New York’s BHP problem

Tim Jost at Health Affairs picks up on an important letter that the Center for Medicare and Medicaid Services (CMS) sent to New York. New York runs a Basic Health Plan. A BHP allows a state to take 95% of the funding for advanced premium tax credits (APTC) and cost sharing reduction (CSR) subsidies to cover the population that makes between 138% FPL (~$16,500 for a single individual) to 200% FPL ($24,040 for a single individual) with basically an enhanced Medicaid program.

Politico is reporting, “The Centers for Medicare and Medicaid Services has told [New York’s] budget office that if Congress does not fund the cost-sharing reduction program in the next three weeks, the federal government will stop paying for a portion of the state’s Essential Plan, creating a nearly $1 billion hole in the upcoming budget.” The Essential Plan is New York’s Basic Health Program.

CMS’s position is apparently that if the Congress does not fund the cost-sharing reductions (CSRs), New York is not due 95 percent of CSR payments.

Tim notes that the House Republicans have made the argument in court that CSR was not tied to BHP payment flows and that New York most likely has a strong case to get the money eventually but this is a problem.

New York runs its own exchange. It has a motivated insurance commissioner. It might have an alternative solution that it can execute quickly to fill that billion dollar hole.

If New York State in mid-open enrollment decided that all filed rates were $120 per member per month too low, they might be a able to impose a premium surcharge on all on-Exchange policies. On-exchange, subsidized buyers would be insulated as all premiums would increase by a fixed amount. This would mean that the subsidy benchmark would increase by the same amount. No subsidized buyer would be worse off.

Non subsidized buyers could be held harmless if they pay the surcharge and also get an automatic rebate equal to the surcharge. This gets around the requirement that all on-Exchange plans also have to be sold off-Exchange.

This is a kludge, but it protects the New York state budget and the Essential Health Plan for another year. And next year, the state commissioners could require a state health insurance tax built into the individual on-Exchange premiums while also requiring cloned off-Exchange filings with no difference in plan attributes where that tax does not apply.