Implementing Health Reform: President Obama’s FY 2016 Budget And The ACA
February 2nd, 2015
By: Timothy Jost
On February 2, 2015, President Obama released his FY 2016 budget, which includes funding for the Affordable Care Act. The President’s budget, of course, is only on opening bid in negotiations that will proceed over the coming months until the government is finally funded for FY 2016. Given the hostility of Congress to the Affordable Care Act, those negotiations will not be easy. The budget does provide, however, some perspective on the funding that the administration believes will be necessary to fund continued ACA operation.
The President’s budget proposes a number of new health care initiatives, including funding for extending the CHIP program through 2019, expanding access to home and community-based services in Medicaid, reducing growth in payments for certain Medicare providers, raising the cost of Medicare coverage for higher-income enrollees, authorizing HHS to negotiate drug prices for biologics and high-cost drugs in the Medicare Part D program, speeding up the closing of the Part D doughnut hole, and continuing to move Medicare payments away from fee-for-service toward value-based payment. For the core ACA health insurance access and affordability programs, the budget simply seeks full funding of the status quo.
ACA funding is divided among several agencies. Funding for the premium tax credits and cost-sharing reduction payments is found in the Department of the Treasury, Internal Revenue Service budget. The FY 2016 budget projects premium assistance tax credits to cost $39.164 billion and cost-sharing reduction payments to cost $6.215 billion. This is classified as mandatory spending and thus does not require a separate appropriation. Funding for enforcing the employer and individual responsibility provisions is not separately budgeted and is presumably found in the IRS general enforcement and operations support budgets.
The CMS budget. Most categories of ACA insurance reform and affordability expenditures are covered, however, by the budget of the Centers for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (HHS). The budget requests $244 million in the CMS program operations budget for oversight and management of the marketplaces. This is in addition to $394.8 million in marketplace user fees, for a total of $638.8 million, an increase of $160.3 over the FY 2015 enacted level (including $25 million in reinsurance administration collections). CMS expects to operate 34 FFMs in FY 2016 as it did in FY 2014 and FY 2015.
This funding covers the costs of the Federally Facilitated Marketplaces (FFMs) for making eligibility determinations for qualified health plan enrollment, advance premium tax credits, cost-sharing reduction payments, and exemptions from the individual responsibility requirement; verification of eligibility information; appeals of eligibility determinations; certification, recertification, and decertification of qualified health plans; administration of the payment of the tax credits and cost-sharing reduction payments to insurers; administration of the premium stabilization programs; administration of the Federally facilitated SHOP exchange; and implementation of the quality rating system, as well as overseeing the state-based marketplaces.
The CMS program operation budget proposal also includes $4.4 million for overseeing the insurance market reforms, $4 million for enforcing the medical loss ratio requirement, and $2 million for rate review. These figures are similar to the FY 2015 enacted level. The CMS program management budget also includes $85 million for administrative support of the marketplaces.
The FY 2016 CMS budget calls for $808.3 million for consumer support. All of this expense is projected to be covered by user fees. This funding includes $545 million for the call center as well as funding for the navigator program and other outreach programs. In addition, the budget calls for $2 million for general consumer information on private insurance, $1.7 million for consumer appeals, $1.1 million for insurer data collection, and $1.2 million for the summary of benefits and coverage program. These expenditures are somewhat higher than FY 2015.
The CMS marketplace IT budget for FY 2016 is set at $657 million, of which $356.8 million is to be covered by user fees and $300 million by budget authority ($70 million less than FY 2015). These expenditures cover the data services hub, cloud computing and marketplace structure, the business functions of the FFMs, the marketplace systems integrator, the healthcare.gov web portal, and other marketplace IT.
The three premium stabilization programs are all projected to be revenue neutral over the FY 2015 and 2016 period. The risk adjustment program is projected to bring in $5.641 billion in revenue and pay out $5.910 billion, the difference being covered by excess revenues from FY 2015. The reinsurance program is projected to raise $6.025 billion in revenue and pay out $6756 million, the difference again covered by funds remaining from FY 2015. The risk corridor program is projected for FY 2016 to raise and to cost $6.4 billion.
Finally, the FY budget contains funding for a number of programs that are winding down. New exchange planning grants to the states ended in 2014, but CMS projects expenditures of $51.5 million in final funding for FY 2016. No additional funds will be available for grants to states that might decide to operate their own exchanges if the Supreme Court decides that the FFMs cannot grant premium tax credits in King v. Burwell this summer. Nevertheless, CMS is requesting support for administrative support for state exchanges and states, “CMS will continue to support transitions that may occur over the next year and the support needed thereafter (SPM to SBM, FFM to SPM).”
Closing out the early retiree reinsurance program, which ended in FY 2013, is still expected to cost $374,000 in FY 2016. Ongoing funding of the CO-OP program is set at $168 million for FY 2016. Finally, the FY 2016 budget projects $40 million for rate review grants to the states.
The SHOP program. Relatively little attention has been paid in recent months to the SHOP program, which is now operational in all states. CMS continues, however, to release information on operational aspects of the SHOP program at its REGTAP and Marketplace websites. It recently published at the Marketplace a guide to the federally facilitated SHOP Marketplace Billing and Payment System for Employers. Employers in the FF-SHOP must pay the premium for their SHOP plan to the FFM for coverage to become effective and to maintain coverage. They cannot have their broker or agent pay for them. Payments can be made online by electronic funds transfer, either individually or through a recurring Auto-Pay system. Payment can be made by mail by check. Payment can also be made by telephoning the call center and arranging an electronic funds transfer. Cash and credit cards are not acceptable.
Employers must make their first payment by the 15th of a month for coverage to be effective on the first day of the following month. After an employer pays the first premium, invoices will be emailed to the employer’s inbox at Healthcare.gov or a paper invoice can be mailed. The employer must pay premiums in full by the first of the month. After coverage is started, the employer can set up a recurring payment. If an employer sets up a recurring payment, it always occurs on the first of a month. The guidance has detailed step-by-step instructions, with screen shots, of how to set up payments, view invoices cancel payments, and edit or stop recurring payments.