UPDATE: YOU DOWN WITH BHP? YEAH, YOU KNOW ME!!

2019 OPEN ENROLLMENT ENDS (most states)

Time: D H M S

 

If you look at The Graph for the 2018 Open Enrollment Period, you'll notice that in addition to the large green section (Qualified Health Plan (QHP) selections across the 39 Healthcare.Gov states) and the smaller blue section (QHP selections across the 12 State-based exchanges), there's a much smaller burgundy slice at the top labelled "BHPs (MN/NY only). This represents around 820,000 people in Minnesota and New York only who are enrolled in Basic Health Plans, or BHPs.

The BHP program was created under the Affordable Care Act as a sort of "Medicaid Plus" low-income public healthcare option. It's only available in those two states at the moment; Minnesota has been offering BHPs since 2014 (in fact, MN's BHP program, called "MinnesotaCare", was around before the ACA as a state-level program which was originally created in 1992. After the ACA passed, MinnesotaCare was basically retooled into the ACA's BHP structure, which also included shifting funding over to the ACA as well. Enrollment jumps around but generally somewhere between 70,000 - 100,000 Minnesotans are covered via MinnesotaCare at any given time. I believe it sits at around 94,000 at the moment.

New York, meanwhile, did a "soft launch" of their own BHP program (called the Essential Plan) in April 2015, limited to legally present non-citizens, which is allowed under the ACA's BHP provision. They transferred around 225,000 members of this population (who had been enrolled in Medicaid on New York's dime until then) over to the Essential Plan first, then expanded the program to the general public in time for the 2016 Open Enrollment Period.

Around 160,000 exchange enrollees were effectively "cannibalized" by the BHP plans, for a total of 380,000 people signed up in 2016. This surged by 75% in 2017 to 665,000 enrollees, and has added another 9% so far this year, currently sitting at 726,300 enrollees with several days of Open Enrollment still left to go.

BHP policies are only available for people who earn between 138% - 200% of the Federal Poverty Line: Around $16,600 - $24,100 for a single adult or $33,900 - $49,200 for a family of four. The catch is that if you're shopping for coverage on the ACA exchange in either of those states, the BHP plans are the only ones you can buy...but that's OK, since they're a much better deal for that income level than the "normal" QHPs anyway. You can buy a QHP if you really want to, but you'd have to pay full price--you wouldn't receive either Advance Premium Tax Credits (APTC) or Cost Sharing Reduction (CSR) assistance if you did so.

For context, Minnesotacare enrollees pay anywhere between $0 - $80/month depending on their income, with nominal co-pays for some services. In New York, it's either $0 or just $20/month, along with reasonable co-pays for those earning around 145-200% FPL.

Since BHP policies come at a nominal cost to the enrollee (ranging from $0 to around $1,000/year at the outside), how are they funded? Well, under the BHP waivers approved by CMS, the federal government provides 95% of whatever the combined APTC + CSR funding the enrollees would otherwise be entitled to if they didn't have a BHP program. This is critically important to explain what happened last week.

Let's say you're a single adult living in New York and earn 150% FPL, or around $18,000/year. If NY didn't have the BHP program, according to the APTC formula, you'd have to pay 4.08% of your income (around $738/year) for the benchmark Silver QHP. Your CSR assistance would also knock your deductible/co-pay costs down considerably, likely by several thousand dollars on average. If the full-price Silver QHP cost, say, $500/month, you'd receive $5,262 in APTC, plus perhaps $1,000 in CSR assistance (remember, the amount of CSR help you actually receive varies greatly depending on how much you actually rack up in healthcare expenses that year). Let's call it around $6,200/year in APTC + CSR combined. 95% of that would be around $5,900. That's how much would normally be available from the federal government to fund the BHP program instead.

Let's say that this amount ($5,900) was the average calculated for all 820,000 BHP enrollees across both MN and NY. Combined, that adds up to around $4.8 billion per year (roughly $4.2 billion for New York and perhaps $600 million for Minnesota). Obviously these are crude estimates, but you get the idea. I'll come back to this in a minute.

With me so far? OK, that's how the BHP program has been funded until recently.

HOWEVER, back in mid-October, as I might have mentioned once or twice over the past few months, Donald Trump cut off CSR reimbursement payments to the insurance carriers.

This move has already caused a massive ripple effect across the individual market, of course. Some insurance carriers dropped out of the individual market altogether. Most stuck around, but simply calculated how much they figured they'd have to eat in CSR expenses and added those costs to the full-price premiums themselves...resulting in an average additional rate increase of around 14 percentage points nationally. This average CSR-specific rate hike varies widely from state to state, of course; in the District of Columbia it's barely 0.1 point, while in states like Mississippi it's estimated to tack a whopping 27% onto the average Silver plan premium.

Why is the impact so low in DC? Simple: Hardly anyone is receiving CSR assistance in the first place...because people earning up to 215% FPL are eligible for Medicaid in the District anyway. Since CSR is only available up to 250% FPL, that means there's only around 500 DC enrollees who receive it, which means there's a nominal amount of reimbursement funding to be spread across the premiums.

What about Minnesota and New York? Well, here's where the odd interaction between APTC, CSR and the BHP program start to come into play. Just as DC has low CSR takeup due to high Medicaid cannibalization, Minnesota and New York both have low CSR takeup due to high BHP cannibalization.

In other words, the bulk of those who would otherwise be enrolled in high-CSR plans are instead enrolled in BHP plans (remember, BHP covers 138% - 200% FPL). The only CSR enrollees in MN/NY are those earning 200-250% FPL...and CSR help is pretty weak at that level anyway.

As a result, there's not that much "lost" CSR funding to be spread across premiums...which means the CSR impact is pretty nominal in both states: Perhaps 5% in Minnesota and just 1.2% or so in New York.

Now, let's go back to the ~$4.8 billion in BHP funding. The bulk of that, perhaps 75-80%, comes from the "missing" APTC subsidies. The other 20-25% or so, roughly $1 billion in New York and perhaps $120 million or so in Minnesota, should be provided by the "missing" CSR assistance in each state that the enrollees would otherwise be entitled to receive.

And that's where the crisis hit. As explained by Bill Hammond of the Empire Center last August:

As happens so often in health policy, New York has more to lose than almost any other state.

In the rest of the country, it’s insurance companies that stand to forfeit money if Trump follows through on his threat. In New York, state government would take most of the hit.

The end of the cost-sharing subsidies would open an almost $1 billion hole in the budget of the state-operated Essential Plan, an optional benefit under Obamacare that was exercised only by New York and Minnesota.

The Cuomo administration would face a choice between backfilling the lost federal funds with state dollars or shutting down a fast-growing health plan that covers 665,000 low-income New Yorkers.

In another wrinkle, New York–because of its unusual structure–also stands to be denied a counterbalancing increase in federal premium tax credits that would soften the blow for low-income consumers in other states.

(Remember, Essential Plan--aka BHP--enrollment has increased this year from 665K to over 726K as of last week.)

You see, the Trump Administration has decided that since CSR reimbursement payments have been cut off, it somehow follows that the BHP programs in NY and MN are no longer entitled to the funding based on those CSR payments.

Everything above is the backstory to this development last week:

#BREAKING: We are suing the Trump administration for abruptly and illegally cutting off more than $1B in funding for New York’s Essential Plan—a lifeline for over 700,000 low-income NYers.

— Eric Schneiderman (@AGSchneiderman) January 26, 2018

Here's the full press release.

I discussed this at length with folks like Hammond, Dave Anderson and Michael Kalina back in August and concluded the following:

Bottom Line: Congress still needs to formally appropriate the damned CSR payments, pronto.

Of course, that was before Silver Loading made the lack of CSR appropriation a net benefit to around 9 million subsidized enrollees nationwide (including quite a few people in...New York and Minnesota), thus muddying the waters quite a bit about what the best route to follow going forward is. The time to appropriate CSR funding was before the 2018 carrier contract signing deadline in late September; once the 2018 rates were locked in, appropriating funding for it shifted to harm more people than it helped, since the unsubsidized individual market is only about half the size of the subsidized market. The other downside, as I noted at the time, is the potential impact on...BHP funding.

OK, so NY Attorney General Schneiderman is just filing a symbolic lawsuit then, right? Well, not quite. As I noted in August:

UPDATE: OK, even as I'm typing this, there's some discussion on Twitter among folks like David Anderson, Michael Kalina and Hannah Recht (all of whom I recommend following) as to whether BHP funding is based on 95% of what APTC+CSR payments actually are or how much they're supposed to be. If the first is accurate, then this is a real problem. If the second is accurate, then not only is BHP funding not at risk, but it should even see a slight increase based on the 1.3% APTC hike. Stay tuned...

Michael Kalina wrote up a brilliant blog post (the only one he's written so far to my knowledge) which laid it out pretty clearly:

Here is the original text again, but with a few key words emphasized:

The amount determined under this paragraph for any fiscal year is the amount the Secretary determines is equal to 85 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.

There’s a very subtle distinction made about the recipient of the PTC and CSR: The eligible individual. CSRs are a funny concept. Based on the way the law is written, insurers are obliged to reduce the cost sharing of certain individuals based on some demographic requirements. The benefit of the CSR is provided to the individual who is enrolled in the plan. Separately, the government is obliged to reimburse insurers for their troubles. What has become clearer every day of the Trump administration is that individuals are provided with CSRs by insurance companies, regardless of whether or not the federal government reimburses the insurance companies for their generosity.

In theory, CSRs given to individuals exist with or without federal reimbursement. And if that is true, then BHP funding should be unaffected by a stoppage in payments.

In addition, as Andrew Sprung of Xpostfactoid noted back in August, MN/NY have another powerful argument in their case...one which comes directly from, of all places, House Republicans who brought the original CSR lawsuit against the Obama Administration in the first place:

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.

In any event, Kalina's point appears to be the crux of the argument being made by the lawsuit in question: That BHP funding is indeed legally based on the amount of financial assistance the enrollees would receive if there was no BHP program, not on how much money is actually paid back to the insurance carriers.

As Dave Anderson put it this morning:

“Would have been provided” implies a counterfactual. We are supposed to imagine the New York and Minnesota markets as if there was no BHP. From here,a projection of premiums is made. And from that premium projection, the number of people who earn between 138% and 200% FPL is calculated. That number is then discounted by 5% to act as the maximum pass-through to the state for their BHP.

“individuals” is the second key word. Everyone agrees that the individual is entitled to CSR benefits. The federal government has argued in court that Silver loading is an acceptable practice if insurers are not to be reimbursed for CSR benefits to individuals.

New York and Minnesota are arguing that they were not treated fairly by CMS compared to all other states that Silver Loaded. CMS is paying on the factual instead of the counterfactual for no good reason despite their own regulations saying that the BHP payment is a counterfactual payment.

There will be a lot of lawyers involved, but I think the counterfactual will eventually win.

Ain't healthcare and lawyering fun?

UPDATE: Thanks to Andrew Sprung for reminding me of a couple of tidbits below which I had originally forgotten about: NY's non-citizen enrollment and the House GOP's earlier legal argument that BHP funding isn't dependent on CSRs being appropriated.