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Implementing Health Reform: Basic Health Program And More ACA Litigation Results



March 10th, 2014

On March 7, 2014, the Centers for Medicare and Medicaid Services of the Department of Health and Human Services released its final rule on the Basic Health Program (BHP).  This rule finalizes a rule proposed by CMS in September of 2013, which was covered here.  CMS also released its methodology for funding the BHP for 2015.  Finally, CMS published, along with the Departments of Labor and Treasury, a request for information regarding the implementation of a provision of the Affordable Care Act that prohibits insurers from discriminating against providers based on their licensure or certification status.

This post will discuss these issuances, as well as a decision by the United States Court of Appeals for the District of Columbia rejecting yet one more challenge to the ACA.

The Basic Health Program Final Rule

Background.  The ACA created the BHP as an option for states that wanted to create a bridge between their expanded Medicaid program, which covers enrollees with household incomes up to 133 percent of the federal poverty level, and the premium tax credit (PTC) and cost-sharing reduction payment (CSR) program operated by the exchange, which covers enrollees with incomes above that level.  Under the BHP, individuals and families with incomes between 133 and 200 percent of poverty would enroll in two or more standard health plans with which the state would negotiate contracts.  The federal government would pay the state 95 percent of the PTC and CSR payments that otherwise would have gone to the individuals that enroll in the program to cover the cost of insuring individuals under the program.

The BHP was supposed to be available as an option for the states for 2014, but the Administration delayed it for a year to 2015.  It is hard to see much advantage for the states in establishing a BHP, particularly since they will have to create the program after having already had a standard, exchange-based program, for a year.  States that participate in the program will, as noted, receive only 95 percent of the amount that beneficiaries would have received had the state had a standard exchange. The hope is that states can negotiate contracts with insurers that will reduce premiums so that this amount will cover the cost of coverage.  States must, however, also cover the administrative costs of the program out of their own funds.

Program beneficiaries will pay the full amount that they would have paid for premiums and cost sharing after the application of PTC and CSRs under the standard program.  States may reduce premiums or cost-sharing with their own funds.  The primary advantages to BHP enrollees is that eligibility can, at the option of the state, be determined on a 12-month continuous eligibility basis, without regard to fluctuations in income, and that there is not reconciliation at the end of the year if enrollees end up receiving more PTC than they were entitled to.  It is also hoped that states will negotiate arrangements with insurers that provide for coordination and continuity with the Medicaid program, so that as individuals and families “churn” back and forth from Medicaid to BHP eligibility as their income fluctuates, coverage will be more or less continuous.

The advantage of the program for the federal government is potentially substantial, as it reduces the cost of coverage to the federal government by five percent.  But the decision to participate in the program lies with the states, and although a number of states had earlier expressed interest in the program, that interest seems to have waned.  CMS estimates that one state may sign up for the program for each of the next three years, with a total of three states participating in the program.

What’s in the rule?  The final rule addresses: (1) the requirements for certification of state-submitted BHP “blueprints,” and a state’s administration of the BHP consistent with its blueprint; (2) eligibility and enrollment requirements for standard health plan coverage offered through the BHP; (3) the minimum requirements for the benefits covered by such standard health plans; (4) the availability of federal funding of certified state BHPs; (5) the purposes for which states can use federal funding; (6) enrollees’ financial obligations; and (7) the requirements for state and federal administration and oversight of BHP funds.  As much as possible, CMS has attempted to align BHP rules with exchange, Medicaid, and CHIP rules to promote coordination and ease of administration.

BHP blueprints and interim certification.  States wishing to operate a BHP will submit a “blueprint” to CMS, similar to the blueprint that states must submit to operate their own exchange.  The blueprint will be a comprehensive document explaining the state’s proposal for operating the program, which must be certified by CMS before the program begins operation.  It must be accompanied with a funding plan providing enrollment and cost projections for the first 12 months of operation and identify non-federal funding sources if the state expects to use such funding.

The final rule modifies the proposed rule by creating an intermediate step of “interim certification,” allowing states to receive approval for their basic program design choices and the structure of their BHP from CMS before they establish all of the details of their program.  This will allow states to receive some assurance that their program is approvable before they go to the work of establishing all of its details.  The final rule also allows states that plan to transition to the BHP in 2015 to propose a “transition plan,” permitting them to phase in enrollment transitioning BHP enrollees from the exchange.

The blueprint must be signed by the governor and must be offered for public comment (including comments from federally recognized Indian tribes) before it is submitted to CMS.  Significant revisions to the plan — that is revisions that alter core program components or change the benefit package or enrollment, disenrollment, or verification policies — must also be offered for public comment.  The blueprint may not reserve decisions for future consideration, but can include contingencies.

No payment can be made for BHP operation until the state’s blueprint is certified by CMS.  States denied certification by CMS can request a reconsideration.  A certification remains in effect until it is replace by an updated certified blueprint, terminated by the state, or terminated by HHS for failure to meet certification standards.  A state that seeks to revise its blueprint must continue to operate under the approved blueprint until a revision is approved.  States may terminate a BHP at any time by giving HHS 120 days notice and 90 days notice to standard health plan operators and enrollees.

States must operate their BHP in a nondiscriminatory manner, provide information designed for individuals with limited English proficiency, and comply with rules regarding access for the disabled. The BHP must operate statewide and cannot cap enrollment.  BHPs must make information available to enrollees on the BHP, including information on benefits and coverage in a manner consistent with exchange requirements. Standard health plans must provide information on premiums, covered benefits, limitations, and cost-sharing.  Standard health plans must also make available current and complete information, updated at least quarterly, on the names and locations of participating providers.

All of the special rules that apply to Indians under the exchange, PTC, and CSR programs also apply to the BHP.  Indians may enroll or change enrollment at least once a month and have no cost-sharing obligations.  BHPs may not reduce payments to Indian health providers by the amount of cost-sharing that would have been owed by the Indian absent these protections.  Standard health plans must pay primary to health programs operated by the Indian Health Service, Indian tribes or tribal organizations, and urban Indian organizations.

BHPs must submit an annual report covering specified issues, including quality and performance information on plans, as required by further guidance.  HHS must review each state’s BHP at least annually to determine state compliance with federal requirements and with the state’s blueprint.  HHS can take various actions in response to compliance issues, including requiring a revision of the blueprint and prohibiting further revisions until the issue is resolved or withdrawing BHP certification.

Who is eligible for the BHP?  Individuals are eligible for BHP participation if they are residents of a state; not eligible for coverage under the state’s Medicaid program in a category that provides at least the essential health benefits (EHBs); have a household income exceeding 133 percent of poverty but not 200 percent of poverty (or for a lawfully-eligible non-citizen ineligible for Medicaid, not exceeding 200 percent of poverty); are not eligible for minimum essential coverage, including affordable employer coverage and CHIP coverage; are under age 65; are citizens or lawfully-present aliens; and are not incarcerated, other than pending disposition of charges.

Eligibility for a Medicaid program that does not cover EHB, such as coverage of pregnancy services only, does not preclude coverage.  BHPs cannot cover individuals with household incomes below 133 percent of poverty in states that fail to expand Medicaid eligibility.  Eligibility for affordable employer coverage (that is, as with PTC, affordable individual employee coverage, even if family coverage is unaffordable) precludes BHP coverage.  Affordable employee coverage precludes BHP coverage even if it does not provide minimum value.  Same-sex couples who are legally married will be considered to be in the same household.  Individuals who are eligible for BHP coverage may purchase QHPs through the exchange instead, but will not be eligible for PTCs or CSRs.

Application assistance must be made available to BHP applicants equal to that provided for Medicaid.  States that use certified application counselors must use either Medicaid or exchange certification standards and processes.  Eligibility determination is a governmental function and must be done by a state or local governmental entity, which could include a state exchange.  Timeliness standards that apply to Medicaid also apply to the BHP.  Effective dates must be determined using either exchange standards or Medicaid rules—that is states may either use exchange open enrollment and special enrollment period rules or Medicaid continuous open enrollment rules.

States that use Medicaid rules can choose whether or not to offer retroactive enrollment.  Tax filing is not required of BHP enrollees.  Medicaid rules that allow hospitals to determine presumptive eligibility do not apply to the BHP.  BHPs must coordinate eligibility determinations with other insurance affordability programs so that applicants do not have to duplicate information they provide, accounts can be transferred electronically between programs, and determinations and assessments of other insurance affordability programs are accepted.  States may use either Medicaid or exchange rules for appeals of eligibility decisions, but there will be no federal appeals process.

A person determined eligible for BHP coverage remains so for 12 months unless a redetermination is warranted by new information.  Under the final rule, however, states can offer continuous eligibility for up to 12 months, regardless of change in income or other circumstances, as long as the enrollee is under age 65, not otherwise enrolled in minimum essential coverage, and still a state resident.  Enrollees must be given an opportunity at least annually to change plans.  States may verify eligibility information using either Medicaid or exchange standards.

Standard benefit plans must include at least the EHBs included in the state’s base benchmark plan. States may select more than one base-benchmark option.  Standard plans may not discriminate in benefit design.  Federal funding cannot be used to purchase abortion services that could not be purchased with federal funds under the Medicaid program.  Like other insurers, standard health plans must cover preventive services without cost sharing.  BHPs do not need to cover Medicaid services not included in the EHB, but states may cover extra services if they choose to do so.

States must contract with standard health plans under a competitive contracting process that includes negotiation of premiums, cost-sharing, benefits, and inclusion of innovative features (except during 2015, when a state can request a waiver from the competitive contracting requirement and leverage existing contractual arrangements).  States have flexibility as to how they pursue this.  They can use an already established competitive contracting process, such as that used for Medicaid or for the QHP process, as long as the process provides for negotiation and addresses each of the required elements for BHP procurement.  States may develop plan standards to serve as the starting point for negotiation.   States must offer at least two standard plans or justify their failure to do so.

The final regulation revises the proposed rule to strengthen network adequacy requirements.  A network must be sufficient in number, mix, and geographic distribution to meet the needs of enrollees to the same extent as would be required under Medicaid or exchange rule s and must include essential community providers.  Standard health plans that are insurer based (as opposed to health maintenance organization or provider network based), must meet an 85 percent medical loss ratio standard.  BHPs must coordinate with other insurance affordability programs to ensure continuity of care when enrollees “churn” among different programs.

States must ensure that enrollees in their BHP program are not required to pay higher premiums than they would have had to pay through the exchange.  States may use BHP trust funds or state funds to lower premiums further.  Enrollees in the BHP will receive cost sharing reductions under the ACA, which will raise the actuarial value of the BHP to 94 percent for enrollees with incomes below 150 percent of poverty and to 87 percent for enrollees with incomes above that level.

As in the exchange, enrollees who have paid at least one premium must be given three months before they can be terminated for non-payment.  The health plan will pay claims during the first month and pend them during the next two, as do QHPs.

States will be paid 95 percent of the amount that enrollees in the BHP would have received through the exchange for PTC and CSR.  The methodology for paying states is discussed further below.  BHP plans are not eligible to participate in the ACA risk adjustment, reinsurance, or risk corridor programs and would not be part of the single individual market risk pool.   States may establish their own risk sharing programs for their BHP plans.  Payment amounts can be adjusted retrospectively only for differences between projected and actual enrollment, mathematical errors in calculation, or where the prevailing BHP funding methodology for a given year permits adjustments due to the lack of availability prospectively of data needed to determine relevant factors.  Deposits into a state’s BHP trust fund will be made quarterly 60 days prior to the beginning of each fiscal quarter.

A state’s BHP trust fund may only be used to reduce premiums and cost sharing and to provide additional benefits for BHP enrollees.  It may not be used to pay BHP administrative expenses, including program implementation and start-up costs. States must use state funds for these purposes, or fund these costs through an assessment imposed on BHP plans.  Finally, the rule addresses issues relating to fiscal policies, accountability, and federal BHP oversight, including provisions for corrective actions, disallowances, and restitution.

Basic Health Program Payment Methodology

The separately published BHP payment methodology is detailed and complex.  It will only be summarized briefly here.

The BHP payment amount is based on multiple “rate cells” within each state.  Each “rate cell” represents a unique combination of age range (in states that permit age rating), geographic rating area, coverage categories (self-only, two-adult, and in some cases adults plus children), household size, and income range as a percentage of the federal poverty level. Age rate cells, for example, use 10-year increments, while there are six household income cells ranging from 0 to 200 percent of the federal poverty level.  States participating in the BHP must project how many enrollees it will enroll within each rate cell for the first quarter of program operation.  Subsequent quarterly payments will be based on actual enrollment numbers.

The payment to the state BHP trust fund is then calculated by using a formula to determine 95 percent of the estimated PTC that would have been paid by the federal government if each enrollee in a rate cell had instead enrolled in a QHP and a separate formula to determine 95 percent of the CSR payment that would have been paid had each enrollee enrolled in a QHP, and then the two amounts are summed to determine the total BHP payment.

The PTC portion of the rate will be calculated as the PTC would have been calculated if the persons in a rate cell were enrolled in a QHP, with three adjustments.  First, the PTC portion of the rate will represent the average PTC that all persons in the rate cell would have received rather than actual individual rates. Second, the reference premium used to calculate the PTC, (as explained below) will be adjusted for BHP population health status.  Third, the PTC will be adjusted prospectively to reflect the average net expected impact of end of the year reconciliation on the individuals enrolled in the BHP.  The reference premium will be the premium for non-tobacco users.

The CSR portion of the rate will be calculated for each rate cell in the state in the manner for which CSR advance payments would be calculated under the Notice of Benefit and Payment Parameters for the year at issue (including separate calculations for American Indians and Alaskan Native enrollees).  This rate is also calculated based on the average person in a rate cell rather than actual individuals and is based on an adjusted reference premium.  It is based on the premium charged to non-tobacco user, but includes an adjustment to account for BHP enrollees’ tobacco-related health costs outside the premium charged to non-tobacco users.  In calculating CSRs, an induced-utilization factor is applied recognizing that reduced cost-sharing results in increased usage of services.

For 2015, states may opt to use 2014 second-lowest cost silver premiums trended forward for 2015, taking into account an adjustment for the BHP health factor to adjust for the projected impact that enrolling BHP-eligible individual would have on BHP premiums and for the fact that the reinsurance program is not available to the BHP.  Payments for states that choose not to use 2014 rates will be based on actual reported 2015 rates, again adjusted for the BHP health factor.

The health factor adjustment is intended to account for the fact that the presence or absence of BHP-eligible enrollees from a state’s QHP risk pool will affect QHP rates if the BHP population has poorer or better health status than the QHP population.  For 2015, HHS proposes to set the health adjustment factor at 1.00, because the BHP population will have already been part of the QHP population for 2014.  States that believe that in fact a further adjustment is needed for their BHP population may include a retrospective population health status adjustment in their BHP methodology and adjust payments retroactively based on the actual health status of the BHP population compared to the QHP population.

Provider Non-Discrimination

On March 7, 2014, HHS, together with the Departments of Labor and Treasury, published a “Request for Information Regarding Provider Non-Discrimination.”  Section 2706 of the ACA prohibits group health plans and health insurers from discriminating “with respect to participation under the plan or coverage against any health care provider who is acting within the scope of that provider’s license or certification under applicable state law.”  The provision does not require payers to contract with any particular provider and does not limit the ability of payers to vary payment rates based on quality or performance measures.

In April of 2013, the Departments issued a frequently asked questions document stating that until further guidance was forthcoming, payers were expected to implement this provision using “a good faith, reasonable interpretation of the law.”  The FAQ stated that the provision “does not require plans or issuers to accept all types of providers into a network and also does not govern provider reimbursement rates, which may be subject to quality, performance, or market standards and considerations.”

The Senate Committee on Appropriations Report dated July 11, 2013, accompanying what became the 2014 Labor, HHS, and Education 2014 appropriations bill, criticized this FAQ, noting that it allowed payers to exclude whole categories of licensed or certified providers and to take into account broad “market considerations,” rather than just quality or performance measures.  The Senate Report further stated, “Section 2706 was intended to prohibit exactly these types of discrimination.”  It directed the Departments to correct this FAQ to correct the FAQ to reflect congressional intent within 30 days of the enactment of the appropriations bill.  The Notice, which was issued months after the appropriations bill was enacted, simply asks for comments on all aspects of the 2706 prohibition.

DC Circuit Rejects Another Legal Challenge To The ACA

Finally, on March 7, 2014, the Court of Appeals for the District of Columbia affirmed the decision of the D.C. district court dismissing the complaint of The Associations of American Physicians and Surgeons and Alliance for Natural Health, U.S.A., which had challenged the constitutionality of the ACA as well as challenging Social Security and Medicare rules.  This is one of the last of the many cases that were filed challenging the ACA under various constitutional theories in the months following the enactment of the statute in 2010.

The frustration of the court with the frivolous and amateurish nature of the claims raised by the case is palpable.  The primary challenge is based on a claim that the individual responsibility provision of the law violates the Takings Clause, which prohibits the government from taking property without just compensation.  The court points out that, absent extraordinary circumstances, the Takings Clause does not apply to taxes, since the government can hardly compensate individuals every time it collects a tax from them; the individual responsibility provision applies a tax; and there are not extraordinary circumstances in this case. Even though the individual responsibility provision has a redistributive effect, this is neither unusual nor illegal.

The court next rejects a challenge based on the Origination Clause, which requires legislation raising revenue to originate in the House.  This claim is rejected because it was not raised in a proper and timely manner by the plaintiffs.  A challenge to a Social Security rule affecting the Medicare program is rejected because the rule is no longer in effect and thus the claim is moot.  Finally, a claim “that the Social Security Commissioner and the Secretary have violated their “fiduciary and equitable duties,” by failing to provide an “honest accounting” of the financial situation facing Social Security and Medicare,” is rejected by the perplexed judges because the plaintiffs provided no legal basis for their claim.

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3 Responses to “Implementing Health Reform: Basic Health Program And More ACA Litigation Results”

  1. Jmotivator Says:

    So, Mr. Jost, care to revisit your September 20, 2012 blog post stating that Executive Orders to grant waivers for PPACA would be illegal?

    Given that the last Executive Order “waiver” submitted by Obama has apparently waived the Individual Mandate for 2 years, I think it is essential that you reopen your old argument.

  2. Gary Says:

    Will there be insurance for elderly, blind and disabled?

    ( On medicaid now and cannot find a doctor in my area that accepts medicaid for blind & disabled adult men, even after contacting my congressman it was unsuccessful, so I am thinking of dropping medicaid since it is worthless)

  3. Sandra Says:

    Why are there no provisions for a person such as myself with a grandfathered plan? If I keep the plan that I’ve had for years and by the way is a much better plan than what I can find in your insurance marketplace; I cannot use tax credits. The passing of bill HR2783 would eliminate the worry of a grandfathered plan and help not only me but hundreds of Virginians keep their insurance without using their entire pension to pay for insurance. Is it fair that I’ve worked for a company 36 years only to have to pay my entire pension for medical insurance?
    Why has our government turned their backs on PBGC recipients and offered no help for people with grandfathered plans?
    I’ve sent e-mail to all Virginia Legislators asking for help and at most only received automated e-mails in return. I’m not asking for a political speech or false promises. I just want our state representatives to know the problems faced by some of the people that voted them into office. HR2783 would solve many of these worries, but has been stalled in congress since July, 2013.

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