Estimating Federal Payments and Eligibility for Basic Health Programs: An Illustrative Example

The above process should provide a reasonable approximation of average federal payments per BHP-eligible consumer; however, actual federal payments could be different. For example, if the lowest-income BHP-eligible residents tend to live in a particularly low-cost or a particularly high-cost area of the state, then actual average federal payments may be lower or higher than the amount derived using the approach suggested here. That said, this method provides a good starting point for estimating the amount that a state would receive from the federal government, if all BHP-eligible consumers were equally likely to enroll. This should allow a comparison of federal payments to the cost of providing BHP coverage to the average eligible consumer.

The appendix tables should facilitate estimating BHP coverage costs by providing information about the characteristics of BHP-eligible consumers. However, BHP costs will depend on state decisions about covered benefits, out-of-pocket cost-sharing, premiums, and provider reimbursement. To estimate state costs, policymakers could begin with either average Medicaid costs for non-pregnant, non-disabled adults at relatively high income levels or average silver-level benchmark QHP costs for adults below 200 percent FPL. In either case, those initial cost figures would need to be adjusted to reflect differences between the coverage on which they are based (Medicaid or subsidized QHP coverage) and BHP.

It will also be important to estimate which consumers are likely to enroll. Only those who sign up will generate costs and yield federal payments. As suggested earlier, states may be able to influence the balance of BHP costs and revenues. For example, if the state designs BHP coverage so that the lowest-income BHP consumers are more likely to enroll because of minimal premiums and out-of-pocket costs, that may increase the average amount of federal BHP payments without a corresponding increase in average state BHP costs.

A BHP fiscal analysis also needs to consider potential state savings from BHP.¹ More fundamentally, federal BHP funding can vary based on year-to-year changes in QHP benchmark premiums. Over time, marketplace premiums should eventually stabilize. Moreover, CMS’s publication of federal payment rates for a given year in February of the prior year gives states advance notice of changes, allowing time to plan. Predictability is further enhanced if a state decides to base a year’s BHP payments, not on that year’s QHP benchmark premiums, but on the previous year’s premiums, updated based on CMS national projections. Notwithstanding these factors that can enhance a state’s ability to predict future federal payments and thus to plan ahead, during BHP’s early years states could consider attempting to retain a small surplus in BHP trust funds to guard against unforeseen drops in future QHP benchmark premiums or unexpected changes to federal BHP payment methodologies.