Manatt on Medicaid: The Basic Health Program: New Final Guidance Offers Insight Into Program Rules and Financing

by Manatt, Phelps & Phillips, LLP

Editor’s Note: The Basic Health Program offers states an alternative coverage vehicle for lower-income individuals who would otherwise be eligible for Marketplace coverage. The new issue of Manatt on Medicaid, summarized below, provides an overview of new final regulatory guidance on the program, including consumer eligibility, plan procurement, financing and oversight. Click here to download the full paper.

The Patient Protection and Affordable Care Act (ACA) gives states the option to establish a Basic Health Plan (BHP)—an alternative coverage vehicle for lower-income individuals who would otherwise be eligible for Marketplace coverage. On March 7, 2014, the Centers for Medicare & Medicaid Services (CMS) issued final regulatory guidance on the BHP, along with the federal funding methodology that will be used to calculate federal payments to states for program year 2015, the first year in which states may operate a BHP.

Consumer Eligibility, Benefits and Costs

To be eligible for coverage under the BHP, individuals must otherwise be eligible for a premium tax credit in the Marketplace and have an annual household income between 133% and 200% of the Federal Poverty Level (FPL). Individuals ineligible for Medicaid due to immigration status may qualify with incomes below 200% FPL. BHP plans must cover at least the ten essential health benefits (EHBs) and any additional state-mandated benefits. While the rules for defining EHBs largely mirror the Marketplace rules, states may choose different base benchmark plans—or more than one plan—for their BHP. Monthly premium costs and cost sharing under BHP cannot exceed what an enrollee would have paid for the second lowest cost silver plan in the Marketplace. States are free to offer more generous benefits, premium subsidies and cost sharing assistance, but will not receive additional federal funding to do so.

States must implement the BHP for their entire populations or not at all. Once a state opts for a BHP, eligible consumers become ineligible for subsidized Marketplace coverage. However, given the limited time to implement a BHP in 2015, the new guidance permits states to propose a phased-in enrollment strategy to CMS for the first year.

Plans and Plan Procurement

BHP coverage is delivered to enrollees through “standard health plans,” which may be offered by licensed HMOs, licensed health insurers, or networks of providers, including non-licensed HMOs participating in Medicaid and/or the Children’s Health Insurance Program (e.g., Primary Care Case Management entities). BHP health plan contracts must be developed through a competitive process, and ensure sufficient provider networks to meet the needs of enrollees. At least two standard health plan options must be available to all BHP applicants and enrollees, unless the state can demonstrate to CMS that they cannot meet this requirement.


Federal funding will be provided to states to finance a BHP based on a state-specific payment methodology. States will receive 95% of the premium tax credit and cost sharing reductions that would have been provided to BHP enrollees had they been enrolled in Qualified Health Plan coverage through the Marketplace. Federal funding may only be used for premiums, cost sharing and benefits for eligible individuals, and cannot be used for administrative costs.

Governance and Oversight

To establish a BHP, states must complete a BHP Blueprint, allow for public comment, and obtain CMS approval. States have the option to obtain an “interim certification,” to provide additional certainty as they seek legislative and budget authority, but must receive full certification before anyone can be enrolled.


To date, only a handful of states have expressed an interest in establishing a BHP in 2015. For these states, the final federal guidance offers significant operational flexibility and critical new details that will inform their decision making in the months to come.

For additional information on the final rule click here. For additional information on the final federal funding methodology for program year 2015, click here.

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Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP on:

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