Multi-State Health Plans
Posted on June 7, 2012 | No Comments
By Jane Hyatt Thorpe, Trish Riley, and Teresa Cascio
By 2014, the Patient Protection and Affordable Care Act (ACA) will provide near-universal health insurance coverage through a substantial expansion in Medicaid, premium tax credits that will help make affordable private plans purchased through new state insurance exchanges, and new insurance market rules that will make private coverage more accessible to individuals and families as well as small businesses. With some exceptions, all individuals will be required to obtain insurance coverage through employers, public programs, the individual market, or the health insurance exchanges for the individual and small group markets.
A primary goal of the ACA is to increase consumer choice by stimulating market competition among health plans to offer more affordable, value-based options through the new insurance exchanges. The state health insurance exchanges are designed to provide consumers choices among pre-approved health plans that meet certain federal standards ranging from the provision of specific benefits to anti-discriminatory requirements for consumers with pre-existing health conditions. Only plans that meet these standards – the qualified health plans or QHPs – will be allowed to participate in the exchanges. To foster competition, particularly in markets where one insurer holds a significant share, the ACA also requires two QHPs participating in each exchange to be multi–state plans or MSPs. Unlike other QHPs participating in state-based exchanges that will be regulated at the state level, the MSPs will be licensed by the states but regulated by the federal Office of Personnel Management (OPM), the same agency that is today responsible for the Federal Employees Health Benefit Plan (FEHBP). MSPs offer the promise of a national plan, uniform in each state and fully portable for consumers.
Changes made by the Affordable Care Act, Public Law No. 111-148, §§ 1323, 1334
- Oversight. The Director of Personnel Management (“Director”) will contract with health insurance issuers in order to offer MSPs through state Exchanges. The Director must ensure that at least one MSP issuer is a non-profit entity and that at least one MSP does not cover abortion services.
- Terms and Conditions. The Director will negotiate terms and conditions, such as profit margins, medical loss ratios, and premiums, with each MSP.
- Issuer Eligibility. Issuers may enter into an MSP contract with the Director if they (1) agree to meet the MSP requirements; (2) have the necessary state licenses and meet all relevant state law requirements; (3) meet minimum standards for offering health benefits plans; and (4) meet any other requirements provided by the Director.
- Requirements for Multi-state Plans. Multi-state plans must: (1) offer a benefits package that provides specific essential benefits and is uniform in each State; (2) meet all qualified health plan requirements (e.g. coverage level requirements, catastrophic coverage requirements); (3) determine premiums according to “part A of title XXVII of the Public Health Service Act” unless the State has an age rating requirement lower than 3:1. In which case the MSP will likely need to comply with the State’s rating requirement; and (4) “offer the plan in all geographic regions, and in all States that have adopted adjusted community rated before [March 2010].”
- Enrollee Credits. Individuals enrolled in MSPs will be eligible for tax credits and cost sharing assistance. The federal government will bear these costs in relation to the essential benefits package, but states must cover the expenses for any additional benefits they require.
- Certification. MSPs offered pursuant to a contract with the Director are deemed certified by an Exchange.
- Phase-In. The MSPs will be phased in nationally and available in 60% of states in year one, 70% in year two, 85% of states by year three and all states in subsequent years.
- Federal Employees Health Benefit Plan (FEHBP). The ACA requires the Director to administer the MSP and the FEHBP as distinct programs. The Director may not allocate fewer resources to the FEHBP as a result of their MSP responsibilities, must keep the risk pools separate and may not consider MSP premiums as federal funds. The ACA authorizes the Director to create separate offices with the OPM to administer each program and to appoint the personnel needed to administer the MSP. The ACA does not require FEHBP issuers to offer an MSP.
- Advisory Board. The Director must create an advisory board, largely consisting of MSP enrollees or their representatives, which will issue recommendations on the Director’s MSP administration activities.
- Level Playing Field. The ACA mandates that if the MSPs are not subject to specific state and federal laws, then other health plans operating in that state may not be held to them including: (1) guaranteed renewal; (2) rating; (3) preexisting conditions; (4) non-discrimination; (5) quality improvement and reporting; (6) fraud and abuse; (7) solvency and financial requirements; (8) market conduct; (9) prompt payment; (10) appeals and grievances; (11) privacy and confidentiality; (12) licensure; and (13) benefit plan material or information. This exemption will not apply if the law specifically mandates QHP compliance.
OPM issued a Request for Information (RFI) to gather information on key implementation issues on June 16, 2011 with responses due in August; OPM subsequently extended the deadline to September of that year. OPM is currently reviewing comments and deliberating questions about the MSPs in anticipation of rulemaking in the spring of 2012.
- Issuer Participation. New opportunities exist under the ACA for health plans to expand markets to people who will become newly insured under the law’s insurance expansions. However, the potential for new covered lives through the individual mandate and premium and cost-sharing tax credits may not be enough to increase competition in markets that are highly concentrated and have long been unattractive for insurers. For example, one insurer holds at least 67% of market share in either the individual or small group markets or both in seventeen states. MSPs could provide needed competition in consolidated markets, but requirements to comply with multiple and potentially conflicting state insurance, OPM, and exchange rules are disincentives for insurer engagement. Will insurers enter the market to offer MSPs?
- MSPs and Exchanges. The ACA requires states to enact various insurance reforms (e.g., guaranteed issue and community rating requirements) by 2013 and to create Health Benefit Exchanges by 2014; failure to meet these deadlines will result in federal intervention. Only 15 states have authorized Health Benefit Exchanges through legislation or executive order and some states may not enact the required insurance reforms. Thus, the federal government may have significant regulatory responsibility for Exchanges by 2014. It is unclear whether a federal Exchange model will provide greater or fewer opportunities for potential MSPs and how OPM will reconcile the ACA’s provision for uniform benefits in each state with U.S. Department of Health and Human Services (HHS) rules that provide some discretion to states to define essential health benefits and identify benchmark plans.
- High Value Option. OPM has the ability to negotiate for high value plans and experience in doing so. The language that assures MSPs operate on a level playing field and meet the same general rules that other plans meet does not preclude an MSP from going beyond those minimums. For example, because the federal government will establish network adequacy standards for MSPs, there may be opportunities for selective contracting with providers who meet higher quality standards or the ability to use out of state centers of excellence that are in a MSPs national network. MSPs with the same benefits, operating through one contract from OPM and the reporting and oversight it provides, could be a model for engaging in national marketing, quality, and consumer information efforts.
- Medicaid Churning. Significant numbers of Exchange enrollees will experience income fluctuations that will cause them to churn between Medicaid and subsidy eligibility through the Exchanges. The potential for these enrollees to fall through the cracks, lose needed coverage or be required to change provider networks as their coverage changes will create further administrative challenges for both Medicaid and the private plans in the Exchange. CMS and OPM may have opportunities to develop collaborative approaches that will incentivize MSPs to participate in Medicaid programs. Health plans, including MSPs, could facilitate seamless enrollment and coverage continuity by participating in state Medicaid programs. However, it is unclear whether MSPs will be willing to participate in Medicaid programs.
- Adverse Selection. OPM’s authority to negotiate the terms and conditions of MSPs could result in MSPs susceptible to adverse selection. For example, OPM could create a lower benefit plan that results in disproportionately healthy enrollment whereas an MSP with extensive benefits could attract a sicker population. The ACA requires OPM to mitigate such risk selection through risk adjustment, risk corridors, and reinsurance. With the exception of funding for reinsurance, the cost of these provisions is generally born by insurers. States raise concerns about whether MSPs will be required to participate in funding these state based risk strategies and how MSPs, regulated by OPM not the state, may influence the broader market.
- Conflicting Authority. States’ and OPM’s shared regulatory authority over MSPs may create conflict and undermine the ACA’s effort to achieve greater competition and cost reductions. In particular, states have the authority to license plans, establish QHP standards that exceed the federal baseline, and otherwise regulate plans offered through their Exchanges. Because states must offer MSPs on their Exchange that comply with OPM standards and regulations, their efforts to effectuate value-based purchasing through selective contracting may be undermined. Additionally, insurance regulation and consumer protection are areas traditionally regulated by States, so the OPM’s oversight of MSPs may create conflict in these areas.
Authorized Funding Levels
Congress appropriated funds “as necessary” to implement the multi-state health plan sections of the ACA.
 Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (2010); Health Care and Education Affordability Reconciliation Act, Pub. L. 111-152, 111th Congress, 2nd sess. (2010).
 ACA §1334(a).
 ACA §1334(a)(4).
 ACA §1334(b).
 ACA §1334(c).
 ACA §1334(c)(3).
 ACA §1334(d).
 ACA §1334(e).
 ACA §1334(g).
 ACA §1334(h).
 ACA §1324.
 Office of Personnel Management, Request for Information for Multi-State Plan – Nationwide Insurance Plans Offered Through Exchanges, OPM35-11-R-0001 (Jun. 16, 2011).
 ACA §1311(b)(1).
 See HHS Essential Health Benefits Bulletin at http://cciio.cms.gov/resources/files/Files2/12162011/essential_health_benefits_bulletin.pdf.
 ACA §1334(i).