May 1, 2019

Centers for Medicare & Medicaid Services

Department of Health and Human Services

Re: CMS-2407-PN: Comments on the Funding Methodology for 2019 and 2020 for the Basic Health Program, via
electronic filing

To Whom It May Concern:

We appreciate the opportunity to comment on the proposed federal payment methodology for the Basic Health
Program (BHP) for 2019 and 2020. We have a number of concerns.

These comments should not be interpreted as a concession that CMS’ decision to assign a zero value to the
formula for cost-sharing reductions (CSRs) within the BHP payment methodology was within the law. We
maintain that Affordable Care Act (ACA) and CMS regulations continue to require that the agency transfer the
full amount of BHP funding to the states each quarter. Given that CMS reduced the portion of the payment
methodology attributable to CSRs despite the law, we agree that a Congressional appropriation for the full value
of the CSRs would resolve this problem.

This proposal uses the 2018 payment methodology as a basis for 2019 and 2020. It includes the premium
adjustment factor, which resulted from the lawsuit brought by Minnesota and New York after the CSRs were
stopped and CMS adjusted the BHP payment methodology to reflect the discontinuation. The addition of the
premium adjustment factor based on the “silver-loading” of premiums by Qualified Health Plan (QHP) in other
states restored only about 72% of the federal funding that Minnesota lost by virtue of the elimination of the CSR
payment. For 2019 and 2020, CMS now proposes to further reduce federal BHP funding through a “metal-tier
selection factor” or “MTSF.”

CMS describes the MTSF adjustment as reflecting an increase in the number of people selecting bronze-level
plans and a related reduction in premium tax credits (PTCs) paid when the premiums for the bronze plans are
less than the value of the PTCs. CMS asserts that “silver-loading” caused this increased reduction in PTCs.

We estimate that this new factor will further reduce Minnesota’s funding by approximately $24 million over
2019 and 2020. This adjustment is inconsistent with the Affordable Care Act and the Administrative Procedure
Act.

The statute authorizing the Basic Health Program is Section 1331 of the ACA (42 U.S.C. § 18044). Paragraph
(3)(A)(i) of that section provides:

The amount determined under this paragraph for any fiscal year is the amount the Secretary determines
is equal to 95 percent of the premium tax credits under section 36B of the Internal Revenue Code of
1986, and the cost-sharing reductions under section 1402, that would have been provided for the fiscal
year to eligible individuals enrolled in standard health plans in the State if such eligible individuals were
allowed to enroll in qualified health plans through an Exchange established under this subtitle.
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May 1, 2019
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Emphasis added. In 2016, CMS interpreted this law as preventing a “pass-through” of premium tax credits for
BHP enrollees in response to a reduction in benchmark premiums induced by the state-funded reinsurance
program. In other words, CMS took full advantage of Minnesota’s willingness to reduce premiums in the
individual market through reinsurance, by interpreting sections 1331 and 1332 of the ACA to only allow the
pass-through payments for people who were actually eligible to enroll in a QHP, and since the BHP prevents
enrollment in QHPs, the reinsurance program cost Minnesota $168 million in reduced funding for the BHP. The
federal government was the sole beneficiary of that decision.

With this proposed MTSF adjustment, CMS attempts to benefit from the opposite interpretation of the law—
that because people in other states whose income is within the BHP range are choosing bronze plans, that CMS
should benefit in the BHP payment methodology from any related reduction in premium tax credits paid, even
though BHP eligible people cannot actually enroll in bronze plans in Minnesota. This is arbitrary and capricious
rulemaking, which is barred by Administrative Procedure Act.

Further, CMS clearly recognizes that the Basic Health Programs are required by the implementing regulations to
maintain a benefit set at a minimum 87% actuarial value (AV) for people within income between 150% and
200% of poverty, and 94% AV for people with income below 150%. CMS is reducing federal BHP payments for
the value of PTCs that individually insured people are foregoing in other states by choosing bronze plans, even
though people eligible for the BHP remain entitled to an AV of 87% and 94%--gold and platinum-level coverage--
and are unable to choose something less. In order to maintain the program, states will be required to pick up
the additional cost. CMS is shifting yet more costs to the BHP states through this MTSF, which CMS
acknowledges that states will be unable to avoid through increases in cost-sharing and decreases in payments to
health plans.

The Affordable Care Act envisioned a Basic Health Program as an alternative to insurance in the individual
market, for people within income below 200% of poverty, by allowing states to pool enrollees’ CSR and PTC
funding through discounted by 5% and without any funding for administrative costs. When the federal
government asserted that CSRs could not be paid due to lack of appropriation, it allowed the market to react by
increasing silver-level premiums. The federal government then attempted to penalize the BHP states even
though these states were providing better of coverage with less federal support. This proposed metal-tier
selection factor is more of the same, is certainly not required by the law, violates principles of fundamental
fairness, and the overall result is a windfall to the federal government that is far greater than the 5% discount
that Congress intended.

We also point out that the Administrative Procedure Act necessitates advance notice and comment prior to a
reduction in the payment methodology. The BHP regulation also requires the Secretary to publish a proposed
payment notice in October for the upcoming calendar year, with a final notice published in February. 42 C.F.R. §
600.610. The April 2 notice is seven months overdue.

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For these reasons, we strongly urge CMS to remove the MTSF. If CMS chooses to adopt the MTSF, it should be
adopted only prospectively for 2021. Finally, we urge CMS to delay the deadline for states to notify CMS
whether they plan to use actual premiums or current year plus trend in the 2020 payment methodology because
it is unlikely that states will have enough time to evaluate that decision.

Thank you for considering these comments.

Sincerely,

Marie Zimmerman
Medicaid Director