HealthCare.gov Rolls Out Subsidies For Unemployed
The Centers for Medicare and Medicaid Services (CMS) continues to implement the American Rescue Plan Act (ARPA), making an additional enhanced marketplace subsidy available to consumers on July 1, 2021. Federal officials also released the summary risk adjustment report for 2020 and the final methodology for the Basic Health Program (BHP) for 2022. In adopting the final methodology, CMS estimates that federal BHP payments to the two states with current BHPs—Minnesota and New York—will increase by about $1.1 billion in 2022. This post summarizes these recent developments.
HealthCare.gov Rolls Out Subsidies For Unemployed People
Beginning July 1, 2021, individuals who have received or been approved to receive unemployment compensation at any time during 2021 can visit HealthCare.gov to receive maximal subsidies under the Affordable Care Act (ACA). Their income will be treated as no higher than 133 percent of the federal poverty level, meaning qualifying individuals will receive the maximum amount of premium tax credit (PTC) and cost-sharing reductions (CSRs) to lower their out-of-pocket costs (if they select a silver plan). This means that these individuals will qualify for a $0 or very low-cost silver plan and CSRs that boost their plan’s actuarial value to 94 percent (i.e., platinum-equivalent coverage). This provision extends to those who are newly eligible to enroll in ACA coverage as well as current marketplace enrollees.
This subsidy enhancement is one of three such enhancements made available under ARPA and the only enhancement that had not yet been operationalized by HealthCare.gov. The prior two enhancements—new subsidies for higher-income people who did not previously quality and increased subsidies for lower-income people who already qualified—have been available through HealthCare.gov since April 1. All three of the subsidies are temporary: maximal subsidies for those who receive unemployment compensation are in place for 2021 only while the other subsidy enhancements will remain available through 2022 (but expire in 2023).
CMS has not released details on how individuals will indicate that they have received or will receive unemployment compensation for 2021. Will these individuals simply check a box to attest that they have received unemployment compensation? Will any documentation be required? Under ARPA, the Treasury Department was required to provide guidance on how a taxpayer can attest (and provide documentation if needed) to the fact that they have received, or have been approved to receive, unemployment benefits. This guidance has not, to my knowledge, been issued.
Lack of details notwithstanding, many can take advantage of this enhanced financial help during the broad COVID-19 special enrollment period (where anyone can enroll in coverage or change plans) through August 15. Similar to how the other two enhanced subsidies were operationalized, the unemployment-linked subsidy will not be applied automatically. Instead, current HealthCare.gov enrollees who qualify will need to return to HealthCare.gov to update their application and choose how to apply the enhanced subsidy. Current enrollees can reselect their current marketplace plan, or switch plans. New consumers will enroll as they would during an open enrollment period.
No consumer will “lose” the benefit of enhanced subsidies, but those who qualify and do not “claim” the PTC now will have to wait to receive extra PTC until tax time in 2022. The same is true for enhanced unemployment-linked subsidies that apply to coverage from January through June; these will not be applied to premiums for 2021 and will instead be paid out at tax time in 2022.
CMS Releases Risk Adjustment Summary Report For 2020
On June 30, CMS released its summary risk adjustment report for 2020. Non-grandfathered plans in the individual and small group markets, inside and outside of the marketplaces, participate in the risk adjustment program. Each plan receives a determination of its average actuarial risk based on enrollees’ individual risk scores. Plans with lower actuarial risk make payments to plans with higher actuarial risk. The overall goal of the risk adjustment program is to protect against adverse selection by spreading financial risk across insurers. The program also discourages insurers from designing their plans in a way that makes them less attractive to less healthy enrollees.
After years of relative consistency, overall risk scores decreased for 2020—by nearly 12 percent in the individual market and 11 percent in the small group market—relative to 2019. CMS largely attributes this drop to changes to the risk adjustment methodology for 2020, including changes to data used for recalibration. These changes, the agency estimates, decreased risk scores by about 9.7 percent. The remaining decrease is due in part to the pandemic: because risk adjustment is tied to claims data, depressed utilization of health care during the public health emergency helped drive down overall risk scores. CMS also notes a whopping 484 percent increase in telehealth paid claims for 2020 compared to 2019 (with significant increases of more than 667 percent and 1074 percent for telehealth visits of 11-20 minutes and 21 to 30 minutes, respectively). Even with a significant increase in telehealth use, there was only a slight increase in total paid claims costs relative to 2019.
Overall, a total of 576 insurers participated in the risk adjustment program for 2020, with 569 receiving a risk adjustment transfer. Total transfers for 2020 were about $11.17 billion, with $5.585 billion in payments and $5.585 billion in charges. Default risk adjustment charges were assessed against 8 insurers, all in the small group market. CMS also issued state-specific average premium data and shows that states with larger premium decreases had larger growth in enrollment. Risk adjustment transfers amount to 9.9 percent of enrollment-weighted monthly premiums in the individual market and 4 percent in the small group market. This yields a national average of 7.5 percent of total premiums (very similar to 7 percent of premiums for 2019).
Consistent with prior years, risk adjustment transfers correlate strongly with paid claims. This shows that the program is working as intended: insurers with high paid claims are more likely to receive risk adjustment payments, while those with low paid claims are more likely to make payments. Insurers in the lowest quartile of claims costs were assessed on average a risk adjustment charge of 14 percent of total collected premiums (up from 13 percent in 2019). Insurers in the highest quartile of claims received payments of about 15 percent of total premiums (a slight drop from 16 percent in 2019). CMS finds continued predictability between interim and final risk scores for 2020, making it easier for insurers to account for transfer amounts.
CMS believes that the high-cost risk pool—which reimburses insurers for 60 percent of claims that exceed $1 million and is designed to help ensure that risk adjustment transfers better reflect average actuarial risk—continues to function well. The risk pool is funded through a 0.24 percent of premium “charge” for the individual market and a 0.38 percent of premium charge for the small group market. In total, 138 insurers in the individual market and 146 insurers in the small group market will receive a high-cost risk pool payment for 2020.
Who Owes What?
The size of some of the planned transfers is significant. Kaiser Permanente, Bright Health, Centene, Molina, and Oscar owe hundreds of millions of dollars in risk adjustment payments while many Blue Cross Blue Shield affiliates are generally on the receiving end of risk adjustment transfers. Blue Shield of California will receive more than $1 billion in risk adjustment in the individual market and about $122.7 million in the small group market. Other insurers slated to receive nine-figure risk adjustment payments include Blue Cross and Blue Shield of Florida, Blue Cross Blue Shield of Illinois, and Blue Cross Blue Shield of Texas.
Final Methodology For The Basic Health Program
On July 2, CMS issued a new rule outlining the final methodology for the BHP for 2022. The BHP is authorized under Section 1331 of the ACA and allows states to offer an alternative to marketplace coverage for certain uninsured individuals with incomes between 133 and 200 percent of the federal poverty level (FPL). Although these individuals would qualify for PTC and CSRs to purchase a marketplace plan, the BHP option allows for more affordable coverage and helps minimize churning between Medicaid and private insurance. Only two states—New York and Minnesota—have opted to establish a BHP so far, with a combined enrollment of nearly 1 million individuals for 2021.
To fund the BHP, CMS makes payments to a state that equal 95 percent of the PTC and CSRs that eligible BHP enrollees would have received if they had enrolled in a qualified health plan through the marketplace. CMS did not codify a specific formula that it must use to make BHP payment calculations. Instead, CMS is required to publish the following year’s proposed BHP payment methodology each fall and finalize it in the spring. Through this publication, CMS notifies the states of the formula it will use the calculate PTC and CSR values to fund the BHP for the next year. Additional details on litigation over the BHP are outlined here.
The final 2022 methodology for determining the amount of federal funds for the BHP is the same as the methodology from 2021 with a handful of exceptions. Given the similarities to prior years, the full methodology is not summarized here, but this post highlights the changes from the proposed rule. These changes are related to how ARPA’s enhanced subsidies affect the BHP methodology for 2022. The changes to the methodology and ARPA will increase federal BHP payments by about $1.1 billion for 2022, relative to the 2021 methodology.
Enhanced marketplace subsidies under ARPA mean higher PTC for marketplace enrollees. Because states receive federal BHP funds based on the amount they would have received if those individuals had been enrolled in marketplace coverage, enhanced subsidies under ARPA mean that states will receive higher federal payments for their BHPs in 2022. (CMS said as much in prior guidance from June 2021, which confirmed that ARPA would increase federal BHP payments and clarified that BHP enrollees cannot pay more than they would pay for marketplace coverage.)
In terms of changes adopted in the final methodology, CMS first updated the applicable percentages of household income that are used to calculate PTC to reflect new enhanced subsidies under ARPA. The relevant new percentages are 0 percent for those whose income is 100 to 150 percent FPL and 2 percent for those whose income is 150 to 200 percent FPL. This does not alter the BHP payment methodology itself, but the new inputs will affect the amount that the federal government owes the states.
Second, in a departure from the proposed methodology, CMS removed the metal-tier selection factor for 2022. The metal-tier selection factor was added beginning with the 2020 program year to account for the impact of consumer plan selection, particularly in response to silver loading. In prior years, CMS made no adjustment for enrollment in non-silver plans because most enrollees in income ranges up to 200 percent FPL selected a silver plan. But silver loading (which began with the 2018 plan year) meant that many consumers who would otherwise enroll in a silver plan could enroll in lower-premium bronze or gold coverage. The metal-tier selection factor helped account for the fact that some marketplace enrollees selected lower-premium bronze plans over silver plans.
CMS believes that this factor is no longer warranted for 2022 in light of enhanced ARPA subsidies. More generous PTC will change consumer behavior and lead more individuals with incomes under 200 percent FPL to enroll in reduced premium silver plans along with CSRs. Removing the metal-tier selection factor from the 2022 methodology is expected to increase BHP payments to states by $261 million in 2022, CMS.
Third, CMS updated the income reconciliation factor from the proposed value of 99.01 percent to the final value of 100.63 percent. This increase reflects updated estimates in light of ARPA.
CMS continues to take the position that it cannot provide states with the CSR component of their BHP payment in the absence of a congressional appropriation for CSR funding. Thus, as it has since 2018, the methodology incorporates a premium adjustment factor of 1.188 for 2022 to account for unpaid CSRs. CMS also gives states the option to implement a retrospective population health status adjustment in their BHP. States that wish to do so must submit a proposed protocol within 60 days after the publication of the final methodology.