Basic Health Plan – Premium Adjustment Factor (PAF) Change
Under the ACA, a Basic Health Plan (BHP) can be established by states to offer health coverage to low-income individuals otherwise eligible to purchase coverage through Health Insurance Exchanges.[38] The payment amount made to states that establish a BHP (Federal BHP payment) must equal 95% of the value of the premium tax credit (PTC) and cost sharing reduction (CSR) payments that would have been paid on behalf of BHP enrollees had they enrolled in a QHP through an Exchange.[39] The 2026 Payment Notice provides a summary of the methodology used to determine the BHP payments, which was explicitly discussed in detail in the 2023 Payment Notice.
The 2026 Payment Notice proposes one change to the current methodology, regarding a formula element known as the premium adjustment factor (PAF) which estimated the median CSR load for non-BHP states compared to the BHP states, where the CSR loading was much lower. For program years 2018 to 2024 the factor has been (and is continuing to be) 1.188 for BHP states. For states in their first year in BHP, CSR loading is expected to have already been considered so the factor is 1.00. These factors are not changing. However, for a partial year implementation the factor should be between 1.00 and 1.188. Beginning in 2026, states that have not implemented the BHP for a full program year, the state would work with CMS to determine the CSR loads in the state to determine what the partial adjustment should be.
Additionally, CMS issued a technical correction where if there are more than one second lowest cost silver plans in a county, the BHP payment would be based on the premium of the second lowest cost silver plan applicable to the largest portion of the county as measured by total population.
[38] https://www.urban.org/research/publication/implementing-basic-health-program
[39] A. 42 CFR Part 600 BHP Methodology Regarding the Value of the Premium Adjustment Factor (PAF)