Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations 35615 

EPA-APPROVED ALABAMA REGULATIONS—Continued 

State citation Title/subject 

State 

effective 

date 

EPA approval date Explanation 

Section 335–3–8–.08 ..... TR NOX Annual Trading Program—Applicability ..... 11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.09 ..... TR NOX Annual Trading Program—Retired Unit Exemption.11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.10 ..... TR NOX Annual Trading Program—Standard Requirements.11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.11 ..... TR NOX Annual Trading Program—Computation of 

Time.

11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.12 ..... Administrative Appeal Procedures ........................... 11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.13 ..... NOX Annual Trading Budgets and Variability Limits 11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.14 ..... TR NOX Annual Allowance Allocations .................... 12/7/2018 3/12/2020, 85 FR 14418.

Section 335–3–8–.16 ..... Authorization of Designated Representative and Alternate Designated Representative.11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.17 ..... Responsibilities of Designated Representative and 

Alternate Designated Representative.

11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.18 ..... Changing Designated Representative and Alternate 

Designated Representative; Changes in Owners 

and Operators; Changes in Units at the Source.

11/24/2015 8/31/2016, 81 FR 59869.

* * * * * * * 

Section 335–3–8–.20 ..... Objections Concerning Designated Representative 

and Alternate Designated Representative.

11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.21 ..... Delegation by Designated Representative and Alternate Designated Representative.11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.23 ..... Establishment of Compliance Accounts, Assurance 

Accounts, and General Accounts.

11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.24 ..... Recordation of TR NOX Annual Allowance Allocations and Auction Results.11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.25 ..... Submission of TR NOX Annual Allowance Transfers 11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.26 ..... Recordation of TR NOX Annual Allowance Transfers.11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.27 ..... Compliance with TR NOX Annual Emissions Limitation.11/24/2015 8/31/2016, 81 FR 59869.

* * * * * * * 

Section 335–3–8–.29 ..... Banking ..................................................................... 11/24/2015 8/31/2016, 81 FR 59869.

Section 335–3–8–.30 ..... Account Error ............................................................ 11/24/2015 8/31/2016, 81 FR 59869.

* * * * * * * 

Section 335–3–8–.33 ..... General Monitoring, Recordkeeping, and Reporting 

Requirements.

11/24/2015 8/31/2016, 81 FR 59869.

* * * * * * * 

Section 335–3–8–.71 ..... NOX Budget Program ............................................... 4/13/2020 7/7/2021, [Insert citation of 

publication].

Section 335–3–8–.72 ..... NOX Budget Program Monitoring and Reporting ..... 4/13/2020 7/7/2021, [Insert citation of 

publication].

Conditionally 

approved. 

* * * * * 

[FR Doc. 2021–14180 Filed 7–6–21; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 600 

[CMS–2438–FN] 

RIN 0938–ZB64 

Basic Health Program; Federal 

Funding Methodology for Program 

Year 2022 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final methodology. 

SUMMARY: This document finalizes the 

methodology and data sources necessary 

to determine federal payment amounts 

to be made for program year 2022 to 

states that elect to establish a Basic 

Health Program under the Patient 

Protection and Affordable Care Act to 

offer health benefits coverage to lowincome individuals otherwise eligible to 

purchase coverage through Health 

Insurance Exchanges, and incorporates 

the effects on such payment amounts 

the American Rescue Plan Act of 2021 

(ARP). 

DATES: The methodology and data 

sources announced in this document are 

effective on January 1, 2022. 


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1BHP program years span from January 1 through 

December 31. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Truffer, (410) 786–1264; or 

Cassandra Lagorio, (410) 786–4554. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Overview of the Basic Health 

Program 

Section 1331 of the Patient Protection 

and Affordable Care Act (Pub. L. 111– 

148, enacted on March 23, 2010), as 

amended by the Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152, enacted on March 30, 

2010) (collectively referred to as the 

Patient Protection and Affordable Care 

Act) provides states with an option to 

establish a Basic Health Program (BHP). 

In the states that elect to operate a BHP, 

the BHP will make affordable health 

benefits coverage available for 

individuals under age 65 with 

household incomes between 133 

percent and 200 percent of the federal 

poverty level (FPL) who are not 

otherwise eligible for Medicaid, the 

Children’s Health Insurance Program 

(CHIP), or affordable employersponsored coverage, or for individuals 

whose income is below these levels but 

are lawfully present non-citizens 

ineligible for Medicaid. For those states 

that have expanded Medicaid coverage 

under section 1902(a)(10)(A)(i)(VIII) of 

the Social Security Act (the Act), the 

lower income threshold for BHP 

eligibility is effectively 138 percent due 

to the application of a required 5 

percent income disregard in 

determining the upper limits of 

Medicaid income eligibility (section 

1902(e)(14)(I) of the Act). 

A BHP is another option for states to 

provide affordable health benefits to 

individuals with incomes in the ranges 

described above. States may find a BHP 

a useful option for several reasons, 

including the ability to potentially 

coordinate standard health plans in the 

BHP with their Medicaid managed care 

plans, or to potentially reduce the costs 

to individuals by lowering premiums or 

cost-sharing requirements. 

Federal funding for a BHP under 

section 1331(d)(3)(A) of the Patient 

Protection and Affordable Care Act is 

based on the amount of premium tax 

credit (PTC) and cost-sharing reductions 

(CSRs) that would have been provided 

for the fiscal year to eligible individuals 

enrolled in BHP standard health plans 

in the state if such eligible individuals 

were allowed to enroll in a qualified 

health plan (QHP) through Health 

Insurance Exchanges (‘‘Exchanges’’). 

These funds are paid to trusts 

established by the states and dedicated 

to the BHP, and the states then 

administer the payments to standard 

health plans within the BHP. 

In the March 12, 2014 Federal 

Register (79 FR 14112), we published a 

final rule entitled the ‘‘Basic Health 

Program: State Administration of Basic 

Health Programs; Eligibility and 

Enrollment in Standard Health Plans; 

Essential Health Benefits in Standard 

Health Plans; Performance Standards for 

Basic Health Programs; Premium and 

Cost Sharing for Basic Health Programs; 

Federal Funding Process; Trust Fund 

and Financial Integrity’’ (hereinafter 

referred to as the BHP final rule) 

implementing section 1331 of the 

Patient Protection and Affordable Care 

Act), which governs the establishment 

of BHPs. The BHP final rule established 

the standards for state and federal 

administration of BHPs, including 

provisions regarding eligibility and 

enrollment, benefits, cost-sharing 

requirements and oversight activities. 

While the BHP final rule codified the 

overall statutory requirements and basic 

procedural framework for the funding 

methodology, it does not contain the 

specific information necessary to 

determine federal payments. We 

anticipated that the methodology would 

be based on data and assumptions that 

would reflect ongoing operations and 

experience of BHPs, as well as the 

operation of the Exchanges. For this 

reason, the BHP final rule indicated that 

the development and publication of the 

funding methodology, including any 

data sources, would be addressed in a 

separate annual BHP Payment Notice. 

In the BHP final rule, we specified 

that the BHP Payment Notice process 

would include the annual publication of 

both a proposed and final BHP payment 

methodology. The proposed BHP 

Payment Notice would be published in 

the Federal Register each October, 2 

years prior to the applicable program 

year, and would describe the proposed 

funding methodology for the relevant 

BHP year,1 including how the Secretary 

of the Department of Health and Human 

Services (the Secretary) considered the 

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

the Patient Protection and Affordable 

Care Act, along with the proposed data 

sources used to determine the federal 

BHP payment rates for the applicable 

program year. The final BHP Payment 

Notice would be published in the 

Federal Register in February, and 

would include the final BHP payment 

methodology, as well as the federal BHP 

payment rates for the applicable BHP 

program year. For example, payment 

rates in the final BHP Payment Notice 

published in February 2015 applied to 

BHP program year 2016, beginning in 

January 2016. As discussed in section 

II.D. of this final methodology, and as 

referenced in 42 CFR 600.610(b)(2), state 

data needed to calculate the federal BHP 

payment rates for the final BHP 

Payment Notice must be submitted to 

CMS. 

As described in the BHP final rule, 

once the final methodology for the 

applicable program year has been 

published, we will generally make 

modifications to the BHP funding 

methodology on a prospective basis, 

with limited exceptions. The BHP final 

rule provided that retrospective 

adjustments to the state’s BHP payment 

amount may occur to the extent that the 

prevailing BHP funding methodology 

for a given program year permits 

adjustments to a state’s federal BHP 

payment amount due to insufficient 

data for prospective determination of 

the relevant factors specified in the 

applicable final BHP Payment Notice. 

For example, the population health 

factor adjustment described in section 

III.D.3. of this final methodology allows 

for a retrospective adjustment (at the 

state’s option) to account for the impact 

that BHP may have had on the risk pool 

and QHP premiums in the Exchange. 

Additional adjustments could be made 

to the payment rates to correct errors in 

applying the methodology (such as 

mathematical errors). 

Under section 1331(d)(3)(ii) of the 

Patient Protection and Affordable Care 

Act, the funding methodology and 

payment rates are expressed as an 

amount per eligible individual enrolled 

in a BHP standard health plan (BHP 

enrollee) for each month of enrollment. 

These payment rates may vary based on 

categories or classes of enrollees. Actual 

payment to a state would depend on the 

actual enrollment of individuals found 

eligible in accordance with a state’s 

certified BHP Blueprint eligibility and 

verification methodologies in coverage 

through the state BHP. A state that is 

approved to implement a BHP must 

provide data showing quarterly 

enrollment of eligible individuals in the 

various federal BHP payment rate cells. 

Such data must include the following: 

• Personal identifier; 

• Date of birth; 

• County of residence; 

• Indian status; 

• Family size; 

• Household income; 

• Number of persons in household 

enrolled in BHP; 

• Family identifier; 

• Months of coverage; 

• Plan information; and 


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Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations 35617 

2 ‘‘Metal tiers’’ refer to the different actuarial 

value plan levels offered on the Exchanges. Bronzelevel plans generally must provide 60 percent 

actuarial value; silver-level 70 percent actuarial 

value; gold-level 80 percent actuarial value; and 

platinum-level 90 percent actuarial value. See 45 

CFR 156.140. 

3https://www.medicaid.gov/federal-policyguidance/downloads/cib060321.pdf. 

• Any other data required by CMS to 

properly calculate the payment. 

B. The 2018 Final Administrative Order, 

2019 Payment Methodology, 2020 

Payment Methodology, and 2021 

Payment Methodology 

On October 11, 2017, the Attorney 

General of the United States provided 

the Department of Health and Human 

Services and the Department of the 

Treasury with a legal opinion indicating 

that the permanent appropriation at 31 

U.S.C. 1324, from which the 

Departments had historically drawn 

funds to make CSR payments, cannot be 

used to fund CSR payments to insurers. 

In light of this opinion—and in the 

absence of any other appropriation that 

could be used to fund CSR payments— 

the Department of Health and Human 

Services directed us to discontinue CSR 

payments to issuers until Congress 

provides for an appropriation. In the 

absence of a Congressional 

appropriation for federal funding for 

CSRs, we cannot provide states with a 

federal payment attributable to CSRs 

that BHP enrollees would have received 

had they been enrolled in a QHP 

through an Exchange. 

Starting with the payment for the first 

quarter (Q1) of 2018 (which began on 

January 1, 2018), we stopped paying the 

CSR component of the quarterly BHP 

payments to New York and Minnesota 

(the states), the only states operating a 

BHP in 2018. The states then sued the 

Secretary for declaratory and injunctive 

relief in the United States District Court 

for the Southern District of New York. 

See New York v. U.S. Dep’t of Health & 

Human Servs., No. 18–cv–00683 (RJS) 

(S.D.N.Y. filed Jan. 26, 2018). On May 

2, 2018, the parties filed a stipulation 

requesting a stay of the litigation so that 

HHS could issue an administrative 

order revising the 2018 BHP payment 

methodology. As a result of the 

stipulation, the court dismissed the BHP 

litigation. On July 6, 2018, we issued a 

Draft Administrative Order on which 

New York and Minnesota had an 

opportunity to comment. Each state 

submitted comments. We considered 

the states’ comments and issued a Final 

Administrative Order on August 24, 

2018 (Final Administrative Order) 

setting forth the payment methodology 

that would apply to the 2018 BHP 

program year. 

In the November 5, 2019 Federal 

Register (84 FR 59529) (hereinafter 

referred to as the November 2019 final 

BHP Payment Notice), we finalized the 

payment methodologies for BHP 

program years 2019 and 2020. The 2019 

payment methodology is the same 

payment methodology described in the 

Final Administrative Order. The 2020 

payment methodology is the same 

methodology as the 2019 payment 

methodology with one additional 

adjustment to account for the impact of 

individuals selecting different metal tier 

level plans in the Exchange, referred to 

as the Metal Tier Selection Factor 

(MTSF).2 In the August 13, 2020 

Federal Register (85 FR 49264 through 

49280) (hereinafter referred to as the 

August 2020 final BHP Payment Notice), 

we finalized the payment methodology 

for BHP program year 2021. The 2021 

payment methodology is the same 

methodology as the 2020 payment 

methodology, with one adjustment to 

the income reconciliation factor (IRF). 

The 2022 final payment methodology is 

the same as the 2021 payment 

methodology, except for the removal of 

the MTSF. 

C. The American Rescue Plan Act and 

Impact on the Basic Health Program 

Final 2022 Payment Amounts 

On March 11, 2021, President Biden 

signed the American Rescue Plan Act of 

2021 (ARP) (Pub. L. 117–2). This action 

has a significant impact on state 

Medicaid, CHIP, and BHP programs and 

beneficiaries.3 ARP also impacts federal 

payments to states’ BHPs. 

Section 9661 of the ARP temporarily 

modifies for 2021 and 2022 the 

applicable percentages of household 

income used to calculate the amount of 

advance payments of the premium tax 

credit (APTC) that taxpayers are eligible 

to have paid on their behalf for coverage 

purchased through an Exchange under 

the Patient Protection and Affordable 

Care Act. The applicable percentages 

determine the maximum amount of an 

individual’s household income that can 

be charged in premiums for purchasing 

the second lowest cost silver plan on the 

Exchange. The difference between the 

maximum amount of an individual’s 

household income that can be charged 

in premiums and the cost of the second 

lowest cost silver plan is paid to the 

individual as a PTC. As discussed in 

section III.D.5. of this final notice, the 

applicable percentages are factored into 

the equation for calculating the amount 

of PTC provided for individuals 

enrolled in QHPs through the Exchange 

and, accordingly, the amount of the 

federal BHP payment owed to states. 

Lower applicable percentages result in 

higher PTCs provided for QHP enrollees 

and higher federal BHP payments for 

states. Therefore, this ARP provision has 

the effect under the BHP payment 

methodology of increasing the amount 

of the federal payments owed to states 

for their BHPs in 2022. 

We published the BHP proposed 

funding methodology for program year 

2022 in ‘‘Basic Health Program; Federal 

Funding Methodology for Program Year 

2022’’ in the November 3, 2020 Federal 

Register (85 FR 69525) (hereinafter 

referred to as the 2022 proposed BHP 

Payment Notice). In the 2022 proposed 

BHP Payment Notice, we proposed that 

the applicable percentages, as then 

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

CFR 1.36B–3(g), for calendar year 2021 

would be effective for BHP program year 

2022. Because the applicable 

percentages have since been amended 

for 2022 by the ARP, we are revising the 

applicable percentages in the final BHP 

payment notice to comply with the 

ARP; we discuss this further in section 

III.D.5. of this final notice. We note that 

updating the applicable percentage 

amounts themselves does not alter the 

BHP payment methodology, but are 

inputs under that methodology that, 

when changed will impact the payment 

amounts paid by the federal government 

to the states that operate a BHP under 

the methodology. In previous payment 

methodologies, we have used the prior 

year’s applicable percentages to 

calculate BHP payments because those 

were the most recently published 

percentages at the time the 

methodologies were finalized. However, 

the 2022 applicable percentages are 

available now as a result of section 9661 

of ARP, so we are updating the 

applicable percentages in this final 

notice. 

In addition, in the 2022 proposed 

BHP Payment Notice, we proposed to 

include the IRF to account for potential 

differences between BHP enrollees’ 

household income reported at the 

beginning of the year and the actual 

income over the year. This factor is 

needed because, unlike PTC recipients 

enrolled through Exchanges, BHP 

enrollees will not experience a 

reconciliation at the end of the tax year. 

This adjustment has been included in 

the methodology since 2015. In the 2022 

proposed BHP Payment Notice, we 

proposed to set the value of the IRF 

equality to 99.01. However, due to 

changes made by the ARP, the Office of 

Tax Analysis (OTA) of the Department 

of the Treasury has revised its estimate 

for the IRF to be 100.63 percent. 

Therefore, we are updating the value of 

the IRF to be 100.63, as further 


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35618 Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations 

discussed in section III.D.7 of this final 

notice. 

In the final payment methodologies 

for program years 2020 and 2021 and 

proposed payment methodology for 

2022, we included a factor to account 

for the impact of the discontinuation of 

CSR payments on individuals’ selection 

of metal tier level plans in the 

Exchange, referred to as the Metal Tier 

Selection Factor. Specifically, the MTSF 

was included to account for the impact 

of QHP enrollees eligible for PTC 

choosing bronze-level plans (which 

have lower premiums than silver-level 

plans) and receiving less than the full 

value of the PTC, which was amplified 

after the discontinuation of the CSR 

payments. However, because section 

9661 of the ARP reduces the maximum 

percentage of an individual’s household 

income that can be charged in 

premiums for purchasing the second 

lowest cost silver plan on the Exchange, 

we believe consumer behavior around 

selecting different metal tier level plans 

likely will change significantly. In other 

words, we anticipate that, as a result of 

the ARP, more individuals with 

household income below 200 percent 

FPL will enroll in silver-level plans 

because these plans can now be 

purchased for a lower premium amount, 

and for many individuals, there will be 

silver-level plans with $0 premium. 

Therefore, we are removing the MTSF 

from the final payment methodology for 

program year 2022. 

II. Summary of the Proposed Provisions 

and Analysis of and Responses to the 

Public Comments 

The following sections, arranged by 

subject area, include a summary of the 

public comments that we received and 

our responses. We received 11 public 

comments from individuals and 

organizations, including, but not limited 

to, state government agencies, other 

government agencies, and private 

citizens. In this section, we outline the 

proposed provisions and provide a 

summary of the public comments 

received and our responses. For a 

complete and full description of the 

BHP proposed funding methodology for 

program year 2022, see the 2022 

proposed BHP Payment Notice. 

A. Background 

In the 2022 proposed BHP Payment 

Notice, we proposed the methodology 

for how the federal BHP payments 

would be calculated for program year 

2022. 

We received the following comments 

on the background information included 

in the 2022 proposed BHP Payment 

Notice: 

Comment: Several commenters were 

supportive of the 2022 BHP payment 

methodology described in the 2022 

proposed BHP Payment Notice. 

Response: We appreciate the support 

from these commenters. As described 

further in this final notice, we are 

finalizing the 2022 methodology as 

proposed in the 2022 proposed BHP 

Payment Notice, with the exception of 

the removal of the MTSF and updating 

the applicable percentages of household 

income used to calculate APTC amounts 

and the value of the IRF, as described 

in section I.C in this final notice. 

B. Overview of the Funding 

Methodology and Calculation of the 

Payment Amount 

We proposed in the overview of the 

funding methodology to calculate the 

PTC and CSR as consistently as possible 

and in general alignment with the 

methodology used by Exchanges to 

calculate APTC and CSR, and by the 

Internal Revenue Service (IRS) to 

calculate the allowable PTC. We 

proposed four equations (1, 2a, 2b, and 

3) that would, if finalized, compose the 

overall BHP payment methodology. 

We received the following comments 

on the overview of the funding 

methodology included in the 2022 

proposed BHP Payment Notice: 

Comment: One commenter 

recommended CMS apply the proposed 

methodology only when a state initially 

establishes a BHP. This commenter 

recommended that after a BHP is 

established, states should be allowed to 

use prior program year premiums for 

payments. The commenter reasoned that 

simplifying the BHP payment 

methodology would provide 

administrative relief as well as greater 

certainty of expected funds for states. 

Response: We did not propose and are 

not adopting the recommendation 

related to the proposed methodology 

applying only to a state’s initial program 

year. We also note that current Federal 

BHP regulations in § 600.605 specify the 

BHP payment methodology. 

Specifically, § 600.605(c) provides that 

the Secretary will annually adjust the 

payment methodology on a prospective 

basis to adjust for any changes in the 

calculation of the PTC and CSR 

components to the extent that necessary 

data is available. Further, regulations at 

§ 600.610 require that a proposed BHP 

payment methodology be published in 

the Federal Register each October, 2 

years prior to the applicable program 

year, and describe the proposed funding 

methodology for the relevant BHP year. 

The final BHP payment methodology 

must be published in the Federal 

Register in February, and include the 

final BHP payment methodology, as 

well as the federal BHP payment rates 

for the applicable BHP program year. 

Changes to this process, like the one 

suggested by the commenter, would 

require amendments to existing BHP 

regulations. 

Comment: One commenter 

recommended that for the purpose of 

calculating BHP payments, CMS assume 

that American Indian and Alaska Native 

(AI/AN) enrollees in BHPs would have 

enrolled in the second-lowest cost 

bronze-level plan instead of the secondlowest cost silver-level plan on the 

Exchanges. 

Response: While AI/AN enrollees may 

enroll in the second-lowest cost bronzelevel plan and continue to receive CSRs, 

PTCs continue to be based on the 

second-lowest cost silver-level QHP. 

Therefore, BHP payments to states for 

AI/AN and all other enrollees need to 

continue to be based on the secondlowest cost silver QHP. 

We did not propose and are not 

adopting this recommendation. The 

only portion of the rate affected by the 

use of the lowest-cost bronze-level plan 

is the CSR portion of the BHP payment; 

due to the discontinuance of CSR 

payments and the accompanying 

modification to the BHP payment 

methodology, the CSR portion of the 

payment is assigned a value of 0, and 

therefore, any change to the assumption 

about which bronze-level QHP is used 

would have no effect on the BHP 

payments. 

Comment: One commenter 

recommended that AI/AN premiums in 

a BHP should not exceed the cost of the 

second-lowest cost bronze-level plan 

and suggested that CMS provide 

additional BHP funding to states in 

order to ensure that AI/AN populations 

do not experience a premium increase 

when enrolling in BHP from a bronzelevel plan on the Exchange. 

Response: We appreciate and 

understand the commenter’s concern 

regarding the premium levels for the AI/ 

AN population. However, section 

1331(a)(2)(A)(i) of the Patient Protection 

and Affordable Care Act requires that 

states operating BHPs must ensure that 

individuals do not pay a higher monthly 

premium than they would have if they 

had been enrolled in the second lowest 

cost silver-level QHP in an Exchange, 

after reduction for any PTCs and CSRs 

allowable with respect to either plan. In 

addition, as specified in § 600.705(c)(1), 

BHP states are permitted to use BHP 

trust funds to reduce premiums and cost 

sharing for eligible individuals enrolled 

in standard health plans under BHP. For 

example, Minnesota does not charge 

premiums for the AI/AN population. 


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Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations 35619 

4Minnesota Statutes, Chapter 256L.15(c). 

This premium policy is required by 

state law and included in Minnesota’s 

BHP Blueprint.4

C. Federal BHP Payment Rate Cells 

In this section of the 2022 proposed 

BHP Payment Notice, we proposed to 

continue to require that a state 

implementing BHP provide us with an 

estimate of the number of BHP enrollees 

it will enroll in the upcoming BHP 

program quarter, by applicable rate cell, 

to determine the federal BHP payment 

amounts. For each state, we proposed 

using rate cells that separate the BHP 

population into separate cells based on 

the following factors: Age, geographic 

rating area, coverage status, household 

size, and income. For specific 

discussions of these proposals, please 

refer to the 2022 proposed BHP Payment 

Notice. 

We received no comments on this 

aspect of the proposed methodology. 

Therefore, we are finalizing these 

policies as proposed. 

D. Sources and State Data 

Considerations 

We proposed in this section of the 

2022 proposed BHP Payment Notice to 

continue to use, to the extent possible, 

data submitted to the federal 

government by QHP issuers seeking to 

offer coverage through an Exchange that 

uses HealthCare.gov to determine the 

federal BHP payment cell rates. 

However, for states operating a Statebased Exchange (SBE), which do not use 

HealthCare.gov, we proposed to 

continue to require such states to submit 

required data for CMS to calculate the 

federal BHP payment rates in those 

states. For specific discussions, please 

refer to the 2022 proposed BHP Payment 

Notice. 

We received no comments on this 

aspect of the proposed methodology. 

Therefore, we are finalizing these 

policies as proposed. 

E. Discussion of Specific Variables Used 

in Payment Equations 

In this section of the 2022 proposed 

BHP Payment Notice, we proposed to 

continue to use eight specific variables 

in the payment equations that compose 

the overall BHP funding methodology 

(seven variables are described in section 

III.D. of this final notice, and the 

premium trend factor is described in 

section III.E. of this final notice). For 

each proposed variable, we included a 

discussion on the assumptions and data 

sources used in developing the 

variables. For specific discussions, 

please refer to 2022 proposed BHP 

Payment Notice. 

Below is a summary of the public 

comments we received regarding 

specific factors and our responses. 

Comment: One commenter supported 

maintaining the value of the premium 

adjustment factor (PAF) at 1.188 for 

program year 2022. 

Response: We appreciate the support 

from this commenter. As described 

further in this final notice, we are 

finalizing the methodology as proposed 

in the 2022 proposed BHP Payment 

Notice, and will be maintaining the 

value of the PAF at 1.188 for program 

year 2022. 

Comment: One commenter expressed 

their support of using 2019 data to 

calculate the MTSF as proposed in the 

2022 proposed BHP Payment Notice. 

This commenter stated that using partial 

2020 data to calculate the MTSF would 

likely not be a reasonable predictor of 

consumer behavior in 2022 due to the 

impact of the COVID–19 public health 

emergency (PHE). 

Response: We appreciate the support 

from this commenter. However, since 

publication of the 2022 proposed 

Payment Notice, Congress passed the 

ARP, which, as discussed in section I.C. 

of this final notice, modifies the 

applicable percentages of household 

income used to calculate the amount of 

APTC taxpayers are eligible to have paid 

on their behalf for coverage purchased 

through an Exchange during taxable 

years 2021 and 2022. We believe that 

these changes are likely to significantly 

affect enrollees’ plan choices starting in 

2022. For this reason and the reasons 

discussed in sections I.C. and III.D.6. of 

this final notice, we are not finalizing 

inclusion of the MTSF in the 2022 final 

BHP Payment Notice. 

F. State Option To Use Prior Program 

Year QHP Premiums for BHP Payments 

In this section of the 2022 BHP 

proposed Payment Notice, we proposed 

to continue to provide states operating 

a BHP with the option to use the 2021 

QHP premiums multiplied by a 

premium trend factor to calculate the 

federal BHP payment rates instead of 

using the 2022 QHP premiums. We 

proposed to require states to make their 

election for the 2022 program year by 

May 15, 2021, or within 60 days of 

publication of the final payment 

methodology, whichever is later. For 

specific discussions, please refer to the 

2022 BHP proposed Payment Notice. 

Below is a summary of the public 

comments we received regarding this 

section and our responses. 

Comment: One commenter expressed 

support for the proposed approach of 

using state-specific premiums and 

giving states the choice of applying 

actual current year premiums or the 

prior year’s premiums multiplied by the 

premium trend factor (PTF). Due to the 

annual timing of this decision, this 

choice allows the state flexibility in 

making a determination that it believes 

is consistent with program goals for the 

upcoming year. 

Response: We appreciate the support 

from this commenter. As described 

further in this final notice, we are 

finalizing the methodology as proposed 

in the 2022 proposed BHP Payment 

Notice. 

G. State Option To Include 

Retrospective State-Specific Health Risk 

Adjustment in Certified Methodology 

In this section of the 2022 BHP 

proposed Payment Methodology, we 

proposed to provide states 

implementing BHP the option to 

develop a methodology to account for 

the impact that including the BHP 

population in the Exchange would have 

had on QHP premiums based on any 

differences in health status between the 

BHP population and persons enrolled 

through the Exchange. We proposed that 

states would submit their optional 

protocol to CMS by the later of August 

1, 2021 or 60 days after the publication 

of the final methodology. For specific 

discussions, please refer to the 2022 

BHP proposed Payment Notice. 

We received no comments on this 

aspect of the methodology. Therefore, 

we are finalizing this policy as 

proposed. Because we are finalizing the 

2022 payment methodology within 60 

days of August 1, 2021, a state electing 

this option must submit their protocol 

to CMS within 60 days of publication of 

this final notice. 

III. Provisions of the 2022 BHP Final 

Methodology 

A. Overview of the Funding 

Methodology and Calculation of the 

Payment Amount 

Section 1331(d)(3) of the Patient 

Protection and Affordable Care Act 

directs the Secretary to consider several 

factors when determining the federal 

BHP payment amount, which, as 

specified in the statute, must equal 95 

percent of the value of the PTC and 

CSRs that BHP enrollees would have 

been provided had they enrolled in a 

QHP through an Exchange. Thus, the 

BHP funding methodology is designed 

to calculate the PTC and CSRs as 

consistently as possible and in general 

alignment with the methodology used 

by Exchanges to calculate APTC and 

CSRs, and by the IRS to calculate PTC 


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35620 Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations 

for the tax year. In general, we have 

relied on values for factors in the 

payment methodology specified in 

statute or other regulations as available, 

and have developed values for other 

factors not otherwise specified in 

statute, or previously calculated in other 

regulations, to simulate the values of the 

PTCs and CSRs that BHP enrollees 

would have received if they had 

enrolled in QHPs offered through an 

Exchange. In accordance with section 

1331(d)(3)(A)(iii) of the Patient 

Protection and Affordable Care Act, the 

final funding methodology must be 

certified by the Chief Actuary of CMS, 

in consultation with the Office of Tax 

Analysis (OTA) of the Department of the 

Treasury, as having met the 

requirements of section 1331(d)(3)(A)(ii) 

of the Patient Protection and Affordable 

Care Act. 

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

Protection and Affordable Care Act 

specifies that the payment 

determination shall take into account all 

relevant factors necessary to determine 

the value of the PTCs and CSRs that 

would have been provided to eligible 

individuals, including but not limited 

to, the age and income of the enrollee, 

whether the enrollment is for self-only 

or family coverage, geographic 

differences in average spending for 

health care across rating areas, the 

health status of the enrollee for 

purposes of determining risk adjustment 

payments and reinsurance payments 

that would have been made if the 

enrollee had enrolled in a QHP through 

an Exchange, and whether any 

reconciliation of APTC and CSR would 

have occurred if the enrollee had been 

so enrolled. Under the payment 

methodologies for 2015 (79 FR 13887 

through 14151) (published on March 12, 

2014), for 2016 (80 FR 9636 through 

9648) (published on February 24, 2015), 

for 2017 and 2018 (81 FR 10091 through 

10105) (published on February 29, 

2016), for 2019 and 2020 (84 FR 59529 

through) (published on November 5, 

2019), and for 2021 (85 FR 49264 

through 49280) (published on August 

13, 2020) (hereinafter referred to as the 

2021 final BHP Payment Notice), the 

total federal BHP payment amount has 

been calculated using multiple rate cells 

in each state. Each rate cell represents 

a unique combination of age range (if 

applicable), geographic area, coverage 

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

household size, and income range as a 

percentage of FPL, and there is a 

distinct rate cell for individuals in each 

coverage category within a particular 

age range who reside in a specific 

geographic area and are in households 

of the same size and income range. The 

BHP payment rates developed also are 

consistent with the state’s rules on age 

rating. Thus, in the case of a state that 

does not use age as a rating factor on an 

Exchange, the BHP payment rates would 

not vary by age. 

Under the methodology finalized in 

the August 2020 final BHP Payment 

Notice, the rate for each rate cell is 

calculated in two parts. The first part is 

equal to 95 percent of the estimated PTC 

that would have been paid if a BHP 

enrollee in that rate cell had instead 

enrolled in a QHP in an Exchange. The 

second part is equal to 95 percent of the 

estimated CSR payment that would have 

been made if a BHP enrollee in that rate 

cell had instead enrolled in a QHP in an 

Exchange. These two parts are added 

together and the total rate for that rate 

cell would be equal to the sum of the 

PTC and CSR rates. As noted in the 

August 2020 final BHP Payment Notice, 

we currently assign a value of zero to 

the CSR portion of the BHP payment 

rate calculation, because there is 

presently no available appropriation 

from which we can make the CSR 

portion of any BHP Payment. 

We finalize that Equation (1) will be 

used to calculate the estimated PTC for 

eligible individuals enrolled in the BHP 

in each rate cell. We note that 

throughout this final methodology, 

when we refer to enrollees and 

enrollment data, we mean data 

regarding individuals who are enrolled 

in the BHP who have been found 

eligible for the BHP using the eligibility 

and verification requirements that are 

applicable in the state’s most recent 

certified Blueprint. By applying the 

equations separately to rate cells based 

on age (if applicable), income and other 

factors, we effectively take those factors 

into account in the calculation. In 

addition, the equations reflect the 

estimated experience of individuals in 

each rate cell if enrolled in coverage 

through an Exchange, taking into 

account additional relevant variables. 

Each of the variables in the equations is 

defined in this section, and further 

detail is provided later in this section of 

this final methodology. In addition, we 

describe in Equation (2a) and Equation 

(2b) (below) how we will calculate the 

adjusted reference premium that is used 

in Equation (1). 

Equation 1: Estimated PTC by Rate Cell 

The estimated PTC, on a per enrollee 

basis, will be calculated for each rate 

cell for each state based on age range (if 

applicable), geographic area, coverage 

category, household size, and income 

range. The PTC portion of the rate will 

be calculated in a manner consistent 

with the methodology used to calculate 

the PTC for persons enrolled in a QHP, 

with 5 adjustments. First, the PTC 

portion of the rate for each rate cell will 

represent the mean, or average, expected 

PTC that all persons in the rate cell 

would receive, rather than being 

calculated for each individual enrollee. 

Second, the reference premium (RP) 

(described in section III.D.1. of this final 

methodology) used to calculate the PTC 

would be adjusted for the BHP 

population health status, and in the case 

of a state that elects to use 2021 

premiums for the basis of the BHP 

federal payment, for the projected 

change in the premium from 2021 to 

2022, to which the rates announced in 

the final payment methodology would 

apply. These adjustments are described 

in Equation (2a) and Equation (2b). 

Third, the PTC will be adjusted 

prospectively to reflect the mean, or 

average, net expected impact of income 

reconciliation on the combination of all 

persons enrolled in the BHP; this 

adjustment, the IRF, as described in 

section III.D.7. of this final 

methodology, will account for the 

impact on the PTC that would have 

occurred had such reconciliation been 

performed. Finally, the rate is 

multiplied by 95 percent, consistent 

with section 1331(d)(3)(A)(i) of the 

Patient Protection and Affordable Care 

Act. We note that in the situation where 

the average income contribution of an 

enrollee would exceed the adjusted 

reference premium, we will calculate 

the PTC to be equal to 0 and would not 

allow the value of the PTC to be 

negative. 

We will use Equation (1) to calculate 

the PTC rate, consistent with the 

methodology described above: 


khammond on DSKJM1Z7X2PROD with RULESER07JY21.071</GPH>

[ I,-lh · · X PTCFh · ·] Equation (1): PTCa,g,c,h,i = ARPa,g,c - 1 ,i,J n ,i,J X IRF X 95% 
Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations 35621 

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

BHP payment rate 

a = Age range 

g = Geographic area 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

h = Household size 

i = Income range (as percentage of FPL) 

ARPa,g,c = Adjusted reference premium 

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

1 percentage-point increment of FPL 

j = jth percentage-point increment FPL 

n = Number of income increments used to 

calculate the mean PTC 

PTCFh,i,j = Premium tax credit formula 

percentage 

IRF = Income reconciliation factor 

Equation (2a) and Equation (2b): 

Adjusted Reference Premium Variable 

(Used in Equation 1) 

As part of the calculations for the PTC 

component, we will calculate the value 

of the adjusted reference premium as 

described below. Consistent with the 

existing approach, we will allow states 

to choose between using the actual 

current year premiums or the prior 

year’s premiums multiplied by the PTF 

(as described in section III.E. of this 

final methodology). Below we describe 

how we will calculate the adjusted 

reference premium under each option. 

In the case of a state that elected to 

use the reference premium (RP) based 

on the current program year (for 

example, 2022 premiums for the 2022 

program year), we will calculate the 

value of the adjusted reference premium 

as specified in Equation (2a). The 

adjusted reference premium will be 

equal to the RP, which will be based on 

the second lowest cost silver plan 

premium in the applicable program 

year, multiplied by the BHP population 

health factor (PHF) (described in section 

III.D.3. of this final methodology), 

which will reflect the projected impact 

that enrolling BHP-eligible individuals 

in QHPs through an Exchange would 

have had on the average QHP premium, 

and multiplied by the PAF (described in 

section III.D.2. of this final 

methodology), which will account for 

the change in silver-level premiums due 

to the discontinuance of CSR payments. 

ARPa,g,c = Adjusted reference premium 

a = Age range 

g = Geographic area 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

RPa,g,c = Reference premium 

PHF = Population health factor 

PAF = Premium adjustment factor 

In the case of a state that elected to 

use the RP based on the prior program 

year (for example, 2021 premiums for 

the 2022 program year, as described in 

more detail in section II.E. of this final 

methodology), we will calculate the 

value of the adjusted reference premium 

as specified in Equation (2b). The 

adjusted reference premium will be 

equal to the RP, which will be based on 

the second lowest cost silver plan 

premium in 2021, multiplied by the 

BHP PHF (described in section III.D.3. 

of this final methodology), which will 

reflect the projected impact that 

enrolling BHP-eligible individuals in 

QHPs on an Exchange would have had 

on the average QHP premium, 

multiplied by the PAF (described in 

section III.D.2. of this final 

methodology), which will account for 

the change in silver-level premiums due 

to the discontinuance of CSR payments, 

and multiplied by the PTF (described in 

section III.E. of this final methodology), 

which would reflect the projected 

change in the premium level between 

2021 and 2022. 

ARPa,g,c = Adjusted reference premium 

a = Age range 

g = Geographic area 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

RPa,g,c = Reference premium 

PHF = Population health factor 

PAF = Premium adjustment factor 

PTF = Premium trend factor 

Equation 3: Determination of Total 

Monthly Payment for BHP Enrollees in 

Each Rate Cell 

In general, the rate for each rate cell 

will be multiplied by the number of 

BHP enrollees in that cell (that is, the 

number of enrollees that meet the 

criteria for each rate cell) to calculate 

the total monthly BHP payment. This 

calculation is shown in Equation (3). 

PMT = Total monthly BHP payment 

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

BHP payment rate 

CSRa,g,c,h,i = Cost sharing reduction portion of 

BHP payment rate 

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

a = Age range 

g = Geographic area 

c = Coverage status (self-only or applicable 

category of family coverage) obtained 

through BHP 

h = Household size 

i = Income range (as percentage of FPL) 

In this equation, we will assign a 

value of zero to the CSR part of the BHP 

payment rate calculation (CSRa,g,c,h,i) 

because there is presently no available 

appropriation from which we can make 

the CSR portion of any BHP payment. In 

the event that an appropriation for CSRs 

for 2022 is made, we will determine 

whether and how to modify the CSR 

part of the BHP payment rate 

calculation (CSRa,g,c,h,i) or the PAF in the 

payment methodology. 

B. Federal BHP Payment Rate Cells 

Consistent with the previous payment 

methodologies, a state implementing a 

BHP will provide us an estimate of the 

number of BHP enrollees it projects will 

enroll in the upcoming BHP program 

quarter, by applicable rate cell, prior to 

the first quarter and each subsequent 

quarter of program operations until 

actual enrollment data is available. 

Upon our approval of such estimates as 

reasonable, we will use those estimates 


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Equation (2a): ARPa,g,c = RPa,g,c X PHF X PAF 

Equation (2b): ARPa,g,c = RPa,g,c x PHF x PAF x PTF 

Equation (3): PMT = L[(PTCa,g,c,h,i + CSRa,g,c,h,i) X Ea,g,c,h,d 
35622 Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations 

5This curve is used to implement the Patient 

Protection and Affordable Care Act’s 3:1 limit on 

age-rating in states that do not create an alternative 

rate structure to comply with that limit. The curve 

applies to all individual market plans, both within 

and outside the Exchange. The age bands capture 

the principal allowed age-based variations in 

premiums as permitted by this curve. The default 

age curve was updated for plan or policy years 

beginning on or after January 1, 2018 to include 

different age rating factors between children 0–14 

and for persons at each age between 15 and 20. 

More information is available at https://

www.cms.gov/CCIIO/Programs-and-Initiatives/ 

Health-Insurance-Market-Reforms/Downloads/ 

StateSpecAgeCrv053117.pdf. Both children and 

adults under age 21 are charged the same premium. 

For adults age 21–64, the age bands in this notice 

divide the total age-based premium variation into 

the three most equally-sized ranges (defining size 

by the ratio between the highest and lowest 

premiums within the band) that are consistent with 

the age-bands used for risk-adjustment purposes in 

the HHS-Developed Risk Adjustment Model. For 

such age bands, see HHS-Developed Risk 

Adjustment Model Algorithm ‘‘Do It Yourself 

(DIY)’’ Software Instructions for the 2018 Benefit 

Year, April 4, 2019 Update, https://www.cms.gov/ 

CCIIO/Resources/Regulations-and-Guidance/ 

Downloads/Updated-CY2018-DIY-instructions.pdf. 

6 In this document, references to the ‘‘current 

methodology’’ refer to the 2021 program year 

methodology as outlined in the 2021 final BHP 

Payment Notice. 

7For example, a cell within a particular state 

might refer to ‘‘County Group 1,’’ ‘‘County Group 

2,’’ etc., and a table for the state would list all the 

counties included in each such group. These 

geographic areas are consistent with the geographic 

areas established under the 2014 Market Reform 

Rules. They also reflect the service area 

requirements applicable to QHPs, as described in 45 

CFR 155.1055, except that service areas smaller 

than counties are addressed as explained in this 

notice. 

8The three lowest income ranges will be limited 

to lawfully present immigrants who are ineligible 

for Medicaid because of immigration status. 

to calculate the prospective payment for 

the first and subsequent quarters of 

program operation until the state 

provides us with actual enrollment data 

for those periods. The actual enrollment 

data is required to calculate the final 

BHP payment amount and make any 

necessary reconciliation adjustments to 

the prior quarters’ prospective payment 

amounts due to differences between 

projected and actual enrollment. 

Subsequent quarterly deposits to the 

state’s trust fund will be based on the 

most recent actual enrollment data 

submitted to us. Actual enrollment data 

must be based on individuals enrolled 

for the quarter who the state found 

eligible and whose eligibility was 

verified using eligibility and verification 

requirements as agreed to by the state in 

its applicable BHP Blueprint for the 

quarter that enrollment data is 

submitted. Procedures will ensure that 

federal payments to a state reflect actual 

BHP enrollment during a year, within 

each applicable category, and 

prospectively determined federal 

payment rates for each category of BHP 

enrollment, with such categories 

defined in terms of age range (if 

applicable), geographic area, coverage 

status, household size, and income 

range, as explained above. 

We are finalizing our proposal to 

require the use of certain rate cells as 

part of this final methodology. For each 

state, we will use rate cells that separate 

the BHP population into separate cells 

based on the five factors described as 

follows: 

Factor 1—Age: We will separate 

enrollees into rate cells by age (if 

applicable), using the following age 

ranges that capture the widest variations 

in premiums under HHS’s Default Age 

Curve: 5

• Ages 0–20. 

• Ages 21–34. 

• Ages 35–44. 

• Ages 45–54. 

• Ages 55–64. 

This provision is unchanged from the 

current methodology.6

Factor 2—Geographic area: For each 

state, we will separate enrollees into 

rate cells by geographic areas within 

which a single RP is charged by QHPs 

offered through the state’s Exchange. 

Multiple, non-contiguous geographic 

areas will be incorporated within a 

single cell, so long as those areas share 

a common RP.7 This provision is also 

unchanged from the current 

methodology. 

Factor 3—Coverage status: We will 

separate enrollees into rate cells by 

coverage status, reflecting whether an 

individual is enrolled in self-only 

coverage or persons are enrolled in 

family coverage through the BHP, as 

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

the Patient Protection and Affordable 

Care Act. Among recipients of family 

coverage through the BHP, separate rate 

cells, as explained below, will apply 

based on whether such coverage 

involves two adults alone or whether it 

involves children. This provision is 

unchanged from the current 

methodology. 

Factor 4—Household size: We will 

continue the current methods for 

separating enrollees into rate cells by 

household size that states use to 

determine BHP enrollees’ household 

income as a percentage of the FPL under 

§ 600.320 (Determination of eligibility 

for and enrollment in a standard health 

plan). We will require separate rate cells 

for several specific household sizes. For 

each additional member above the 

largest specified size, we will publish 

instructions for how we would develop 

additional rate cells and calculate an 

appropriate payment rate based on data 

for the rate cell with the closest 

specified household size. We will 

publish separate rate cells for household 

sizes of 1 through 10. This finalized 

provision is unchanged from the current 

methodology. 

Factor 5—Household Income: For 

households of each applicable size, we 

will continue the current methods for 

creating separate rate cells by income 

range, as a percentage of FPL. The PTC 

that a person would receive if enrolled 

in a QHP through an Exchange varies by 

household income, both in level and as 

a ratio to the FPL. Thus, separate rate 

cells will be used to calculate federal 

BHP payment rates to reflect different 

bands of income measured as a 

percentage of FPL. We will use the 

following income ranges, measured as a 

percentage of the FPL: 

• 0 to 50 percent of the FPL. 

• 51 to 100 percent of the FPL. 

• 101 to 138 percent of the FPL.8

• 139 to 150 percent of the FPL. 

• 151 to 175 percent of the FPL. 

• 176 to 200 percent of the FPL. 

This provision is unchanged from the 

current methodology. 

These rate cells will only be used to 

calculate the federal BHP payment 

amount. A state implementing a BHP 

will not be required to use these rate 

cells or any of the factors in these rate 

cells as part of the state payment to the 

standard health plans participating in 

the BHP or to help define BHP 

enrollees’ covered benefits, premium 

costs, or out-of-pocket cost-sharing 

levels. 

Consistent with the current 

methodology, we are finalizing our 

proposal to use averages to define 

federal payment rates, both for income 

ranges and age ranges (if applicable), 

rather than varying such rates to 

correspond to each individual BHP 

enrollee’s age (if applicable) and income 

level. This approach will increase the 

administrative feasibility of making 

federal BHP payments and reduce the 

likelihood of inadvertently erroneous 

payments resulting from highly complex 

methodologies. This approach should 

not significantly change federal 

payment amounts, since within 

applicable ranges; the BHP-eligible 

population is distributed relatively 

evenly. 

The number of factors contributing to 

rate cells, when combined, can result in 

over 350,000 rate cells, which can 

increase the complexity when 

generating quarterly payment amounts. 

In future years, and in the interest of 

administrative simplification, we will 

consider whether to combine or 

eliminate certain rate cells, once we are 

certain that the effect on payment would 

be insignificant. 


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Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations 35623 

9See 81 FR at 10097. 

C. Sources and State Data 

Considerations 

To the extent possible, unless 

otherwise provided, we will continue to 

use data submitted to the federal 

government by QHP issuers seeking to 

offer coverage through the Exchange in 

the relevant BHP state to perform the 

calculations that determine federal BHP 

payment cell rates. 

States operating an SBE in the 

individual market, however, must 

provide certain data, including 

premiums for second lowest cost silver 

plans, by geographic area, for CMS to 

calculate the federal BHP payment rates 

in those states. States operating BHPs 

interested in obtaining the applicable 

2022 program year federal BHP payment 

rates for its state must submit such data 

accurately, completely, and as specified 

by CMS, by no later than October 15, 

2021. If additional state data (that is, in 

addition to the second lowest cost silver 

plan premium data) are needed to 

determine the federal BHP payment 

rate, such data must be submitted in a 

timely manner, and in a format 

specified by us to support the 

development and timely release of 

annual BHP Payment Methodologies. 

The specifications for data collection to 

support the development of BHP 

payment rates are published in CMS 

guidance and are available in the 

Federal Policy Guidance section at 

https://www.medicaid.gov/federalpolicy-Guidance/index.html under 

‘‘State Report for Health Insurance 

Exchange Premiums. 

States operating a BHP must submit 

enrollment data to us on a quarterly 

basis and should be technologically 

prepared to begin submitting data at the 

start of their BHP, starting with the 

beginning of the first program year. This 

differs from the enrollment estimates 

used to calculate the initial BHP 

payment, which states would generally 

submit to CMS 60 days before the start 

of the first quarter of the program start 

date. This requirement is necessary for 

us to implement the payment 

methodology that is tied to a quarterly 

reconciliation based on actual 

enrollment data. 

We will continue the policy first 

adopted in the 2016 final BHP Payment 

Methodology that in states that have 

BHP enrollees who do not file federal 

tax returns (non-filers), the state must 

develop a methodology to determine the 

enrollees’ household income and 

household size consistently with 

Marketplace requirements.9 The state 

must submit this methodology to us at 

the time of their Blueprint submission. 

We reserve the right to approve or 

disapprove the state’s methodology to 

determine household income and 

household size for non-filers if the 

household composition and/or 

household income resulting from 

application of the methodology are 

different from what typically would be 

expected to result if the individual or 

head of household in the family were to 

file a tax return. States currently 

operating a BHP that wish to change the 

methodology for non-filers must submit 

a revised Blueprint outlining the 

revisions to its methodology, consistent 

with § 600.125. 

In addition, as the federal payments 

are determined quarterly and the 

enrollment data is required to be 

submitted by the states to us quarterly, 

the quarterly payment will be based on 

the characteristics of the enrollee at the 

beginning of the quarter (or their first 

month of enrollment in the BHP in each 

quarter). Thus, if an enrollee were to 

experience a change in county of 

residence, household income, 

household size, or other factors related 

to the BHP payment determination 

during the quarter, the payment for the 

quarter will be based on the data as of 

the beginning of the quarter (or their 

first month of enrollment in the BHP in 

the applicable quarter). Payments will 

still be made only for months that the 

person is enrolled in and eligible for the 

BHP. We do not anticipate that this will 

have a significant effect on the federal 

BHP payment. The states must maintain 

data that is consistent with CMS’ 

verification requirements, including 

auditable records for each individual 

enrolled, indicating an eligibility 

determination and a determination of 

income and other criteria relevant to the 

payment methodology as of the 

beginning of each quarter. 

Consistent with § 600.610 (Secretarial 

determination of BHP payment amount), 

the state is required to submit certain 

data in accordance with this notice. We 

require that this data be collected and 

validated by states operating a BHP, and 

that this data be submitted to CMS. 

D. Discussion of Specific Variables Used 

in Payment Equations 

1. Reference Premium (RP) 

To calculate the estimated PTC that 

would be paid if BHP-eligible 

individuals enrolled in QHPs through 

an Exchange, we must calculate a RP 

because the PTC is based, in part, on the 

premiums for the applicable second 

lowest cost silver plan as explained in 

section III.D.5. of this final 

methodology, regarding the premium 

tax credit formula (PTCF). This method 

is unchanged from the current 

methodology except to update the 

reference years, and to provide 

additional methodological details to 

simplify calculations and to deal with 

potential ambiguities. Accordingly, for 

the purposes of calculating the BHP 

payment rates, the RP, in accordance 

with 26 U.S.C. 36B(b)(3)(C), is defined 

as the adjusted monthly premium for an 

applicable second lowest cost silver 

plan. The applicable second lowest cost 

silver plan is defined in 26 U.S.C. 

36B(b)(3)(B) as the second lowest cost 

silver plan of the individual market in 

the rating area in which the taxpayer 

resides that is offered through the same 

Exchange. We will use the adjusted 

monthly premium for an applicable 

second lowest cost silver plan in the 

applicable program year (2022) as the 

RP (except in the case of a state that 

elects to use the prior plan year’s 

premium as the basis for the federal 

BHP payment for 2022, as described in 

section III.E. of this final methodology). 

The RP will be the premium 

applicable to non-tobacco users. This is 

consistent with the provision in 26 

U.S.C. 36B(b)(3)(C) that bases the PTC 

on premiums that are adjusted for age 

alone, without regard to tobacco use, 

even for states that allow insurers to 

vary premiums based on tobacco use in 

accordance with 42 U.S.C. 

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

Consistent with the policy set forth in 

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

PTC for those enrolled in a QHP through 

an Exchange, we will not update the 

payment methodology, and 

subsequently the federal BHP payment 

rates, in the event that the second 

lowest cost silver plan used as the RP, 

or the lowest cost silver plan, changes 

(that is, terminates or closes enrollment 

during the year). 

The applicable second lowest cost 

silver plan premium will be included in 

the BHP payment methodology by age 

range (if applicable), geographic area, 

and self-only or applicable category of 

family coverage obtained through the 

BHP. 

We note that the choice of the second 

lowest cost silver plan for calculating 

BHP payments relies 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, 


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10CMCS. ‘‘State Medicaid, CHIP and BHP Income 

Eligibility Standards Effective October 1, 2020.’’ 

because one or more QHPs in the 

family’s geographic area might not offer 

family coverage that includes the niece. 

We believe that it would not be possible 

to replicate such variations for 

calculating the BHP payment and 

believe that in the aggregate, they will 

not result in a significant difference in 

the payment. Thus, we will use the 

second lowest cost silver plan available 

to any enrollee for a given age, 

geographic area, and coverage category. 

This choice of RP relies on an 

assumption about enrollment in the 

Exchanges. In the payment 

methodologies for program years 2015 

through 2019, we had assumed that all 

persons enrolled in the BHP would have 

elected to enroll in a silver level plan if 

they had instead enrolled in a QHP 

through an Exchange (and that the QHP 

premium would not be lower than the 

value of the PTC). In the November 2019 

final BHP Payment Notice, we 

continued to use the second-lowest cost 

silver plan premium as the RP, but for 

the 2020 payments we changed the 

assumption about which metal tier 

plans enrollees would choose (see 

section III.D.6. on the MTSF in this final 

methodology). In the 2021 payment 

methodology, we continued to account 

for how enrollees may choose other 

metal tier plans by applying the MTSF. 

For the 2022 payment methodology, we 

will not continue to account for how 

enrollees may choose other metal tier 

plans by removing the MTSF as 

described in section III.D.6. of this final 

methodology. 

We do not believe it is appropriate to 

adjust the payment for an assumption 

that some BHP enrollees would not have 

enrolled in QHPs for purposes of 

calculating the BHP payment rates, 

since section 1331(d)(3)(A)(ii) of the 

Patient Protection and Affordable Care 

Act requires the calculation of such 

rates as if the enrollee had enrolled in 

a QHP through an Exchange. 

The applicable age bracket (if any) 

will be one dimension of each rate cell. 

We propose to assume a uniform 

distribution of ages and estimate the 

average premium amount within each 

rate cell. We believe that assuming a 

uniform distribution of ages within 

these ranges is a reasonable approach 

and would produce a reliable 

determination of the total monthly 

payment for BHP enrollees. We also 

believe this approach will avoid 

potential inaccuracies that could 

otherwise occur in relatively small 

payment cells if age distribution were 

measured by the number of persons 

eligible or enrolled. 

We will use geographic areas based on 

the rating areas used in the Exchanges. 

We will define each geographic area so 

that the RP is the same throughout the 

geographic area. When the RP varies 

within a rating area, we will define 

geographic areas as aggregations of 

counties with the same RP. Although 

plans are allowed to serve geographic 

areas smaller than counties after 

obtaining our approval, no geographic 

area, for purposes of defining BHP 

payment rate cells, will be smaller than 

a county. We do not believe that this 

assumption will have a significant 

impact on federal payment levels and it 

would simplify both the calculation of 

BHP payment rates and the operation of 

the BHP. 

Finally, in terms of the coverage 

category, federal payment rates only 

recognize self-only and two-adult 

coverage, with exceptions that account 

for children who are potentially eligible 

for the BHP. First, in states that set the 

upper income threshold for children’s 

Medicaid and CHIP eligibility below 

200 percent of FPL (based on modified 

adjusted gross income (MAGI)), children 

in households with incomes between 

that threshold and 200 percent of FPL 

would be potentially eligible for the 

BHP. Currently, the only states in this 

category are Idaho and North Dakota.10

Second, the BHP will include lawfully 

present immigrant children with 

household incomes at or below 200 

percent of FPL in states that have not 

exercised the option under sections 

1903(v)(4)(A)(ii) and 2107(e)(1)(E) of the 

Act to qualify all otherwise eligible, 

lawfully present immigrant children for 

Medicaid and CHIP. States that fall 

within these exceptions will be 

identified based on their Medicaid and 

CHIP State Plans, and the rate cells will 

include appropriate categories of BHP 

family coverage for children. For 

example, Idaho’s Medicaid and CHIP 

eligibility is limited to families with 

MAGI at or below 185 percent FPL. If 

Idaho implemented a BHP, Idaho 

children with household incomes 

between 185 and 200 percent could 

qualify. In other states, BHP eligibility 

will generally be restricted to adults, 

since children who are citizens or 

lawfully present immigrants and live in 

households with incomes at or below 

200 percent of FPL will qualify for 

Medicaid or CHIP, and thus be 

ineligible for a BHP under section 

1331(e)(1)(C) of the Patient Protection 

and Affordable Care Act, which limits a 

BHP to individuals who are ineligible 

for minimum essential coverage (as 

defined in 26 U.S.C. 5000A(f)). 

2. Premium Adjustment Factor (PAF) 

The PAF considers the premium 

increases in other states that took effect 

after we discontinued payments to 

issuers for CSRs provided to enrollees in 

QHPs offered through Exchanges. 

Despite the discontinuance of federal 

payments for CSRs, QHP issuers are 

required to provide CSRs to eligible 

enrollees. As a result, many QHP issuers 

increased the silver-level plan 

premiums to account for those 

additional costs; adjustments and how 

those were applied (for example, to only 

silver-level plans or to all metal tier 

plans) varied across states. For the states 

operating BHPs in 2018, the increases in 

premiums were relatively minor, 

because the majority of enrollees 

eligible for CSRs (and all who were 

eligible for the largest CSRs) were 

enrolled in the BHP and not in QHPs on 

the Exchanges, and therefore issuers in 

BHP states did not significantly raise 

premiums to cover unpaid CSR costs. 

In the Final Administrative Order, the 

2019 final BHP Payment Notice, the 

2020 final BHP Payment Notice, and the 

2021 final BHP Payment Notice we 

incorporated the PAF into the BHP 

payment methodologies for 2018, 2019, 

2020, and 2021 to capture the impact of 

how other states responded to us 

ceasing to pay CSRs. We will include 

the PAF in the 2022 payment 

methodology and to calculate it in the 

same manner as in the Final 

Administrative Order. In the event that 

an appropriation for CSRs for 2022 is 

made, we would determine whether and 

how to modify the PAF in the payment 

methodology. 

Under the Final Administrative 

Order, we calculated the PAF by using 

information sought from QHP issuers in 

each state and the District of Columbia, 

and determined the premium 

adjustment that the responding QHP 

issuers made to each silver level plan in 

2018 to account for the discontinuation 

of CSR payments to QHP issuers. Based 

on the data collected, we estimated the 

median adjustment for silver level QHPs 

nationwide (excluding those in the two 

BHP states). To the extent that QHP 

issuers made no adjustment (or the 

adjustment was zero), this would be 

counted as zero in determining the 

median adjustment made to all silver 

level QHPs nationwide. If the amount of 

the adjustment was unknown—or we 

determined that it should be excluded 

for methodological reasons (for 

example, the adjustment was negative, 

an outlier, or unreasonable)—then we 

did not count the adjustment towards 


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11Some examples of outliers or unreasonable 

adjustments include (but are not limited to) values 

over 100 percent (implying the premiums doubled 

or more because of the adjustment), values more 

than double the otherwise highest adjustment, or 

non-numerical entries. 

12See Kaiser Family Foundation, ‘‘Average 

Marketplace Premiums by Metal Tier, 2018–2021,’’ 

https://www.kff.org/health-reform/state-indicator/ 

average-marketplace-premiums-by-metal-tier/. 

13See Basic Health Program: Federal Funding 

Methodology for Program Years 2019 and 2020; 

Final Methodology, 84 FR 59529 at 59532 

(November 5, 2019). 

determining the median adjustment.11

The median adjustment for silver level 

QHPs is the nationwide median 

adjustment. 

For each of the two BHP states, we 

determined the median premium 

adjustment for all silver level QHPs in 

that state, which we refer to as the state 

median adjustment. The PAF for each 

BHP state equaled one plus the 

nationwide median adjustment divided 

by one plus the state median adjustment 

for the BHP state. In other words, 

PAF = (1 + Nationwide Median 

Adjustment) ÷ (1 + State Median 

Adjustment)Q P=’02’≤ 

To determine the PAF described 

above, we sought to collect QHP 

information from QHP issuers in each 

state and the District of Columbia to 

determine the premium adjustment 

those issuers made to each silver level 

plan offered through the Exchange in 

2018 to account for the end of CSR 

payments. Specifically, we sought 

information showing the percentage 

change that QHP issuers made to the 

premium for each of their silver level 

plans to cover benefit expenditures 

associated with the CSRs, given the lack 

of CSR payments in 2018. This 

percentage change was a portion of the 

overall premium increase from 2017 to 

2018. 

According to our records, there were 

1,233 silver-level QHPs operating on 

Exchanges in 2018. Of these 1,233 

QHPs, 318 QHPs (25.8 percent) 

responded to our request for the 

percentage adjustment applied to silverlevel QHP premiums in 2018 to account 

for the discontinuance of the CSRs. 

These 318 QHPs operated in 26 different 

states, with 10 of those states running 

SBEs (while we requested information 

only from QHP issuers in states serviced 

by an FFE, many of those issuers also 

had QHPs in states operating SBEs and 

submitted information for those states as 

well). Thirteen of these 318 QHPs were 

in New York (and none were in 

Minnesota). Excluding these 13 QHPs 

from the analysis, the nationwide 

median adjustment was 20.0 percent. Of 

the 13 QHPs in New York that 

responded, the state median adjustment 

was 1.0 percent. We believe that this is 

an appropriate adjustment for QHPs in 

Minnesota, as well, based on the 

observed changes in New York’s QHP 

premiums in response to the 

discontinuance of CSR payments (and 

the operation of the BHP in that state) 

and our analysis of expected QHP 

premium adjustments for states with 

BHPs. We calculated the final PAF as (1 

+ 20%) ÷ (1 + 1%) (or 1.20/1.01), which 

results in a value of 1.188. 

We are finalizing our proposal to 

continue to set the PAF to 1.188 for 

program year 2022. We believe that this 

value for the PAF continues to 

reasonably account for the increase in 

silver-level premiums experienced in 

non-BHP states that took effect after the 

discontinuance of the CSR payments. 

We believe that the impact of the 

increase in silver-level premiums in 

2022 can reasonably be expected to be 

similar to that in 2018, because the 

discontinuation of CSR payments has 

not changed. Moreover, we believe that 

states and QHP issuers have not 

significantly changed the manner and 

degree to which they are increasing 

QHP silver-level premiums to account 

for the discontinuation of CSR payments 

since 2018, and we expect the same for 

2022. 

In addition, the percentage difference 

between the average second lowest-cost 

silver level QHP and the bronze-level 

QHP premiums has not changed 

significantly since 2018, and we do not 

expect a significant change for 2022. In 

2018, the average second lowest-cost 

silver level QHP premium was 41.1 

percent higher than the average lowestcost bronze-level QHP premium ($481 

and $341, respectively). In 2021, (the 

latest year for which premiums have 

been published), the difference is 

similar; the average second lowest-cost 

silver-level QHP premium is 37.8 

percent higher than the average lowestcost bronze-level QHP premium ($452 

and $328, respectively).12 In contrast, 

the average second lowest-cost silverlevel QHP premium was only 23.8 

percent higher than the average lowestcost bronze-level QHP premium in 2017 

($359 and $290, respectively).13 If there 

were a significant difference in the 

amounts that QHP issuers were 

increasing premiums for silver-level 

QHPs to account for the discontinuation 

of CSR payments over time, then we 

would expect the difference between the 

bronze-level and silver-level QHP 

premiums to change significantly over 

time, and that this would be apparent in 

comparing the lowest-cost bronze-level 

QHP premium to the second lowest-cost 

silver-level QHP premium. 

3. Population Health Factor (PHF) 

We are finalizing our proposal to 

include the PHF in the methodology to 

account for the potential differences in 

the average health status between BHP 

enrollees and persons enrolled through 

the Exchanges. To the extent that BHP 

enrollees would have been enrolled 

through an Exchange in the absence of 

a BHP in a state, the exclusion of those 

BHP enrollees in the Exchange may 

affect the average health status of the 

overall population and the expected 

QHP premiums. 

We currently do not believe that there 

is evidence that the BHP population 

would have better or poorer health 

status than the Exchange population. At 

this time, there continues to be a lack 

of data on the experience in the 

Exchanges that limits the ability to 

analyze the potential health differences 

between these groups of enrollees. More 

specifically, Exchanges have been in 

operation since 2014, and 2 states have 

operated BHPs since 2015, but data is 

not available to do the analysis 

necessary to determine if there are 

differences in the average health status 

between BHP and Exchange enrollees. 

In addition, differences in population 

health may vary across states. We also 

do not believe that sufficient data would 

be available to permit us to make a 

prospective adjustment to the PHF 

under § 600.610(c)(2) for the 2022 

program year. 

Given these analytic challenges and 

the limited data about Exchange 

coverage and the characteristics of BHPeligible consumers, the PHF will be 1.00 

for program year 2022. 

In previous years BHP payment 

methodologies, we included an option 

for states to include a retrospective 

population health status adjustment. 

States will have same option for 2022 to 

include a retrospective population 

health status adjustment in the certified 

methodology, which is subject to our 

review and approval. This option is 

described further in section III.F. of this 

final methodology. Regardless of 

whether a state elects to include a 

retrospective population health status 

adjustment, we anticipate that, in future 

years, when additional data becomes 

available about Exchange coverage and 

the characteristics of BHP enrollees, we 

may propose a different PHF. 

While the statute requires 

consideration of risk adjustment 

payments and reinsurance payments 

insofar as they would have affected the 

PTC that would have been provided to 

BHP-eligible individuals had they 


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14See 79 FR at 14131. 

15See 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’’). 

16These income ranges and this analysis of 

income apply to the calculation of the PTC. 

17See Table IV A1 from the 2020 Annual Report 

of the Boards of Trustees of the Federal Hospital 

Insurance and Federal Supplementary Medical 

Insurance Trust Funds, available at https://

www.cms.gov/files/document/2020-medicaretrustees-report.pdf. 

enrolled in QHPs, we are not requiring 

that a BHP’s standard health plans 

receive such payments. As explained in 

the BHP final rule, BHP standard health 

plans are not included in the federallyoperated risk adjustment program.14

Further, standard health plans did not 

qualify for payments under the 

transitional reinsurance program 

established under section 1341 of the 

Patient Protection and Affordable Care 

Act for the years the program was 

operational (2014 through 2016).15 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. Household Income (I) 

Household income is a significant 

determinant of the amount of the PTC 

that is provided for persons enrolled in 

a QHP through an Exchange. 

Accordingly, all BHP Payment 

Methodologies incorporate household 

income into the calculations of the 

payment rates through the use of 

income-based rate cells. We are 

finalizing our proposal to define 

household income in accordance with 

the definition of modified adjusted gross 

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

consistent with the definition in 45 CFR 

155.300. Income will be measured 

relative to the FPL, which is updated 

periodically in the Federal Register by 

the Secretary under the authority of 42 

U.S.C. 9902(2). Household size and 

income as a percentage of FPL will be 

used as factors in developing the rate 

cells. We are finalizing our proposal to 

use the following income ranges 

measured as a percentage of FPL: 16

• 0–50 percent. 

• 51–100 percent. 

• 101–138 percent. 

• 139–150 percent. 

• 151–175 percent. 

• 176–200 percent. 

We will assume a uniform income 

distribution for each federal BHP 

payment cell. We believe that assuming 

a uniform income distribution for the 

income ranges finalized will be 

reasonably accurate for the purposes of 

calculating the BHP payment and would 

avoid potential errors that could result 

if other sources of data were used to 

estimate the specific income 

distribution of persons who are eligible 

for or enrolled in the BHP within rate 

cells that may be relatively small. 

Thus, when calculating the mean, or 

average, PTC for a rate cell, we will 

calculate the value of the PTC at each 

one percentage point interval of the 

income range for each federal BHP 

payment cell and then calculate the 

average of the PTC across all intervals. 

This calculation would rely on the PTC 

formula described in section III.D.5. of 

this final methodology. 

As the APTC for persons enrolled in 

QHPs would be calculated based on 

their household income during the open 

enrollment period, and that income 

would be measured against the FPL at 

that time, we will adjust the FPL by 

multiplying the FPL by a projected 

increase in the CPI–U between the time 

that the BHP payment rates are 

calculated and the QHP open 

enrollment period, if the FPL is 

expected to be updated during that time. 

The projected increase in the CPI–U will 

be based on the intermediate inflation 

forecasts from the most recent Old-Age, 

Survivors, and Disability Insurance 

(OASDI) and Medicare Trustees 

Reports.17

5. Premium Tax Credit Formula (PTCF) 

In Equation 1 described in section 

III.A.1. of this final methodology, we 

will use the formula described in 26 

U.S.C. 36B(b) to calculate the estimated 

PTC that would be paid on behalf of a 

person enrolled in a QHP on an 

Exchange as part of the BHP payment 

methodology. This formula is used to 

determine the contribution amount (the 

amount of premium that an individual 

or household theoretically would be 

required to pay for coverage in a QHP 

on an Exchange), which is based on (A) 

the household income; (B) the 

household income as a percentage of 

FPL for the family size; and (C) the 

schedule specified in 26 U.S.C. 

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

The difference between the 

contribution amount and the adjusted 

monthly premium (that is, the monthly 

premium adjusted for the age of the 

enrollee) for the applicable second 

lowest cost silver plan is the estimated 

amount of the PTC that would be 

provided for the enrollee. 

The PTC amount provided for a 

person enrolled in a QHP through an 

Exchange is calculated in accordance 

with the methodology described in 26 

U.S.C. 36B(b)(2). The amount is equal to 

the lesser of the premium for the plan 

in which the person or household 

enrolls, or the adjusted premium for the 

applicable second lowest cost silver 

plan minus the contribution amount. 

The applicable percentage is defined 

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

1.36B–3(g) as the percentage that 

applies to a taxpayer’s household 

income that is within an income tier 

specified in Table 1, increasing on a 

sliding scale in a linear manner from an 

initial premium percentage to a final 

premium percentage specified in Table 

1. We are finalizing our proposal to 

continue to use applicable percentages 

to calculate the estimated PTC that 

would be paid on behalf of a person 

enrolled in a QHP on an Exchange as 

part of the BHP payment methodology 

as part of Equation 1. 

As discussed in section I.C. of this 

final notice, we note that the ARP 

updated the applicable percentages of 

household income used to calculate the 

PTC that would be paid to an individual 

enrolled in a QHP on an Exchange for 

calendar years (CY) 2021 and 2022. The 

applicable percentages in Table 1 for CY 

2022 will be effective for BHP program 

year 2022. Absent future legislation 

addressing applicable percentages, 

applicable percentages will be updated 

in future years in accordance with 26 

U.S.C. 36B(b)(3)(A)(ii). 

TABLE 1—APPLICABLE PERCENTAGE TABLE FOR CY 2022 a

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

income tier: 

The initial premium 

percentage is— 

The final premium 

percentage is— 

Up to 150% .............................................................................................................................................. 0.0 0.0 

150.0% percent up to 200.0% ................................................................................................................. 0.0 2.0 


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TABLE 1—APPLICABLE PERCENTAGE TABLE FOR CY 2022 a—Continued 

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

income tier: 

The initial premium 

percentage is— 

The final premium 

percentage is— 

200.0% up to 250.0% .............................................................................................................................. 2.0 4.0 

250.0% up to 300.0% .............................................................................................................................. 4.0 6.0 

300.0 percent up to 400.0% .................................................................................................................... 6.0 8.5 

400.0% percent and higher ..................................................................................................................... 8.5 8.5 

a section 9661 of the American Rescue Plan Act of 2021. 

6. Metal Tier Selection Factor (MTSF) 

On the Exchange, if an enrollee 

chooses a QHP and the value of the 

APTC to which the enrollee is entitled 

is greater than the premium of the plan 

selected, then the APTC is reduced to be 

equal to the premium. This usually 

occurs when enrollees eligible for larger 

APTCs choose bronze-level QHPs, 

which typically have lower premiums 

on the Exchange than silver-level QHPs. 

Prior to 2018, we believed that the 

impact of these choices and plan 

selections on the amount of PTCs that 

the federal government paid was 

relatively small. During this time, most 

enrollees in income ranges up to 200 

percent FPL chose silver-level QHPs, 

and in most cases where enrollees chose 

bronze-level QHPs, the premium was 

still more than the PTC. Based on our 

analysis of the percentage of persons 

with incomes below 200 percent FPL 

choosing bronze-level QHPs and the 

average reduction in the PTCs paid for 

those enrollees, we believe that the total 

PTCs paid for persons with incomes 

below 200 percent FPL were reduced by 

about 1 percent in 2017. Therefore, we 

did not seek to make an adjustment 

based on the effect of enrollees choosing 

non-silver-level QHPs in developing the 

BHP payment methodology applicable 

to program years prior to 2018. 

However, after the discontinuance of the 

CSR payments in October 2017, several 

changes occurred that increased the 

expected impact of enrollees’ plan 

selection choices on the amount of PTC 

the government paid. These changes led 

to a larger percentage of individuals 

choosing bronze-level QHPs, and for 

those individuals who chose bronzelevel QHPs, these changes also generally 

led to larger reductions in PTCs paid by 

the federal government per individual. 

The combination of more individuals 

with incomes below 200 percent of FPL 

choosing bronze-level QHPs and the 

reduction in PTCs had an impact on 

PTCs paid by the federal government for 

enrollees with incomes below 200 

percent FPL. 

Therefore, in the 2020 and 2021 

payment methodology, we included an 

adjustment (the MTSF) in the BHP 

payment methodology to account for the 

effects of these choices. Section 

1331(d)(3) of the Patient Protection and 

Affordable Care Act requires that the 

BHP payments to states be based on 

what would have been provided if such 

eligible individuals were allowed to 

enroll in QHPs, and we believed that it 

was appropriate to consider how 

individuals would have chosen different 

plans—including across different metal 

tiers—as part of the BHP payment 

methodology. 

In the 2022 proposed Payment Notice, 

we proposed to include the MTSF in the 

payment methodology and calculate its 

value using the same approach as 

finalized in the 2020 final Payment 

Notice (84 FR 59543). As discussed 

above, since publication of the 2022 

proposed Payment Notice, Congress 

passed the ARP, which, as discussed in 

section I.C. of this final notice, modifies 

the applicable percentages of household 

income used to calculate the amount of 

APTC taxpayers are eligible to have paid 

on their behalf for coverage purchased 

through an Exchange during taxable 

years 2021 and 2022. Also as discussed 

above, we believe that these changes are 

likely to significantly affect enrollees’ 

plan choices starting in 2022. Most 

notably, individuals with incomes up to 

150 percent of FPL will be able to 

purchase a silver-level plan with a $0 

premium, and individuals with incomes 

between 150 percent and 200 percent of 

FPL will be able to purchase a silverlevel plan at a lower premium than 

previously. Therefore, we believe that 

significantly more enrollees likely will 

choose to enroll in silver-level plans 

(and fewer in bronze-level plans) and 

the amount of PTC foregone therefore 

will be less than it was in previous 

years. Accordingly, the impact of the 

MTSF likely will be significantly less. 

Therefore, we are not finalizing our 

proposal to include the MTSF in the 

2022 payment methodology. 

7. Income Reconciliation Factor (IRF) 

For persons enrolled in a QHP 

through an Exchange who receive 

APTC, there will be an annual 

reconciliation following the end of the 

year to compare the APTC to the correct 

amount of PTC based on household 

circumstances shown on the federal 

income tax return. Any difference 

between the latter amounts and the 

APTC paid during the year would either 

be paid to the taxpayer (if too little 

APTC was paid) or charged to the 

taxpayer as additional tax (if too much 

APTC was paid, subject to any 

limitations in statute or regulation), as 

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

Section 1331(e)(2) of the Patient 

Protection and Affordable Care Act 

specifies that an individual eligible for 

the BHP may not be treated as a 

‘‘qualified individual’’ under section 

1312 of the Patient Protection and 

Affordable Care Act who is eligible for 

enrollment in a QHP offered through an 

Exchange. We are defining ‘‘eligible’’ to 

mean anyone for whom the state agency 

or the Exchange assesses or determines, 

based on the single streamlined 

application or renewal form, as eligible 

for enrollment in the BHP. Because 

enrollment in a QHP is a requirement 

for individuals to receive APTC, 

individuals determined or assessed as 

eligible for a BHP are not eligible to 

receive APTC for coverage in the 

Exchange. Because they do not receive 

APTC, BHP enrollees, on whom the 

BHP payment methodology is generally 

based, are not subject to the same 

income reconciliation as Exchange 

consumers. 

Nonetheless, there may still be 

differences between a BHP enrollee’s 

household income reported at the 

beginning of the year and the actual 

household income over the year. These 

may include small changes (reflecting 

changes in hourly wage rates, hours 

worked per week, and other fluctuations 

in income during the year) and large 

changes (reflecting significant changes 

in employment status, hourly wage 

rates, or substantial fluctuations in 

income). There may also be changes in 

household composition. Thus, we 

believe that using unadjusted income as 

reported prior to the BHP program year 

may result in calculations of estimated 

PTC that are inconsistent with the 

actual household incomes of BHP 

enrollees during the year. Even if the 

BHP adjusts household income 

determinations and corresponding 


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claims of federal payment amounts 

based on household reports during the 

year or data from third-party sources, 

such adjustments may not fully capture 

the effects of tax reconciliation that BHP 

enrollees would have experienced had 

they been enrolled in a QHP through an 

Exchange and received APTC. 

Therefore, in accordance with current 

practice, we are finalizing our proposal 

to include in Equation 1 an adjustment, 

the IRF, that will account for the 

difference between calculating 

estimated PTC using: (a) Household 

income relative to FPL as determined at 

initial application and potentially 

revised mid-year under § 600.320, for 

purposes of determining BHP eligibility 

and claiming federal BHP payments; 

and (b) actual household income 

relative to FPL received during the plan 

year, as it would be reflected on 

individual federal income tax returns. 

This adjustment will seek prospectively 

to capture the average effect of income 

reconciliation aggregated across the BHP 

population had those BHP enrollees 

been subject to tax reconciliation after 

receiving APTC for coverage provided 

through QHPs. Consistent with the 

methodology used in past years, we will 

estimate reconciliation effects based on 

tax data for 2 years, reflecting income 

and tax unit composition changes over 

time among BHP-eligible individuals. 

The OTA maintains a model that 

combines detailed tax and other data, 

including Exchange enrollment and PTC 

claimed, to project Exchange premiums, 

enrollment, and tax credits. For each 

enrollee, this model compares the APTC 

based on household income and family 

size estimated at the point of enrollment 

with the PTC based on household 

income and family size reported at the 

end of the tax year. The former reflects 

the determination using enrollee 

information furnished by the applicant 

and tax data furnished by the IRS. The 

latter would reflect the PTC eligibility 

based on information on the tax return, 

which would have been determined if 

the individual had not enrolled in the 

BHP. Consistent with prior years, we 

will use the ratio of the reconciled PTC 

to the initial estimation of PTC as the 

IRF in Equation (1) for estimating the 

PTC portion of the BHP payment rate. 

For 2022, OTA previously estimated 

that the IRF for states that have 

implemented the Medicaid eligibility 

expansion to cover adults up to 133 

percent of the FPL would be 99.01 

percent. However, due to changes made 

by the ARP, OTA has revised its 

estimate for the IRF to be 100.63 

percent. Specifically, section 9661 of the 

ARP specifies new applicable 

percentages of household income for the 

purposes of calculating the PTC for 2021 

and 2022. This would lead to an 

increase in PTC, by reducing the 

household premium contribution. It also 

is anticipated to have an effect on the 

income reconciliation for persons 

enrolled in QHPs in the Exchanges, as 

evidenced by the revised estimate. 

We believe that it is appropriate to 

distinguish between the IRF for 

Medicaid expansion states and nonExpansion states to remove data for 

those with incomes under 138 percent 

of FPL for Medicaid expansion states. 

This is the same approach that we 

finalized in the 2021 final BHP Payment 

Notice. For other factors used in the 

BHP payment methodology, it may not 

always be possible to separate the 

experiences between different types of 

states and there may not be meaningful 

differences between the experiences of 

such states. Therefore, we will set the 

value of the IRF for states that have 

expanded Medicaid equal to the value 

of the IRF for incomes between 138 and 

200 percent of FPL and the value of the 

IRF for states that have not expanded 

Medicaid equal to the value of the IRF 

for incomes between 100 and 200 

percent of FPL. This gives an IRF of 

100.63 percent for states that have 

expanded Medicaid and 100.83 percent 

for states that have not expanded 

Medicaid for program year 2022. 

We will use this value for the IRF in 

Equations (1) for calculating the PTC 

portion of the BHP payment rate. 

E. State Option To Use Prior Program 

Year QHP Premiums for BHP Payments 

In the interest of allowing states 

greater certainty in the total BHP federal 

payments for a given plan year, we have 

given states the option to have their 

final federal BHP payment rates 

calculated using a projected adjusted 

reference premium (that is, using 

premium data from the prior program 

year multiplied by the premium trend 

factor (PTF), as described in Equation 

(2b). We will require states to make their 

election to have their final federal BHP 

payment rates calculated using a 

projected adjusted reference premium 

by the later of (1) May 15 of the year 

preceding the applicable program year 

or (2) 60 days after the publication of 

the final notice. Therefore, because we 

are finalizing the 2022 payment 

methodology after May 15, 2021, states 

must inform CMS in writing of their 

election for the 2022 program year by 60 

days after the publication of the final 

notice. 

For Equation (2b), we will define the 

PTF, with minor changes in calculation 

sources and methods, as follows: 

PTF: In the case of a state that would 

elect to use the 2021 premiums as the 

basis for determining the 2022 BHP 

payment, it would be appropriate to 

apply a factor that would account for 

the change in health care costs between 

the year of the premium data and the 

BHP program year. This factor would 

approximate the change in health care 

costs per enrollee, which would 

include, but not be limited to, changes 

in the price of health care services and 

changes in the utilization of health care 

services. This would provide an 

estimate of the adjusted monthly 

premium for the applicable second 

lowest cost silver plan that would be 

more accurate and reflective of health 

care costs in the BHP program year. 

For the PTF we are finalizing our 

proposal to use the annual growth rate 

in private health insurance expenditures 

per enrollee from the National Health 

Expenditure (NHE) projections, 

developed by the Office of the Actuary 

in CMS (https://www.cms.gov/ResearchStatistics-Data-and-Systems/StatisticsTrends-and-Reports/NationalHealth

ExpendData/ 

NationalHealthAccountsProjected). 

Based on these projections, we are 

finalizing our proposal that the PTF be 

4.7 percent for BHP program year 2022. 

We note that the increase in 

premiums for QHPs from 1 year to the 

next may differ from the PTF developed 

for the BHP funding methodology for 

several reasons. In particular, we note 

that the second lowest cost silver plan 

may be different from one year to the 

next. This may lead to the PTF being 

greater than or less than the actual 

change in the premium of the second 

lowest cost silver plan. 

F. State Option To Include Retrospective 

State-Specific Health Risk Adjustment 

in Certified Methodology 

To determine whether the potential 

difference in health status between BHP 

enrollees and consumers in an Exchange 

would affect the PTC and risk 

adjustment payments that would have 

otherwise been made had BHP enrollees 

been enrolled in coverage through an 

Exchange, we will provide states 

implementing the BHP the option to 

propose and to implement, as part of the 

certified methodology, a retrospective 

adjustment to the federal BHP payments 

to reflect the actual value that would be 

assigned to the population health factor 

(or risk adjustment) based on data 

accumulated during that program year 

for each rate cell. 

We acknowledge that there is 

uncertainty with respect to this factor 

due to the lack of available data to 

analyze potential health differences 


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between the BHP and QHP populations, 

which is why, absent a state election, 

we will use a value for the PHF (see 

section III.D.3. of this final 

methodology) to determine a 

prospective payment rate which 

assumes no difference in the health 

status of BHP enrollees and QHP 

enrollees. There is considerable 

uncertainty regarding whether the BHP 

enrollees will pose a greater risk or a 

lesser risk compared to the QHP 

enrollees, how to best measure such 

risk, the potential effect such risk would 

have had on PTC, and risk adjustment 

that would have otherwise been made 

had BHP enrollees been enrolled in 

coverage through an Exchange. 

However, to the extent that a state 

would develop an approved protocol to 

collect data and effectively measure the 

relative risk and the effect on federal 

payments of PTCs and CSRs, we are 

finalizing our proposal to permit a 

retrospective adjustment that will 

measure the actual difference in risk 

between the two populations to be 

incorporated into the certified BHP 

payment methodology and used to 

adjust payments in the previous year. 

For a state electing the option to 

implement a retrospective population 

health status adjustment as part of the 

BHP payment methodology applicable 

to the state, we are finalizing our 

proposal to require the state to submit 

a proposed protocol to CMS, which 

would be subject to approval by us and 

would be required to be certified by the 

Chief Actuary of CMS, in consultation 

with the OTA. We will apply the same 

protocol for the population health status 

adjustment as what is set forth in 

guidance in Considerations for Health 

Risk Adjustment in the Basic Health 

Program in Program Year 2015 (http:// 

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

proposed to require a state to submit its 

proposed protocol for the 2022 program 

year by the later of August 1, 2021 or 60 

days after the publication of this final 

notice. Because this final notice is being 

published within 60 days of August 1, 

2021, we are finalizing that a state will 

be required to submit its proposed 

protocol for the 2022 program year by 

60 days after the publication of this final 

notice. This submission will also need 

to include descriptions of how the state 

would collect the necessary data to 

determine the adjustment, including 

any contracting contingences that may 

be in place with participating standard 

health plan issuers. We will provide 

technical assistance to states as they 

develop their protocols, as requested. To 

implement the population health status 

adjustment, we must approve the state’s 

protocol by December 31, 2021 for the 

2022 program year. Finally, the state 

will be required to complete the 

population health status adjustment at 

the end of the program year based on 

the approved protocol. After the end of 

the program year, and once data is made 

available, we will review the state’s 

findings, consistent with the approved 

protocol, and make any necessary 

adjustments to the state’s federal BHP 

payment amounts. If we determine the 

federal BHP payments were less than 

they would have been using the final 

adjustment factor, we will apply the 

difference to the state’s next quarterly 

BHP trust fund deposit. If we determine 

that the federal BHP payments were 

more than they would have been using 

the final reconciled factor, we will 

subtract the difference from the next 

quarterly BHP payment to the state. 

IV. Collection of Information 

Requirements 

Although the methodology’s 

information collection requirements and 

burden had at one time been approved 

by the Office of Management and 

Budget (OMB) under control number 

0938–1218 (CMS–10510), the approval 

was discontinued on August 31, 2017, 

since we adjusted our estimated number 

of respondents below the Paperwork 

Reduction Act of 1995 (PRA) (44 U.S.C. 

3501 et seq.) threshold of ten or more 

respondents (only New York and 

Minnesota operate a BHP at this time). 

Since we continue to estimate fewer 

than ten respondents, the final 2022 

methodology is not subject to the 

requirements of the PRA. 

V. Regulatory Impact Analysis 

A. Statement of Need 

Section 1331 of the Patient Protection 

and Affordable Care Act (42 U.S.C. 

18051) requires the Secretary to 

establish a BHP, and section 1331(d)(1) 

specifically provides that if the 

Secretary finds that a state meets the 

requirements of the program established 

under section 1331(a) of the Patient 

Protection and Affordable Care Act, the 

Secretary shall transfer to the state 

federal BHP payments described in 

section 1331(d)(3). This final 

methodology provides for the funding 

methodology to determine the federal 

BHP payment amounts required to 

implement these provisions for program 

year 2022. 

B. Overall Impact 

We have examined the impacts of this 

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. 

96354), section 1102(b) of the Act, 

section 202 of the Unfunded Mandates 

Reform Act of 1995 (March 22, 1995; 

Pub. L. 104–4), Executive Order 13132 

on Federalism (August 4, 1999), and 

Subtitle E of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (the Congressional Review Act) (5 

U.S.C. 801 et seq.). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Section 3(f) of Executive Order 

12866 defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) (Having an annual 

effect on the economy of $100 million 

or more in any 1 year, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). As noted 

in the BHP final rule, the BHP provides 

states the flexibility to establish an 

alternative coverage program for lowincome individuals who would 

otherwise be eligible to purchase 

coverage on an Exchange. To date, two 

states have established a BHP, and we 

expect state participation to remain 

static as a result of this payment 

methodology. However, the final 

payment methodology for program year 

2022 differs from the payment 

methodology for program year 2021 due 

to the removal of the MTSF, which 

would increase BHP payments, 

compared to the methodology for 

program year 2021. OMB Office of 


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Information and Regulatory Affairs has 

determined this rulemaking is 

‘‘economically significant’’ as measured 

by the $100 million threshold under 

Executive Order 12866, and hence also 

a major rule under the Congressional 

Review Act, 5 U.S.C. 804(2). 

Accordingly, we have prepared a RIA 

that, to the best of our ability, presents 

the costs and benefits of the rulemaking. 

C. Detailed Economic Analysis 

The aggregate economic impact of this 

payment methodology is estimated to be 

$1,114 million in transfers for CY 2022 

(measured in real 2022 dollars), which 

would be an increase in federal 

payments to the state BHPs. For the 

purposes of this analysis, we have 

assumed that two states would 

implement BHPs in 2022. This 

assumption is based on the fact that two 

states have established a BHP to date, 

and we do not have any indication that 

additional states may implement the 

program. We also assumed there would 

be approximately 926,000 BHP enrollees 

in 2022. The size of the BHP depends 

on several factors, including the number 

of and which particular states choose to 

implement or continue a BHP, the level 

of QHP premiums, and the other 

coverage options for persons who would 

be eligible for the BHP. In particular, 

while we generally expect that many 

enrollees would have otherwise been 

enrolled in a QHP on the Exchange, 

some persons may have been eligible for 

Medicaid under a waiver or a state 

health coverage program. For those who 

would have enrolled in a QHP and thus 

would have received PTCs, the federal 

expenditures for the BHP would be 

expected to be more than offset by a 

reduction in federal expenditures for 

PTCs. For those who would have been 

enrolled in Medicaid, there would likely 

be a smaller offset in federal 

expenditures (to account for the federal 

share of Medicaid expenditures), and for 

those who would have been covered in 

non-federal programs or would have 

been uninsured, there likely would be 

an increase in federal expenditures. 

Projected BHP enrollment and 

expenditures under the previous 

payment methodology were calculated 

using the most recent 2021 QHP 

premiums and state estimates for BHP 

enrollment. We projected enrollment for 

2022 using the projected increase in the 

number of adults in the U.S. from 2021 

to 2022 (0.4 percent), and we projected 

premiums using the NHE projection of 

premiums for private health insurance 

(4.7 percent). Prior to any changes made 

in the 2022 BHP payment methodology, 

federal BHP expenditures are projected 

to be $6,738 million in 2022. This 

projection serves as our baseline 

scenario when estimating the net impact 

of the 2022 final methodology on federal 

BHP expenditures. 

The change in the PTCF percentages 

is the most significant change in the 

methodology from the proposed notice, 

and is prescribed in the ARP. To 

calculate the changes that result from 

these changes in the payment 

methodology, we compared the results 

before and after these changes using the 

BHP payment model, we maintain to 

calculate payments to states, with 

projections used to calculate impacts in 

2022. We recalculated the BHP 

payments using the new PTCF 

percentages to calculate the impact of 

this change, and we estimate that this 

would increase BHP payments by $853 

million in 2022 (as compared to using 

the previous PTCF percentages, as 

described in the proposed 

methodology). The new PTCF 

percentages can be found in Table 1 in 

section III.D.5 of this final notice. For 

the change in the methodology to 

remove the MTSF for benefit year 2022, 

the MTSF was calculated as having a 

value of 96.68 percent (as described 

previously). We recalculated the BHP 

payments excluding the MTSF from the 

formula, and we estimate this would 

increase BHP payments by $261 million 

in 2022 (as compared to the payments 

using a methodology including the 

MTSF factor). The projected BHP 

expenditures after these changes are 

$7,852 million, which is the sum of the 

prior estimate ($6,738 million) and the 

impacts of the changes to the 

methodology ($853 million and $261 

million). 

TABLE 2—ESTIMATED FEDERAL IMPACTS FOR THE BASIC HEALTH PROGRAM 2022 PAYMENT METHODOLOGY

[Millions of 2022 dollars] 

Projected Federal BHP Payments 

under 2021 Final Methodology $6,738 

Projected Federal BHP Payment 

under 2022 Final Methodology 7,852 

Federal costs ................................ 1,114 

Totals may not add due to rounding. 

The provisions of this final 

methodology are designed to determine 

the amount of funds that will be 

transferred to states offering coverage 

through a BHP rather than to 

individuals eligible for federal financial 

assistance for coverage purchased on the 

Exchange. We are uncertain what the 

total federal BHP payment amounts to 

states will be as these amounts will vary 

from state to state due to the statespecific factors and conditions. For 

example, total federal BHP payment 

amounts may be greater in more 

populous states simply by virtue of the 

fact that they have a larger BHP-eligible 

population and total payment amounts 

are based on actual enrollment. 

Alternatively, total federal BHP 

payment amounts may be lower in 

states with a younger BHP-eligible 

population as the RP used to calculate 

the federal BHP payment will be lower 

relative to older BHP enrollees. While 

state composition will cause total 

federal BHP payment amounts to vary 

from state to state, we believe that the 

methodology, like the methodology 

used in 2021, accounts for these 

variations to ensure accurate BHP 

payment transfers are made to each 

state. 

D. Alternative Approaches 

We considered several alternatives in 

developing the BHP payment 

methodology for 2022, and we discuss 

some of these alternatives below. 

We considered alternatives as to how 

to calculate the PAF in the final 

methodology for 2022. The value for the 

PAF is 1.188, which is the same as was 

used for 2018, 2019, 2020, and 2021. We 

believe it would be difficult to obtain 

the updated information from QHP 

issuers comparable to what was used to 

develop the 2018 factor, because QHP 

issuers may not distinctly consider the 

impact of the discontinuance of CSR 

payments on the QHP premiums any 

longer. We do not have reason to believe 

that the value of the PAF would change 

significantly between program years 

2018 and 2022. We are continuing to 

consider whether or not there are other 

methodologies or data sources we may 

be able to use to calculate the PAF. 

We also considered alternatives as 

how to calculate the MTSF in the final 

methodology for 2022. Given the 

changes made to the determination of 

PTC for 2022 in the ARP, we are not 

including the MTSF in the 2022 

payment methodology, as described in 

section III.D.6. of this final notice. 

We also considered whether to 

continue to provide states the option to 

develop a protocol for a retrospective 

adjustment to the PHF as we did in 

previous payment methodologies. We 

believe that continuing to provide this 

option is appropriate and likely to 

improve the accuracy of the final 

payments. 

We also considered whether to 

require the use of the program year 

premiums to develop the federal BHP 

payment rates, rather than allow the 

choice between the program year 

premiums and the prior year premiums 


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trended forward. We believe that the 

payment rates can still be developed 

accurately using either the prior year 

QHP premiums or the current program 

year premiums and that it is appropriate 

to continue to provide the states these 

options. 

Many of the factors in this final 

methodology are specified in statute; 

therefore, for these factors we are 

limited in the alternative approaches we 

could consider. We do have some 

choices in selecting the data sources 

used to determine the factors included 

in the methodology. Except for statespecific RPs and enrollment data, we 

will use national rather than statespecific data. This is due to the lack of 

currently available state-specific data 

needed to develop the majority of the 

factors included in the methodology. 

We believe the national data will 

produce sufficiently accurate 

determinations of payment rates. In 

addition, we believe that this approach 

will be less burdensome on states. In 

many cases, using state-specific data 

would necessitate additional 

requirements on the states to collect, 

validate, and report data to CMS. By 

using national data, we are able to 

collect data from other sources and limit 

the burden placed on the states. For RPs 

and enrollment data, we will use statespecific data rather than national data, 

as we believe state-specific data will 

produce more accurate determinations 

than national averages. Our responses to 

public comments on these alternative 

approaches are in section II of this final 

notice. 

E. Accounting Statement and Table 

In accordance with OMB Circular A– 

4, Table 3 depicts an accounting 

statement summarizing the assessment 

of the transfers associated with these 

payment methodologies. 

TABLE 3—ACCOUNTING STATEMENT CHANGES TO FEDERAL PAYMENTS FOR THE BASIC HEALTH PROGRAM FOR 2022 

Category Estimates 

Units 

Year dollar Discount rate 

(%) Period covered 

Transfers: Annualized/Monetized ($million/year) ............................. $1,114 2022 7 2022 

1,114 2022 3 2022 

From Whom to Whom ..................................................................... From the Federal Government to States Operating BHPs. 

F. Regulatory Flexibility Act (RFA) 

The Regulatory Flexibility Act (5 

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

agencies to prepare a final regulatory 

flexibility analysis to describe the 

impact of the final rule on small 

entities, unless the head of the agency 

can certify that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The RFA generally defines a ‘‘small 

entity’’ as (1) a proprietary firm meeting 

the size standards of the Small Business 

Administration (SBA); (2) a not-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. 

Because this final methodology is 

focused solely on federal BHP payment 

rates to states, it does not contain 

provisions that would have a direct 

impact on hospitals, physicians, and 

other health care providers that are 

designated as small entities under the 

RFA. Accordingly, we have determined 

that the methodology, like the previous 

methodology and the final rule that 

established the BHP program, will not 

have a significant economic impact on 

a substantial number of small entities. 

Therefore, the Secretary has determined 

that this final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

Section 1102(b) of the Act requires us 

to prepare a regulatory impact analysis 

if a methodology may have a significant 

economic impact on the operations of a 

substantial number of small rural 

hospitals. For purposes of section 

1102(b) of the Act, we define a small 

rural hospital as a hospital that is 

located outside of a metropolitan 

statistical area and has fewer than 100 

beds. For the preceding reasons, we 

have determined that the methodology 

will not have a significant impact on a 

substantial number of small rural 

hospitals. Therefore, the Secretary has 

determined that this final rule will not 

have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

G. Unfunded Mandates Reform Act 

(UMRA) 

Section 202 of the Unfunded 

Mandates Reform Act (UMRA) of 2005 

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 

2021, that threshold was approximately 

$158 million. States have the option, but 

are not required, to establish a BHP. 

Further, the methodology would 

establish federal payment rates without 

requiring states to provide the Secretary 

with any data not already required by 

other provisions of the Patient 

Protection and Affordable Care Act or 

its implementing regulations. Thus, the 

final payment methodology does not 

mandate expenditures by state 

governments, local governments, or 

tribal governments. 

H. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it issues a final rule 

that imposes substantial direct effects 

on states, preempts state law, or 

otherwise has federalism implications. 

The BHP is entirely optional for states, 

and if implemented in a state, provides 

access to a pool of funding that would 

not otherwise be available to the state. 

Accordingly, the requirements of 

Executive Order 13132 do not apply to 

this final methodology. 

I. Conclusion 

Overall, federal BHP payments are 

expected to increase by $1,114 million 

in 2022 as a result of the changes to the 

payment methodology. The analysis 

above, together with the remainder of 

this preamble, provides an RIA. 

This final regulation is subject to the 

Congressional Review Act (5 U.S.C. 801 

et seq.) and has been transmitted to the 

Congress and the Comptroller General 

for review. 

Dated: June 30, 2021. 

Xavier Becerra, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2021–14393 Filed 7–2–21; 4:15 pm] 

BILLING CODE 4120–01–P 


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