Congress of the United States Bashington, BE 20510 April 24, 2019 ‘The Honorable Steven Mnuchin The Honorable Seema Verma Secretary Administrator U.S. Department of the Treasury Centers for Medicare and Medicaid Sei 1500 Pennsylvania Avenue, N.W. 200 Independence Avenue, S.W. Washington, D.C. 20220 Washington, D.C. 20201 Dear Secretary Mnuchin and Administrator Verma: ‘We write to express our concems regarding the Centers for Medicare and Medicaid Services’ (CMS) estimated amount of pass-through funding associated with New Jersey’s State Innovation Waiver under section 1332 of the Affordable Care Act (ACA). As you know, pursuant to P.L.2018, ¢.24., on July 2, 2018, New Jersey applied for a State Innovation Waiver to establish a state-based reinsurance program, which has reduced premium rates in the individual market. In its application, the state included a detailed actuarial analysis ‘that projected that the waiver would reduce net federal spending by $218 million in 2019. Section 1332 of the ACA allows the federal government to “pass through” the funding state residents would have received in premium tax credits absent an approved waiver. Therefore, based on the actuarial analysis, New Jersey requested $218 million in pass-through funding for 2019. CMS approved New Jersey’s waiver on August 16, 2018, but it was not until November 30, 2018, that CMS notified the state that it would only receive an estimated $180 million in pass- through funding for 2019? This is significantly less than New Jersey’s estimate, and we are concerned that the $38 million discrepancy raises questions regarding the transparency of the waiver process. thas come to our attention that the Department of the Treasury (Treasury) used a previously undisclosed methodology and data sources when calculating the pass-through funding that New Jersey would receive under this waiver. The methodology is described in a Treasury document entitled, “Method for Calculation of Section 1332 Waiver Premium Tax Credit Pass-through Amounts.”? However, this document was published in November 2018 — four months after the " New Jersey Department of Banking and Insurance, New Jersey 1332 Waiver Application, 2 July 2018, hhupss/www.state.nj.us/dobi/division_insurance/section1332/180702finalwaiverapplication pdf 2 Center for Consumer Information and Insurance Oversight, Centers for Medicare & Medicaid Services, Message to ‘New Jersey Department of Banking and Insurance, November 30, 2018, Letter, ‘hps://www.ems.gov/CCHO/Programs-and-lnitativestate-Innovation-Waivers/Downloads/1332-NJ-2019 pdf. > Office of Tax Analysis, Department of Treasury, Method for Calculation of Section 1332 Waiver Premium Tax ‘Credit Pass-through Amounts, November 2018, hips: /www.cms, gov: CCIIO/Programs-an-Initiatives/State= Innovation-Waivers/Downloads/TreasuryPassthroughMethodology.pdf.state submitted its waiver application. Furthermore, Treasury did not raise any concerns with the state regarding its actuarial analysis at any point during the review of its waiver application. We are also aware of and appreciate that CMS recently published additional information about the pass-through funding calculation process.* While this information may provide additional insight, questions surrounding this process remain, Treasury did not provide the information necessary for states to accurately estimate the pass- through funding they would receive in 2019. This issue is not unique to New Jersey. Wisconsin and Minnesota are also estimated to receive significantly less pass-through funding than they calculated, whereas Maine and Maryland are both estimated to receive more pass-through funding than they calculated.’ Going forward, to prevent discrepancies in the future and ensure that states can plan and budget accurately, we urge you to clearly communicate the federal government’s methodology to states before they submit a waiver application or request for pass- through funding. In addition, as Treasury works to make a final administrative determination regarding the pass- through funding associated with New Jersey’s State Innovation Waiver, we encourage the agency to consider the concerns we have raised in this letter as well as the concerns raised by the ‘New Jersey Department of Banking and Insurance (DOBI) in its January 8, 2019, letter to CMS.6 Furthermore, we respectfully request CMS respond to the questions in DOBI’s letter no later than May 17, 2019, and copy our offices on the response. ‘Thank you for attention to this important matter. Sincerely, Cory A. Booker Frank Pallone, Jr. 7 Z United States Senator United States Senator Member of Congress "The Center for Consumer Information and Insurance Oversight, Centers for Medicare and Medicaid Services, Section 1332: State Innovation Waivers, February 2019, htipsvnrw.cms.gow/CCIIO/Prograins-and= tivesState-Innovation-Waivers/Section_1332_State_Innovation Waivers. him) Katie Keith, CMS Announces Reinsurance Funding For NJ, WI, Health Affairs, 28 November 2018, ‘hups!/ww.healthaffairs.org/do/10,1377/hblog20181228,648961 full, © New Jersey Department of Banking and Insurance, Message to Center for Consumer Information and Insurance Oversight, Centers for Medicare & Medicaid Services, 8 January 2019, Letter, hntps://asses.njspotlight.comvassets/19/0108/2027,Lots Bill Paserell, Jr. Albio Sires Member of Congress Member of Congress ‘Andy Kim Mikie Sherrill Member of Congress Member of Congress Bonnie Watson Coleman Donald Noreross Member of Congress Member of Congress Donald M. fs Member of Congress — . low = Tom Malinowski Jefferson Van Drew Member of Congress ‘Member of Congress