Healthcare Business News

CMS' proposed payment initiative could derail lower-cost insurance program, officials and insurers warn

By Virgil Dickson
Posted: January 27, 2014 - 4:00 pm ET

State officials and health insurers warn a payment policy proposed by the CMS could derail a program to provide lower-cost insurance to Americans who are eligible to buy but can't afford plans in the exchanges.

The initiative, a provision of the Patient Protection and Affordable Care Act known as the Basic Health Program, was supposed to be implemented in 2014 but was delayed until 2015.

Despite the postponement, the CMS proposed a payment methodology Dec. 23 for determining amounts to be paid by the federal government to states that want to establish the program. State officials, providers and payers are concerned the formula doesn't reflect the actual costs of covering the residents who enroll.

Advertisement | View Media Kit


The program allows states to offer plans to residents who earn between 133% and 200% of the federal poverty level, meaning they don't qualify for Medicaid yet still may struggle to buy plans sold in the health insurance exchange. The plans also are intended to provide continuity to a population of people who might flow between Medicaid, CHIP and private plans—a dynamic often referred to as “churn.”

The CMS would base payments to states on what the federal government would have paid if the enrollees had instead received subsidies for coverage through the exchange. To deduce this rate, the proposed methodology outlines a complex formula that takes into account age, geographic area, marriage status, household size and income.

The comments received by the CMS on this proposal were largely negative, particularly the ones from Minnesota, believed to be the only state thus far to have passed legislation to create a basic health plan.

Last year, Minnesota made changes to one of its publicly subsidized healthcare programs, known as MinnesotaCare, to allow it to serve as the state's basic health plan. A bipartisan cadre of state lawmakers say the shortfall “threatens the sustainability” of MinnesotaCare, which now has more than 130,000 enrollees. “In effect, this methodology misaligns incentives so that a state like Minnesota gets punished for leading the nation in healthcare reform.”

The Minnesota Medical Association and Minnesota Hospital Association say the formula is flawed because it bases payments on the CMS' prospective estimates and not actual state-specific data. They are also concerned the CMS did not include a retrospective reconciliation provision that addresses actual premiums, population risk, administrative costs or other factors in its proposal.

Blue Cross and Blue Shield of Minnesota said without retrospective reconciliation—a process for adjusting payments to reflect actual costs—“there will be no way to correct for methodological errors that occur in 2015.”

The payment formula as the CMS proposed, according to the medical association, could lead to the state receiving up to $91 million less in federal support than was previously estimated.

Follow Virgil Dickson on Twitter: @MHvdickson

What do you think?

Share your opinion. Send a letter to the Editor or Post a comment below.

Post a comment

Loading Comments Loading comments...



Switch to the new Modern Healthcare Daily News app

For the best experience of on your iPad, switch to the new Modern Healthcare app — it's optimized for your device but there is no need to download.