One of the key mechanisms for expanding health insurance coverage under
the Affordable Care Act is the creation of new insurance
exchanges--marketplaces where people can compare and purchase qualified
private health plans based on benefits, quality, and price. Although one
goal is to stimulate competition among private health plans, in most
states the insurance markets for individuals and small businesses are
highly concentrated. For example, in 30 states a single insurance company
accounts for more than half the enrollees in the individual market, and in
most states one or two insurers dominate the small-group market.
To spur competition among plans, the Affordable Care Act also created
the Multi-State Plan Program. The Office of Personnel Management (OPM),
which administers health insurance programs for federal employees and
members of Congress, will certify and oversee health insurance issuers to
offer at least two plans in every state exchange.
This policy
brief explores the background of the Multi-State Plan Program, the
challenges facing OPM in administering it, and the issues associated with
offering health insurance plans in multiple states.
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States have several options for organizing and operating their
exchanges, also known as "health insurance marketplaces." A state can
establish and operate its own exchange, work with other states to
establish regional exchanges, or run an exchange in partnership with the
federal government. If a state does not establish its own exchange, the
Department of Health and Human Services will operate a "federally
facilitated exchange" for the state (the option that most states have
chosen to date). As of March 2013, 17 states and the District of Columbia
have elected to operate their own exchanges; 7 states will operate
partnership exchanges; and 26 states will let the federal government
operate their exchanges for them.
Regardless of which entity
runs an insurance exchange, there will be two types in each state--one for
individuals and their families and one for the employees of small
businesses, with the possibility that some states may combine their
individual and small-group exchanges. (See previous Health Policy Briefs
for additional background on insurance
market reforms, published April 30, 2010; on the
Small Business Health Options Program (SHOP) exchanges, published
February 9, 2012; on federally
facilitated exchanges, published January 31, 2013; and on CO-OP
insurance plans, published February 28, 2013.)
Program
Specifics: As mentioned, the Multi-State Plan Program was
included in the Affordable Care Act to increase competition among the
health plans offered through the exchanges. Under the law, the program
will be administered by OPM, drawing on that agency's more than 50 years
of experience in administering the Federal Employees Health Benefits
(FEHB) program. An estimated 8 million federal workers and their
dependents, federal retirees, and members of Congress and their staffs
obtain health coverage through FEHB, making it the nation's largest
employer-sponsored health insurance program. OPM has been recognized for
its ability to negotiate relatively low rates with insurance carriers,
keep administrative costs low, and offer government employees a wide range
of health plans and coverage options.
OPM must certify at
least two issuers to be able to sell coverage in the exchanges in time for
open enrollment on October 1, 2013. By law, at least one issuer must be
nonprofit, and one must not offer coverage for abortion services, so that
people who have religious or other objections to abortion will not have
their premium dollars subsidize the procedure.
The multistate
issuers must offer plans in at least 60 percent of states on January 1,
2014, expanding to every state and the District of Columbia within four
years. Until then, the insurance companies can determine which states they
will offer coverage in, as long as they do so in a nondiscriminatory
manner. The companies may initially offer plans in only parts of a state
and expand to the rest of the state later on. Companies may also offer
plans only in the individual markets and expand into the SHOP exchange
markets over time.
Also under the law, insurers
participating in the multistate program must offer at least two plans
through each exchange--one at the "silver" level of coverage and one at
the "gold" level. These terms refer to the average percentage of medical
costs a plan is required to cover. Silver plans on average will cover 70
percent of an enrollee's medical costs, and gold plans will cover 80
percent.
Oversight: Historically, insurance
regulation has been a state responsibility, but for multistate plans OPM
will play a greater regulatory role. In addition to oversight at the
federal level, the insurance companies must also be licensed by each state
in which they offer a multistate plan. They will also be subject to all
pertinent state laws and regulations, so long as these rules do not
conflict with the federal government's multistate plan requirements. OPM
officials say that they will have a review and appeals process in place to
deal with any unforeseen conflicts between federal and state
requirements.
As it does with FEHB plans, OPM will negotiate
premiums with participating multistate plan issuers, monitor their
performance, and oversee plan compliance with legal requirements and
contractual terms. Multistate plans that meet OPM's requirements will
automatically be certified to operate in all the exchanges and will not
need to be separately certified by individual states.
On
March 1, 2013, OPM published a final regulation laying out additional
requirements for the multistate plans and delineating specific areas of
federal and state responsibility, as
follows:
Appeals. Multistate plan issuers will be
subject to state laws regarding appeals procedures involving disputes over
such issues as whether a particular aspect of care is deemed medically
necessary and therefore to be covered by insurance. However, OPM will
conduct a separate review when disputes involve issues of contract
coverage, such as whether a benefit is covered under the plan. This
approach is intended to make sure that disputes involving OPM-administered
contracts are resolved in a uniform fashion across
states.
Rate Review. Nearly every state requires
insurance companies to file their proposed rates for review by state
regulators, who examine whether the rates are both affordable and
sufficient to cover expected medical claims. Although state regulators may
also review proposed rates of multistate plans, OPM will retain final
authority, noting that the review process is essential for negotiating
rates, which is OPM's responsibility.
Benefit Plan
Materials And Information. OPM intends to review all information
that explains or describes the insurance products offered by the
multistate plans. This intention does not preclude states from also
requiring multistate plans to file this information for review by state
insurance departments. OPM intends to work with states to resolve any
discrepancies that may arise between federal and state
reviews.
Essential Health Benefits: The Affordable
Care Act requires qualified health plans in the individual and small-group
markets to cover 10 categories of so-called essential health benefits,
including hospitalization and emergency care, maternity and newborn care,
ambulatory care, prescription drugs, and mental health and substance
abuse. The health care law allows each state to choose from a set of plans
to serve as the benchmark in their state. (See the Health Policy Brief
published April 25, 2012, for more information on essential
health benefits.)
With respect to the essential health
benefits, OPM gives multistate plans some flexibility. Multistate plan
issuers can offer essential health benefits equal either to a state's
benchmark plan or to one of the three largest FEHB plans. However, OPM
requires that whatever option the issuer chooses, it must be consistent
across states. That is, an issuer cannot offer a state benchmark plan in
one state and a FEHB benchmark plan in another. In taking this approach,
OPM disagreed with some state insurance commissioners and consumer
advocates, who had argued that multistate plan issuers should be required
to offer the same essential health benefits package as other plans in a
state to allow consumers to compare across health plans, reduce confusion,
and ensure a level playing field.
Seal Of
Approval: Multistate plans approved by OPM will be permitted to
market themselves as being certified by a federal agency. Many states have
laws prohibiting plans from advertising that they are endorsed by a
government agency. In comments responding to earlier proposed federal
regulations, the National Association of Insurance Commissioners expressed
concern that multistate plans would gain a competitive advantage by
claiming they were "government approved" or "government certified." OPM
acknowledged this concern but said that the plans would, in fact, be OPM
certified, and therefore state law could not prohibit them from using that
designation.
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A core issue is whether the Multi-State Plan Program will genuinely
increase competition among health plans. In addition, tensions over the
Multi-State Plan Program have also arisen in several areas between the
federal government and states and their respective regulatory
roles.
Competition: As noted above, although one
of the goals of the Multi-State Plan Program was to increase competition,
it is possible that the program could have the opposite effect and
increase dominant players' share of an already concentrated market. The
reason is that only a handful of insurance companies are currently in
position to participate. The issuers participating in the Multi-State Plan
Program must be licensed in each state and have sufficient provider
networks and financial reserves and an adequate information technology
structure in place to meet enrollees' needs nationwide. Many plans that
will fulfill those obligations are likely to be dominant players in state
markets already.
Many companies that are positioned to be
able to participate in the Multi-State Plan Program already participate in
FEHB. For example, Blue Cross Blue Shield (BCBS) is the dominant carrier
offering preferred provider organization plans through FEHB. Nearly 65
percent of FEHB participants are enrolled in BCBS or one of its
affiliates. In addition, BCBS is also the dominant carrier in the
individual market in most states. If BCBS is chosen for the Multi-State
Plan Program, it could lead to further market concentration, not increased
competition. On the other hand, the Government Employees Health
Association, commonly known as GEHA, may be positioning itself to
participate in the Multi-State Plan Program. GEHA does not have a strong
presence in states' individual and small-group markets, although it does
participate in FEHB.
Conflicting Aims: A conflict
may emerge between federal officials' desire to carry out the law and have
at least two multistate plans available through all exchanges and states'
desire to drive the plans in the exchanges toward particular goals. For
example, at least a handful of states are exploring so-called active
purchasing strategies. In other words, instead of allowing all plans that
meet certification requirements to participate in the exchange, a state
regulatory authority operating as an active purchaser might select only
those plans that submit the lowest bids or meet other standards, such as
for customer service, benefit design, or quality.
The
Multi-State Plan Program may interfere with such strategies, however.
Under the Affordable Care Act, states must allow multistate plans to
participate in their exchanges and cannot weed them out through active
purchaser selection strategies.
Regulatory
Conflicts: Lawmakers drafting the Affordable Care Act included
language requiring multistate plan issuers to operate on a "level playing
field" with other plans in the exchanges. For example, the law specifies
that if a multistate plan were exempted from federal or state laws in any
of 13 specific categories, such as with respect to solvency and financial
requirements, then other health plans would not be subject to those
requirements, either. This provision was intended to ensure that
multistate plans are neither competitively advantaged nor disadvantaged
compared to other private health plans in the exchange.
But
because OPM is the primary regulator of multistate plans, some state
insurance commissioners and consumer advocates have expressed concerns
that multistate plans might still not be subject to important state
oversight and consumer protection laws and regulations beyond the 13
categories cited in the law. This, in turn, could give multistate plans an
unfair competitive advantage over other insurance plans offered through
the exchanges. OPM is providing a dispute resolution process if a state
wants to challenge OPM's ruling that a state law is not applicable to a
multistate plan issuer.
Service Areas And Phased-In
Coverage: As mentioned above, multistate plans must offer a plan
in at least 60 percent of the states on January 1, 2014, and then expand
to all states incrementally over four years. OPM has also determined that
multistate plans will be able initially to offer coverage in only parts of
a state and to expand coverage statewide over time. However, many
stakeholders have objected to allowing multistate plans to have only
partial coverage within a state, arguing that the plans could gain an
unfair economic advantage by avoiding high-cost areas.
Acknowledging concerns for "cherry-picking," OPM says that it will review
and approve expansion plans to ensure that they are not
discriminatory--that is, they have not been designed to exclude high-cost
or medically underserved populations. Nevertheless, depending on how the
expansion is implemented, rural parts of many states--the areas suffering
the most from a lack of competition--may not see the benefits of increased
competition for years.
Similarly, OPM will allow
multistate plans to phase in coverage in the small-group market through
the SHOP exchanges. The small-group insurance market is nearly as
concentrated as the individual market in most states; therefore, allowing
plans to phase in small-business coverage will not quickly improve that
situation.
There is also uncertainty as to how many
insurers will participate in the multistate plan program. OPM has said
that it is optimistic that there will be at least two issuers; however, as
of the date of publication of this brief, none have made a definitive
commitment.
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Corlette, Sabrina, "Action
on Multistate Plans, but Still No Specifics," Center on Health
Insurance Reforms, Georgetown University Health Policy Institute,
September 27, 2012.
Jost, Timothy, "Implementing
Health Reform: The Multistate Plan Program Final Rule," Health
Affairs blog, March 2, 2013.
Office of Personnel Management, "Patient
Protection and Affordable Care Act: Establishment of Multistate Plan
Program for Affordable Insurance Exchanges," Federal Register
78, no. 47 (March 11, 2013): 15560-96.
Riley, Trish, and Jane Hyatt Thorpe, "Multistate
Plans under the Affordable Care Act," George Washington University,
School of Public Health and Health Services, April 2012.
Watson, Sidney, Yolonda Campbell, and Timothy McBride, "Creating
Multistate Qualified Health Plans in Health Insurance Exchanges: Lessons
for Rural and Urban America from the Federal Employees Health Benefits
Program," St. Louis University Journal of Health Law and Policy
5, no. 1 (2011): 103-26. |