Last week, CMS proposed the payment methodology and data sources for Basic Health Programs (BHPs), which include state-level insurance coverage created by the Affordable Care Act (ACA) for low-income residents. The proposal updates requirements for 2016. Comments are due by November 24, 2014. .

States may execute a BHP as an alternative to coverage under state-based or federal insurance exchanges. BHP plans are available for state residents who do not otherwise qualify for Medicaid, CHIP, or other minimum essential coverage. The ACA requires that BHP beneficiaries have income between 113 and 200 percent of the federal poverty level, although for states that have expanded Medicaid programs, the lower threshold will be 138 percent. Just as with the insurance exchanges, low income individuals are eligible for subsidies in the form of premium tax credits and cost sharing.

Under the ACA, payment rates are expressed as an amount per BHP enrollee for each month of enrollment, and the rates themselves vary by categories of enrollees. Prospective payments are made quarterly, estimated based on the prior quarter’s enrollment and then reconciled once enrollment data is submitted.

Funding for BHP plans is limited to what states would receive from the federal government, had the individuals instead enrolled in an exchange plan. States with certified BHP plans will receive federal funds equal to 95 percent of the amount of the premium tax credit and cost sharing provided by the state. Earlier this year, CMS issued a final rule reflecting its methodology to determine reimbursement for program year 2015. Enrollees will be categorized into unique rate cells based on age, county, income, household size, and number of other household members enrolled in the BHP. The 2016 proposed rule does not update the cell categories, but rather the tax credit and cost sharing equation values and adjustment factors for each.

Consistent with 2015, 2016 premium tax credits will be based on mean expected credit in a given rate cell, instead of on individual enrollees. The credit is the difference between the silver plan premium on the exchange (the “reference premium”) and the amount that the average rate cell individual would have to pay for that silver premium. Also like 2015, 2016 cost sharing will be calculated using the average advance cost-sharing reduction states would provide for an exchange plan to persons in each rate cell.

Under the 2016 proposed rule, American Indian and Alaska Native enrollees’ reference premium will be the bronze, rather than the silver plan. For all individuals, the reference premium will be adjusted for population health status and a premium trend factor. Like 2015, the standard health adjustment factor is a value of 1, reflecting CMS’s determination that it will be difficult to predict the difference in health status between BHP and exchange populations. However, for 2016, states may propose to CMS other methodology to better capture the difference. Lastly, the proposed rule allows states to choose a premium trend factor based either on 2016 exchange premiums or expected increases for 2015 BHP premiums.

CMS anticipates updating BHP payment policies annually. The 2016 proposed rule is expected to be finalized by February 2015 to allow states time to plan necessary adjustments. Comments are due November 24, 2014.

The proposed rule is available here.