BHPs and CSRs and Appropriations! Oh My!

Here’s the question: if the federal government, for whatever reason, stopped making Cost Sharing Reduction (CSR) payments to health insurers, would federal funding of Basic Health Plan (BHP) programs in New York and Minnesota be reduced in kind? Let’s take a look!

The amount the federal government pays a state for the BHP program is clearly defined in the original law:

The amount determined under this paragraph for any fiscal year is the amount the Secretary determines is equal to 85 95 percent of the premium tax credits under section 36B of the Internal Revenue Code of 1986, and the cost-sharing reductions under section 1402, that would have been provided for the fiscal year to eligible individuals enrolled in standard health plans in the State if such eligible individuals were allowed to enroll in qualified health plans through an Exchange established under this subtitle.

That’s a long way of saying 95% of PTCs and CSRs had this program not superseded the normal exchange-based market in the state. So, if the federal government is not paying CSRs, there would be $0 in CSR and 95% of $0 is $0. This was not topic worthy of my first ever blog post. Or was it?

Here is the original text again, but with a few key words emphasized:

The amount determined under this paragraph for any fiscal year is the amount the Secretary determines is equal to 85 95 percent of the premium tax credits under section 36B of the Internal Revenue Code of 1986, and the cost-sharing reductions under section 1402, that would have been provided for the fiscal year to eligible individuals enrolled in standard health plans in the State if such eligible individuals were allowed to enroll in qualified health plans through an Exchange established under this subtitle.

There’s a very subtle distinction made about the recipient of the PTC and CSR: The eligible individual. CSRs are a funny concept. Based on the way the law is written, insurers are obliged to reduce the cost sharing of certain individuals based on some demographic requirements. The benefit of the CSR is provided to the individual who is enrolled in the plan. Separately, the government is obliged to reimburse insurers for their troubles. What has become clearer every day of the Trump administration is that individuals are provided with CSRs by insurance companies, regardless of whether or not the federal government reimburses the insurance companies for their generosity.

In theory, CSRs given to individuals exist with or without federal reimbursement. And if that is true, then BHP funding should be unaffected by a stoppage in payments.

This is all well and good but who am I to interpret the law in such a way? If this were true, why would New York and Minnesota specifically mention the threat of losing the CSR component of their BHP funding in their letter to the appeals court asking to intervene in the ongoing CSR appeal? That is an excellent question. One that I cannot answer. But I have some interesting ammunition in my corner. You see, the DC district court has already ruled that CSR payments are not appropriated and are therefore illegal. In their ruling, they throw in this little tidbit:

Nor does Section 1402 condition the insurers’ obligations to reduce cost sharing on the receipt of offsetting payments.

Ah ha! So the DC district court agrees with me that individuals receive the benefit of CSR independent of federal funding of the program. Very interesting.

Ok, quick review of where we are so far:

• The question: is the CSR component of BHP funding dependent on whether or not the federal government makes CSR payments to insurer?
• BHP funding is 95% of APTC + CSR that an individual would have received in a QHP
• CSR is conferred upon an individual whether or not the federal government pays for it

So at this point, you can make the argument that the calculation for BHP payments is unaffected by payments made by the federal government to insurers. And, in fact, the House of Representatives, in their own letter to the appeals court arguing that states should not be allowed to intervene in the CSR appeal, makes that exact argument:

… BHP subsidies are calculated based on a formula that includes in part “the cost-sharing reductions … that would have been provided … to eligible individuals enrolled in standard health plans.” 42 U.S.C. § 18051(d)(3)(A)(i) (emphases added). Significantly, the amount of “cost-sharing reductions” that “would have been provided” to “eligible individuals” is unaffected by whether insurers receive cost-sharing offset payments, because the statutory obligation to provide cost-sharing reductions is not contingent on insurers’ receipt of those offset payments. See 42 U.S.C. § 18071(a)(2) & (c). Thus, a cessation of the cost-sharing offset payments to insurers would have no impact on the amount of a state’s BHP subsidy. And the district court’s injunction does not affect the calculation of cost-sharing reductions for eligible individuals, see J.A. 63-64, 101, so it cannot and does not affect the BHP subsidies.

Lawyered.

Ok! So the thing is that none of this really matters if no one cares to test the theory in court. If the federal government decides that by stopping the CSR payments, they must also stop the CSR component of the BHP funding and neither New York nor Minnesota challenge them in court, then no legal loopholes can help anyone. And there may very well be good reason not to challenge the federal government in court.

BHP sits in a funding purgatory very similar to CSR. Technically, no moneys were ever appropriated to fund the program. The primary difference between the two, at this time, is that a court has ruled that no appropriation exists for CSR and therefore any payments are unconstitutional. There is very little difference in how the law was written for CSR and BHP from a funding perspective. Neither program had moneys appropriated within the text of the law. No appropriation has occurred separately. It seems quite possible that BHP could face the same fate as CSR. But at this time it hasn’t.

So if you are New York or Minnesota and the federal government shuts down the CSR component of your BHP funding, what do you do? Do you accept a 25% reduction in funding or do you go to court and risk a 100% reduction in funding?

So where does that leave us? It seems clear that there is a legal argument to be made against conditioning the CSR component of BHP funding to federal payments to insurers. The republican-controlled House of Representatives has so argued. But does it matter? I don’t know. No one does. New York and Minnesota are nervous. At least some lawyers have weighed in suggesting that of course the BHP funding would be reduced in kind. Only time will tell.

Many thanks to Andrew Sprung, David Anderson, Charles Gaba, Nicholas Bagley, Bill Hammond, Josh Schultz, Wesley Sanders and the many others that I have bothered about this on Twitter.