Wednesday, August 02, 2017

Are New York's Essential Plan and Minnesota's MinnesotaCare threatened by CSR fund cutoff?

A question hath arisen on Twitter: if federal Cost Sharing Reduction (CSR) reimbursements to insurers are cut off, either by Trump administration fiat or court ruling, would New York and Minnesota's Basic Health Programs formed under the ACA lose the portion of their federal funding derived from CSR payments?

To review, the ACA gives states the option of establishing a Basic Health Program (BHP) for qualifying residents with incomes between 138% and 200% of the Federal Poverty Level -- the very population eligible for strong CSR in the ACA marketplace in a state with no BHP*.   A BHP is designed to have low premiums and high actuarial value -- though not necessarily higher than that provided by CSR. So far, Minnesota and New York are the only states to have formed BHPs.  New York's BHP, the Essential Plan, has minimal cost sharing and a maximum premium of $20 per month (for those in the 150-200% FPL range). MinnesotaCare premiums top out at $80 per month; the actuarial value is 94%, matching CSR for marketplace enrollees with incomes up to 150% FPL.

Section 1331 of the ACA provides for federal funding of BHPs according to this formula:
The amount determined under this paragraph for any fiscal year is the amount the Secretary determines is equal to 85 percent [amended to 95%] 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.
The Republican House challenged federal funding of CSR on grounds that while the ACA requires insurers to provide the benefit, instructs the Treasury to reimburse insurers, and builds CSR funding into the budget,  it leaves appropriation of the funds to Congress -- and Congress declined.  A preliminary district court decision went in favor of the House, but stayed the ruling pending appeal.  The Trump administration has threatened to drop the appeal but not yet done so, while periodically threatening to stop payment. Yesterday, the D.C. appeals court ruled that state attorneys general seeking to defend the payments have standing to do so.  A court decision could ultimately go either way -- and Trump could meanwhile still opt to make an administrative determination that the payments are illegal, and stop making them, wreaking havoc in insurance markets.

If CSR payments are stopped, what about the portion of BHP funding derived from what CSR payments would have been?  Bill Hammond, director of health policy at the Empire Center, cites a state Budget Division estimate that 25% of the Essential Plan's federal funding, or $925 million per year, comes from the estimate of what CSR would have been. Is that funding at risk?

Maybe. But look again at the statutory language above. The portion of BHP funding that's derived from CSR is based on the amount "that would have been provided to...eligible individuals" had they enrolled in the ACA marketplace (which they can't, once a BHP is established). By statute, those individuals would have obtained CSR if they had bought silver plans in the marketplace, whether or not insurers were reimbursed for them (and the funding is based on a contrary-to-fact: what they would have been eligible for in the marketplace). Michael Kalina of Northwell Health made this argument on Twitter, and it struck me as well when reading to the statute.

More to the point, the House plaintiffs themselves made this argument, in a reply brief to the state AGs' bid to enter the suit. In response to the AGs' claim that New York and Minnesota stood to be harmed by loss of BHP funding if the federal CSR payments stopped, the House argues (pp. 8-9):
Finally, Movants’ claim (Mot. 17) that New York and Minnesota “risk losing hundreds of millions of dollars” for their Basic Health Programs (BHPs), which are optional state-run programs for low-income individuals that are partially subsidized by the federal government. 42 U.S.C. § 18051(d). Movants’ claim is false.

The House did not challenge the BHP subsides in this action, and the district court’s injunction therefore does not affect those subsidies. Movants incorrectly contend that the amount of the BHP subsidies is tied to the cost-sharing offset payments provided “to insurers.” Mot. 18. To the contrary, BHP subsidies are calculated based on a formula that includes in part “the cost-sharing reductions … that would have been provided … to eligible individuals enrolled in standard health plans.” 42 U.S.C. § 18051(d)(3)(A)(i) (emphases added). Significantly, the amount of “cost-sharing reductions” that “would have been provided” to “eligible individuals” is unaffected by whether insurers receive cost-sharing offset payments, because the statutory obligation to provide cost-sharing reductions is not contingent on insurers’ receipt of those offset payments. See 42 U.S.C. § 18071(a)(2) & (c). Thus, a cessation of the cost-sharing offset payments to insurers would have no impact on the amount of a state’s BHP subsidy. And the district court’s injunction does not affect the calculation of cost-sharing reductions for eligible individuals, see J.A. 63-64, 101, so it cannot and does not affect the BHP subsidies.
Timothy Jost, who pointed me to this brief, also points out that the administration is not bound by the House's position. Should the House prevail in the suit, and the decision not address this point, the administration could cut off the CSR-derived portion of BHP funding and leave it to the states to challenge. Or, the administration could cut off CSR funding tomorrow and the CSR part of BHP funding with it, again forcing the states to challenge.

Still, the articulation of this argument by the plaintiff House is a pretty powerful endorsement, and it points to a theoretical escape for interested states from the threat of CSR cutoff. By forming a BHP, a state could defuse the threat aso of the time of BHP implementation.  The vast majority of CSR funding goes to marketplace enrollees with incomes up to 200% FPL -- who would instead be enrolled in a BHP. About 85% of enrollees who obtain CSR have incomes in the 100-200% FPL range, and the benefit is negligible above the 200% FPL threshold, raising the actuarial value of a silver plan just 3 percentage points, from 70% to 73%. By contrast, CSR-enhanced silver is bumped up to AV 94% for those with incomes up to 150% FPL, and to 87% for the 150-200% FPL band. CSR phases out entirely at 251% FPL.  In a state with a BHP, insurers would be on the hook only for weakest-level CSR if federal reimbursements were cut off. That's the case in New York now. There, Hammond points out:
Based on recent filings by health plans, the Department of Financial Services has estimated that the loss of cost-sharing would increase premiums by an average of just 1.3 percent.
The problem with a BHP bailout, however, is timing. A program can't be stood up on  dime, and insurers who have submitted rates for 2018 can't have half of prospective enrollees pulled out from under them.

The earliest a state could plausibly set up a BHP, as Jost reminds me, is 2019. Will CSR uncertainty still be hanging over our heads then? Possibly. Would it make sense for a state to guard against that possibility by starting planning for a BHP now? Probably not. For one things, its approval would be dependent on HHS, which would also determine whether CSR-derived funding would be available. As a defensive measure, BHP planning would simply pile uncertainty on uncertainty.

* BHPs, like the ACA marketplace are also open to legally present noncitizens with incomes in the 0-138% FPL range who are subject to the federal 5-year bar on Medicaid eligibility (or more stringent state time bars). Pre-ACA, New York was enrolling those subject to the 5-year bar in Medicaid on its own dime, in response to a court order. By shifting them to the BHP the state got a huge windfall -- $850 million, according to the Hammond (I believe that's annually; pre-implementation estimates were in the billion dollar range). In April 2015, the state shifted 225,000 noncitizen Medicaid enrollees into the BHP; Hammond puts enrollment of this population at 250,000.

1 comment:

  1. Under Trump, I'm losing faith in the ability of the Federal Government to "govern". Its the middle of October 2017 and the Trump administration has decided to stop funding CSR's which will create havoc in the health insurance marketplace. It could conceivable crash my 2018 health insurance because I'm signed up for a (NYS) BHP. I'm retired and have made decisions based on Federal actions which Trump now decides to pull the rug out from under. If you cant depend on the Federal government to stand behind their promises - its a sad day. The insurance markets are like a big boat that can't turn on a dime. Actions like this need to be phased in to allow for adjustment by people and the health industry.