in the CSR portion of the rate 

would be 0.60 instead of 0.70, which is 

consistent with the actuarial value of a 

bronze level plan. 

3. We propose that the induced 

utilization factor for use in the CSR 

portion of the rate would be 1.15, which 

is consistent with the proposed HHS 

Notice of Benefit and Payment 

Parameters for 2015 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. We propose that the change in the 

actuarial value for use in the CSR 

portion of the rate would 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. Example Application of the BHP 

Funding Methodology 

This example of the proposed 

approach involves 1-person households 

with incomes between 138 and 150 

percent FPL who obtain single coverage 

through BHP in a particular geographic 

rating area located in a state that permits 

insurers to increase premiums for 

tobacco users. To determine federal BHP 

payment rates, we begin by analyzing 

single-adult, silver-level coverage 

offered through the Exchange in that 

area. A particular QHP charges the 

‘‘reference premium’’—that is, the 

second lowest cost premium among 

those charged by all silver-level plans 

offered in the area, for a specific age 

range, without premium increases for 

tobacco users. Within the following age 

ranges, the mean value of that reference 

premium for 2014, assuming every age 

in the range is equally represented, is as 

follows in our example: 

• $132.34 for 0–20 year olds. 

• $243.39 for 21–44 year olds. 

• $385.37 for 45–54 year olds. 

• $571.49 for 55–64 year olds. 

We multiply these reference 

premiums by the premium trend 

factor—that is, by the expected increase 

in average private health insurance costs 

from 2014 to 2015. The most recent 

National Health Expenditure projections 

from the CMS Office of the Actuary 

estimate that, from 2014 to 2015, private 

health insurance costs per enrollee will 

rise by an average of 3.5 percent.9

Accordingly, for purposes of calculating 

2015 federal BHP payments, reference 

premium amounts will be adjusted to: 

• $136.97 for 0–20 year olds. 

• $251.91 for 21–44 year olds. 

• $398.86 for 45–54 year olds. 

• $591.50 for 55–64 year olds. 

We then multiply these amounts by 

the population health factor, reflecting 

the amount by which premiums in the 

Exchange would have increased or 

decreased, relative to actual levels, if all 

BHP-eligible consumers had been 

allowed to obtain coverage through 

QHPs, rather than BHP. In this 

particular state, the amounts charged in 

the Exchange for 2014 assume the 

inclusion of BHP-eligible consumers, so 

no adjustment needs to be made for BHP 

program year 2015.10 As a result, this 

factor is 1.00, so the final premiums 

listed above, by age, are the adjusted 

reference premiums. 

We then factor in the effects of 

household size, FPL, and the PTC 

formula. We take current FPL guidelines 

(which are for 2013) 11 and trend them 

forwards to 2015, based on the 

intermediate inflation forecasts from the 

most recent Medicare Trustees Report.12

Accordingly, for purposes of calculating 

federal BHP payments, we assume that 

100 percent of FPL will be $12,024 a 

year ($1,002 a month) for a 1-person 

household in 2015. 

With each household size and FPL 

range, we determine the average (mean) 

PTC amount. For purposes of this 

example, we calculate the amount that 

BHP-eligible consumers with incomes 

between 138 and 150 percent FPL in 1- 

person households would pay, after 

receiving a premium tax credit, for an 

adjusted-reference-premium plan at 

every FPL percentage point level 

included in that range—at 138 percent 

FPL, 139 percent FPL, 140 percent FPL, 

etc., up to and including 150 percent 

FPL. Household payments throughout 

this range average $38.28 (Table 2). 

Subtracting this payment level from the 

2015 adjusted reference premium 

amounts shown above yields the 

following estimated premium tax 

credits, by age range, for 1-person 

households between 138 and 150 

percent FPL: 

• $98.69 for 0–20 year olds. 

• $213.63 for 21–44 year olds. 

• $360.58 for 45–54 year olds. 

• $553.22 for 55–64 year olds. 

If the best estimates from modeling 

show that, taking into account tax 

reconciliation effects across the entire 

BHP-eligible population, the net impact 

of reconciliation is to reduce tax credit 

amounts by an average (mean) of 2.00 

percent, then the income reconciliation 

adjustment for 2015 would be 0.98. 

Between that adjustment and including 

95 rather than 100 percent of the 

estimated premium tax credit within the 

federal BHP payment rate, the above 

amounts are multiplied by 0.931, 

resulting in the premium tax 

components of federal BHP payments as 

follows for 1-person households 

between 138 and 150 percent FPL 

receiving single coverage through BHP: 

• $91.88 for 0–20 year olds. 

• $198.89 for 21–44 year olds. 

• $335.70 for 45–54 year olds. 

• $515.05 for 55–64 year olds. 

In calculating the cost-sharing 

reduction subsidy component of federal 

BHP payments, we begin with the above 

adjusted reference premiums for 2015, 

including the premium trend factor and 

the population health factor ($136.97 for 

0–20 year olds, etc.). We then multiply 

those premiums by the following 

additional factors, with the results 

shown in Table 3: 

• The Factor for Removing 

Administrative Costs, which is 0.80; 

• A standard actuarial value (AV) 

factor, which is 1 over the standard 

actuarial value of 70 percent for silverlevel plans, or 1.4286; 

• The tobacco rating adjustment 

factor, which we assume, for purposes 

of this example, would be found to be 

1.30, following a determination of: (a) 

Weighted-average premiums charged by 

silver level QHPs to tobacco users and 

non-users, by age; and (b) CDC estimates 

of tobacco usage within the state’s BHPeligible population, by age; 

• An induced utilization factor of 

1.12; 

• The increase in actuarial value (by 

income), which is 0.24 for BHP 

enrollees in the applicable income range 

(138 to 150 percent FPL); and 

• 0.95. 

Table 4 concludes this example by 

showing both the premium tax credit 


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Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 77411 

component and the cost-sharing 

reduction subsidy component of federal 

BHP payments for 1-person households 

between 138 and 150 percent FPL who 

obtain single coverage through BHP. 

TABLE 2—HOUSEHOLD PREMIUM CHARGES, AFTER RECEIVING PREMIUM TAX CREDITS, FOR 1-PERSON HOUSEHOLDS

BETWEEN 138–150 PERCENT FPL BUYING REFERENCE-PREMIUM SINGLE COVERAGE IN THE MARKETPLACE

FPL 

Household premium charges 

As a 

percentage 

of income 

In dollars 

per month 

138 ........................................................................................................................................................................... 2.29 31.72 

139 ........................................................................................................................................................................... 2.35 32.77 

140 ........................................................................................................................................................................... 2.41 33.83 

141 ........................................................................................................................................................................... 2.47 34.91 

142 ........................................................................................................................................................................... 2.53 35.99 

143 ........................................................................................................................................................................... 2.59 37.09 

144 ........................................................................................................................................................................... 2.65 38.19 

145 ........................................................................................................................................................................... 2.71 39.31 

146 ........................................................................................................................................................................... 2.76 40.45 

147 ........................................................................................................................................................................... 2.82 41.59 

148 ........................................................................................................................................................................... 2.88 42.75 

149 ........................................................................................................................................................................... 2.94 43.91 

150 ........................................................................................................................................................................... 3.00 45.09 

Average ............................................................................................................................................................ ........................ 38.28 

Note: This table assumes a hypothesized geographic area that: (a) Is within a state that permits insurers to increase premiums for tobacco 

users; and (b) has mean premiums for the second-lowest-cost silver-level QHP, calculated for non-tobacco users assuming an even age distribution, as follows in 2014: $132.34 for 0–20 year olds; $243.39 for 21–44 year olds; $385.37 for 45–54 year olds; and $571.49 for ages 55–64 year 

olds. 

TABLE 3—CALCULATING THE MONTHLY COST-SHARING REDUCTION SUBSIDY COMPONENT OF FEDERAL BHP PAYMENTS

FOR 1-PERSON HOUSEHOLDS BETWEEN 138 AND 150 PERCENT FPL RECEIVING SINGLE COVERAGE THROUGH BHP 

Age 

Adjusted 

reference 

premium 

for 2015 

After application of factor (by name and amount) Final 

BHP 

CSR 

subsidy 

component 

Factor for 

removing 

administrative 

costs 

Standard 

AV 

factor 

Tobacco 

rating 

adjustment 

Induced 

utilization 

Increased 

AV 

0.8 1.43 1.3 1.12 0.24 0.95 

0–20 ............................. $136.97 $109.58 $156.69 $203.70 $228.15 $54.76 $52.02 

21–44 ........................... 251.91 201.53 288.19 374.64 419.60 100.70 95.67 

45–54 ........................... 398.86 319.09 456.30 593.18 664.37 159.45 151.48 

55–64 ........................... 591.50 473.20 676.68 879.68 985.24 236.46 224.63 

Note: See note to Table 2. 

TABLE 4—TOTAL MONTHLY AND QUARTERLY FEDERAL BHP PAYMENTS FOR 1-PERSON HOUSEHOLDS BETWEEN 138 

AND 150 PERCENT FPL RECEIVING SINGLE COVERAGE THROUGH BHP 

Age 

Monthly components Total BHP 

payments 

Premium per enrollee Quarterly 

tax 

credit 

Cost-sharing 

reduction 

subsidy Monthly 

0–20 ................................................................................................. $91.88 $52.02 $143.90 $431.69 

21–44 ............................................................................................... 198.89 95.67 294.56 883.67 

45–54 ............................................................................................... 335.70 151.48 487.18 1,461.53 

55–64 ............................................................................................... 515.05 224.63 739.68 2,219.05 

Note: See note to Table 2. 

III. Collection of Information 

Requirements 

While this document contains 

collection of information requirements 

that are subject to the Paperwork 

Reduction Act, CMS is seeking 

emergency OMB review and approval of 

those requirements under 5 CFR 

1320.13. The notice setting out the 

proposed requirements and burden 

estimates is publishing in today’s 

Federal Register under CMS–10510 

(OCN 0938—New). That notice also sets 

out instructions for submitting public 

comment, as well as the comment due 

date. 


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77412 Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact 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 Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999) 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 proposed 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 Exchange. We are 

uncertain, as described further below, as 

to whether the effects of the proposed 

rulemaking, and subsequently, this 

document, will be ‘‘economically 

significant’’ as measured by the $100 

million threshold, and hence not a 

major rule under the Congressional 

Review Act. We seek comment on the 

analysis provided below to help inform 

this assessment by the time of 

concurrent publication of the final BHP 

rule and final payment notice. In 

accordance with the provisions of 

Executive Order 12866, this document 

was reviewed by the Office of 

Management and Budget. 

1. Need for the Notice 

Section 1331 of the Affordable Care 

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

requires the Secretary to establish a 

Basic Health Program, and subsection 

(d)(1) specifically provides that if the 

Secretary finds that a state ‘‘meets the 

requirements of the program established 

under subsection (a) [of section 1331], 

the Secretary shall transfer to the State’’ 

federal BHP payments described in 

subsection (d)(3). This document 

provides for the funding methodology to 

determine the federal BHP payment 

amounts required to implement these 

provisions. 

2. Alternative Approaches 

Many of the factors proposed in this 

document 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 proposed methodology. Except 

for state-specific reference premiums 

and enrollment data, we propose using 

national rather than state-specific data. 

This is due to the lack of currently 

available state-specific data needed to 

develop the majority of the factors 

included in the proposed methodology. 

We believe the national data will 

produce sufficiently accurate 

determinations of payment rates. In 

addition, we believe that this approach 

will be less burdensome on states. With 

respect to reference premiums and 

enrollment data, we propose using statespecific data rather than national data as 

we believe state-specific data will 

produce more accurate determinations 

than national averages. 

3. Transfers 

The provisions of this document are 

designed to determine the amount of 

funds that will be transferred to states 

offering coverage through a Basic Health 

Program rather than to individuals 

eligible for premium and cost-sharing 

reductions for coverage purchased on 

the Exchange. We are uncertain what 

the total federal BHP payment amounts 

to states will be as these amounts will 

vary from state to state due to the 

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 proposed 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 Unfunded 

Mandates Reform Act of 1995 (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 

2013, that threshold is approximately 

$141 million. States have the option, but 

are not required, to establish a BHP. 

Further, the proposed 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 proposed 

payment notice 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. 


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Federal Register / Vol. 78, No. 246 / Monday, December 23, 2013 / Proposed Rules 77413 

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 document. 

Because this document is focused on 

the proposed 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. 

However, the provisions in this 

document may have a substantial, 

positive indirect effect on hospitals and 

other health care providers due to the 

substantial increase in the prevalence of 

health coverage among populations who 

are currently unable to pay for needed 

health care, leading to lower rates of 

uncompensated care at hospitals. The 

Department cannot determine whether 

this document would have a significant 

economic impact on a substantial 

number of small entities, and we request 

public comment on this issue. 

Section 1102(b) of the Act requires us 

to prepare a regulatory impact analysis 

if a document 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, the 

Department cannot determine whether 

this document 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. 

We have consulted with states to 

receive input on how the Affordable 

Care Act provisions codified in this 

document would affect states. We have 

participated in a number of conference 

calls and in person meetings with state 

officials. 

We continue to engage in ongoing 

consultations with states that have 

expressed interest in implementing a 

BHP through the BHP Learning 

Collaborative, which serves as a staff 

level policy and technical exchange of 

information between CMS and the 

states. Through consultations with this 

Learning Collaborative, we have been 

able to get input from states on many of 

the specific issues addressed in this 

document. 

Authority: Section 1331(d)(3) of the 

Affordable Care Act. 

Dated: November 20, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: November 22, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–30435 Filed 12–18–13; 4:15 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 660 

[Docket No. 130822744–3744–01] 

RIN 0648–BD63 

Fisheries Off West Coast States; 

Coastal Pelagic Species Fisheries; 

Change to Start of Pacific Sardine 

Fishing Year 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Proposed rule. 

SUMMARY: Each year, NMFS implements 

regulations that set the annual quota 

and management measures for the 

Pacific sardine fishing year. NMFS 

proposes to change the starting date of 

the annual Pacific sardine fishery from 

January 1 to July 1. This would change 

the fishing season from one based on the 

calendar year to one based on a July 1 

through the following June 30th 

schedule. No other changes to the 

annual allocation structure are being 

made and the existing seasonal 

allocation percentages will remain as 

specified in the FMP; as would the 

current quota roll-over provisions. The 

purpose of this change is to better align 

the timing of the research and science 

that is used in the annual stock 

assessments with the annual 

management schedule. To enable this 

transition in fishing years, this action 

also would establish a one-time interim 

harvest period for the 6 months from 

January 1, 2014, through June 30, 2014. 

DATES: Comments must be received by 

January 22, 2014. 

ADDRESSES: You may submit comments 

on this document identified by 

‘‘NOAA–NMFS–2013–0167’’ by any of 

the following methods: 

• Electronic Submissions: Submit all 

electronic public comments via the 

Federal e-Rulemaking Portal. Go to 

www.regulations.gov/

#!docketDetail;D=NOAA-NMFS-2013- 

0167, click the ‘‘Comment Now!’’ icon, 

complete the required fields, and enter 

or attach your comments. 

• Mail: Submit written comments to 

William W. Stelle, Jr., Regional 

Administrator, West Coast Region, 

NMFS, 7600 Sand Point Way NE., 

Seattle, WA 98115–0070; Attn: Joshua 

Lindsay. 

• Fax: (562) 980–4047; Attn: Joshua 

Lindsay 

Instructions: Comments sent by any 

other method, to any other address or 

individual, or received after the end of 

the comment period, may not be 

considered by NMFS. All comments 

received are a part of the public record 

and will generally be posted for public 

viewing on www.regulations.gov 

without change. All personal identifying 

information (e.g., name, address, etc.), 

confidential business information, or 

otherwise sensitive information 

submitted voluntarily by the sender will 

be publicly accessible. NMFS will 

accept anonymous comments (enter ‘‘N/ 

A’’ in the required fields if you wish to 

remain anonymous). Attachments to 

electronic comments will be accepted in 

Microsoft Word, Excel, or Adobe PDF 

file formats only. 

FOR FURTHER INFORMATION CONTACT: 

Joshua Lindsay, Southwest Region, 

NMFS, (562) 980–4034. 

SUPPLEMENTARY INFORMATION: This 

proposed rule would change the start 

date of the 12-month Pacific sardine 

fishery from January 1 to July 1, thus 

changing the fishing season for Pacific 

sardine from one based on the calendar 

year to one beginning on July 1 and 

continuing through June 30th of the 

following year. The purpose of this 

change is to better align the timing of 

the research and science used in the 

annual stock assessments with the 

annual management schedule, as the 

present schedule imposes substantial 


tkelley on DSK3SPTVN1PROD with PROPOSALS