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DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services

Administrator
Washingtpn, DC 20201
JAN 2 2018
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The Honorable Mark Dayton
Governor of Minnesota
Saint Paul, MN 55155
g9 JAN 1 6 2013.
Dear Governor Dayton:

Thank you for your letters to the Secretary of Health and Human Services regarding Minnesota's
section 1332 state innovation waiver, specifically the impact on the state's federal funding for
the Basic Health Program (BHP) as a result of the state's waiver for reinsurance. We appreciate
you sharing your concerns with us. He has asked that I respond to you directly.

The Centers for Medicare & Medicaid Services (CMS) has taken Minnesota's legal analysis, as
laid out in your October 3, 2017, and October 31, 2017, letters into consideration. However, we
maintain that a BHP is not eligible for pass-through funding under a section 1332 waiver
program. Minnesota residents who are eligible to enroll in the state's BHP, with or without a
1332 waiver in place, are not eligible to participate in the Health Insurance Exchange, and thus
are not eligible to receive premium tax credits (PTC). Accordingly, any savings related to BHP-
eligible persons cannot be considered when determining Minnesota's 1332 pass-through
amounts. Specifically, the statute only authorizes three funding streams available for pass
through payments: PTCs, cost sharing reductions (CSR), and small business tax credits. 1 BHP is
not included in the list of allowable funding streams available for pass through. Furthermore, we
do not agree that CMS can simply "un-adjust" BHP payments, which are calculated based on
actual data and market conditions in the state, to achieve a desired level of funding. The BHP
payment methodology is designed to arrive at an accurate valuation of the PTCs and CSRs that
would have been available to BHP-eligible individuals had they been able to purchase coverage
in the Health Insurance Exchange. To the extent the state is asking CMS to value the PTCs and
CSRs based on hypothetical premium rates that do not account for the impact of the state's
reinsurance program authorized under section 1332 of the Patient Protection and Affordable Care
Act, we believe this approach is inconsistent with federal regulations and the BHP statute.

We recognize that BHP funding is an important issue for Minnesota and the Minnesotans who
rely on the program for health care services. We also recognize the impact that the state's
reinsurance program, while critical to Minnesota's individual health insurance market, may have
on federal funding for your BHP. However, while implementation of Minnesota's 1332 state
innovation waiver will likely have the effect of lowering federal spending on Minnesota's BHP,
that reduction will not be considered in determining payments to the state under section 1332.

I See PPACA §1332(a)(3).

Page 2 - The Honorable Mark Dayton

Again, thank you for your letters expressing concern about BHP funding. We look forward to
continuing to partner with you, the State of Minnesota, and other stakeholders to provide every
American with access to affordable coverage choices. Should you have additional questions,
please contact the Office of Intergovernmental and External Affairs at 202-690-6060.