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Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Rules and Regulations
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Any other data required by CMS to properly calculate the payment.
B. The 2018 Final Administrative Order, 2019 Payment Methodology, 2020
Payment Methodology, and 2021
Payment Methodology On October 11, 2017, the Attorney General of the United States provided the Department of Health and Human Services and the Department of the Treasury with a legal opinion indicating that the permanent appropriation at 31
U.S.C. 1324, from which the Departments had historically drawn funds to make CSR payments, cannot be used to fund CSR payments to insurers.
In light of this opinionand in the absence of any other appropriation that could be used to fund CSR payments the Department of Health and Human Services directed us to discontinue CSR
payments to issuers until Congress provides for an appropriation. In the absence of a Congressional appropriation for federal funding for CSRs, we cannot provide states with a federal payment attributable to CSRs that BHP enrollees would have received had they been enrolled in a QHP
through an Exchange.
Starting with the payment for the first quarter Q1 of 2018 which began on January 1, 2018, we stopped paying the CSR component of the quarterly BHP
payments to New York and Minnesota the states, the only states operating a BHP in 2018. The states then sued the Secretary for declaratory and injunctive relief in the United States District Court for the Southern District of New York.
See New York v. U.S. Dept of Health &
Human Servs., No. 18cv00683 RJS
S.D.N.Y. filed Jan. 26, 2018. On May 2, 2018, the parties filed a stipulation requesting a stay of the litigation so that HHS could issue an administrative order revising the 2018 BHP payment methodology. As a result of the stipulation, the court dismissed the BHP
litigation. On July 6, 2018, we issued a Draft Administrative Order on which New York and Minnesota had an opportunity to comment. Each state submitted comments. We considered the states comments and issued a Final Administrative Order on August 24, 2018 Final Administrative Order setting forth the payment methodology that would apply to the 2018 BHP
program year.
In the November 5, 2019 Federal Register 84 FR 59529 hereinafter referred to as the November 2019 final BHP Payment Notice, we finalized the payment methodologies for BHP
program years 2019 and 2020. The 2019
payment methodology is the same payment methodology described in the
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Final Administrative Order. The 2020
payment methodology is the same methodology as the 2019 payment methodology with one additional adjustment to account for the impact of individuals selecting different metal tier level plans in the Exchange, referred to as the Metal Tier Selection Factor MTSF.2 In the August 13, 2020
Federal Register 85 FR 49264 through 49280 hereinafter referred to as the August 2020 final BHP Payment Notice, we finalized the payment methodology for BHP program year 2021. The 2021
payment methodology is the same methodology as the 2020 payment methodology, with one adjustment to the income reconciliation factor IRF.
The 2022 final payment methodology is the same as the 2021 payment methodology, except for the removal of the MTSF.
C. The American Rescue Plan Act and Impact on the Basic Health Program Final 2022 Payment Amounts On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 ARP Pub. L. 1172. This action has a significant impact on state Medicaid, CHIP, and BHP programs and beneficiaries.3 ARP also impacts federal payments to states BHPs.
Section 9661 of the ARP temporarily modifies for 2021 and 2022 the applicable percentages of household income used to calculate the amount of advance payments of the premium tax credit APTC that taxpayers are eligible to have paid on their behalf for coverage purchased through an Exchange under the Patient Protection and Affordable Care Act. The applicable percentages determine the maximum amount of an individuals household income that can be charged in premiums for purchasing the second lowest cost silver plan on the Exchange. The difference between the maximum amount of an individuals household income that can be charged in premiums and the cost of the second lowest cost silver plan is paid to the individual as a PTC. As discussed in section III.D.5. of this final notice, the applicable percentages are factored into the equation for calculating the amount of PTC provided for individuals enrolled in QHPs through the Exchange and, accordingly, the amount of the federal BHP payment owed to states.
2 Metal tiers refer to the different actuarial value plan levels offered on the Exchanges. Bronzelevel plans generally must provide 60 percent actuarial value; silver-level 70 percent actuarial value; gold-level 80 percent actuarial value; and platinum-level 90 percent actuarial value. See 45
CFR 156.140.
3 https www.medicaid.gov/federal-policyguidance/downloads/cib060321.pdf.

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Lower applicable percentages result in higher PTCs provided for QHP enrollees and higher federal BHP payments for states. Therefore, this ARP provision has the effect under the BHP payment methodology of increasing the amount of the federal payments owed to states for their BHPs in 2022.
We published the BHP proposed funding methodology for program year 2022 in Basic Health Program; Federal Funding Methodology for Program Year 2022 in the November 3, 2020 Federal Register 85 FR 69525 hereinafter referred to as the 2022 proposed BHP
Payment Notice. In the 2022 proposed BHP Payment Notice, we proposed that the applicable percentages, as then defined in 26 U.S.C. 36Bb3A and 26
CFR 1.36B3g, for calendar year 2021
would be effective for BHP program year 2022. Because the applicable percentages have since been amended for 2022 by the ARP, we are revising the applicable percentages in the final BHP
payment notice to comply with the ARP; we discuss this further in section III.D.5. of this final notice. We note that updating the applicable percentage amounts themselves does not alter the BHP payment methodology, but are inputs under that methodology that, when changed will impact the payment amounts paid by the federal government to the states that operate a BHP under the methodology. In previous payment methodologies, we have used the prior years applicable percentages to calculate BHP payments because those were the most recently published percentages at the time the methodologies were finalized. However, the 2022 applicable percentages are available now as a result of section 9661
of ARP, so we are updating the applicable percentages in this final notice.
In addition, in the 2022 proposed BHP Payment Notice, we proposed to include the IRF to account for potential differences between BHP enrollees household income reported at the beginning of the year and the actual income over the year. This factor is needed because, unlike PTC recipients enrolled through Exchanges, BHP
enrollees will not experience a reconciliation at the end of the tax year.
This adjustment has been included in the methodology since 2015. In the 2022
proposed BHP Payment Notice, we proposed to set the value of the IRF
equality to 99.01. However, due to changes made by the ARP, the Office of Tax Analysis OTA of the Department of the Treasury has revised its estimate for the IRF to be 100.63 percent.
Therefore, we are updating the value of the IRF to be 100.63, as further
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