Will Competition Arise for Multistate Health Plans? Recent Regulations Are Unlikely to Make the MSP Program a Platform for More Robust Health Insurance Competition

By Meredith, Neil R.; Moffit, Robert E. | Regulation, Summer 2015 | Go to article overview

Will Competition Arise for Multistate Health Plans? Recent Regulations Are Unlikely to Make the MSP Program a Platform for More Robust Health Insurance Competition


Meredith, Neil R., Moffit, Robert E., Regulation


As part of the 2010 Patient Protection and Affordable Care Act (ACA), Congress and President Obama passed into law the Multi-State Plan (MSP) program. Beginning in 2014, the program requires the U.S. Office of Personnel Management (OPM)--the agency that administers civil service laws, rules, regulations, and the Federal Employees Health Benefits Program (FEHBP)--to contract with two or more national insurance carriers to offer coverage on health insurance exchanges. The program mandates that at least one carrier must be nonprofit. Coverage through an MSP program issuer must also be obtainable on exchanges in the District of Columbia and all 50 states within four years.

MSPs must fulfill certain statutory requirements, including

* provision of the 10 categories of essential health benefits

* coverage of preventive services

* age rating and pre-existing condition restrictions

* guaranteed issue and renewability

State and federal laws for particular insurance practices also apply, such as

* guaranteed renewal and rating

* coverage of pre-existing conditions and nondiscrimination

* quality improvement and reporting

* oversight to prevent fraud and abuse

* solvency and financial requirements

Similar to other ACA-qualified plans, MSP enrollment can occur through federally facilitated or state-facilitated exchanges. Contingent on family size and income, enrollees are also eligible for subsidies, as in other ACA plans.

Presently, the OPM has more than 200 MSP options available through two issuers on 36 exchanges. Despite Obama administration officials' projections of enrolling 750,000 people in MSPs by the end of 2014, recent estimates show that just 371,000 people are participating in an MSP plan. Average annual premiums for participants stand at $4,200, according to OPM estimates.

The legislative history surrounding the creation of the MSP program is, to put it mildly, sparse. Some analysts who worked closely with developing the legislation noted that the program was not rigorously discussed.

The OPM reports that MSP options were developed to increase competition. Moreover, some advocates for the MSP program have argued that the pursuit of increased competition would meet the U.S. Senate's goal of a "public option," where the government would support a plan that competes with private insurance in health exchanges. Additionally, the OPM attributes the congressional authorization for its administration of the MSP program to its more than 50 years of experience running the FEHBP. Failure of the MSP program may lead to renewed calls for a public option. With the federal government's considerable involvement in health care and the requirement of nonprofit insurance in the MSP program, a public option may slowly come to fruition.

This article describes what the law says and does through the MSP program, the possible effect on health insurance markets, recent regulatory changes to the MSP program, and possible effects of the changes. Through our exposition we aim to shed light on a program within the ACA that, contrary to its intended purpose, could damage competition. We also explore the possible effect of recent regulatory changes that may contribute to more or less competition in health insurance markets.

WHAT THE LAW SAYS AND DOES

The MSP program is created under Section 1334 of the ACA. It requires the OPM director to exercise the agency's contractual authority with the MSPs in the same way that it contracts with health plans in the FEHBP.

While the MSPs must comply with the laws and rules governing all other "qualified health plans" in the health insurance exchanges as promulgated and enforced by the U.S. Department of Health and Human Services, the OPM is authorized under Section 1334 (a)(4) to negotiate four specific items with the MSP plans: their medical loss ratios, profit margins, premiums, and provider networks. …

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