Multistate Health Plans: Agents for Competition or Consolidation?

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

Multistate Health Plans: Agents for Competition or Consolidation?


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


Abstract

We discuss and evaluate the Multi-State Plan (MSP) Program, a provision of the Affordable Care Act that has not been the subject of much debate as yet. The MSP Program provides the Office of Personnel Management with new authority to negotiate and implement multistate insurance plans on all health insurance exchanges within the United States. We raise the concern that the MSP Program may lead to further consolidation of the health insurance industry despite the program's stated goal of increasing competition by means of health insurance exchanges. The MSP Program arguably gives a competitive advantage to large insurers, which already dominate health insurance markets. We also contend that the MSP Program's failure to produce increased competition may motivate a new effort for a public health insurance option.

Keywords

Affordable Care Act, Multi-State Plan Program, health insurance, regulation, market structure

The United States Office of Personnel Management (OPM), which is the federal agency that enforces civil service laws, rules, and regulations, is playing a new role in America's health insurance markets. As of January 2014, the Patient Protection and Affordable Care Act (ACA) requires OPM to contract with at least 2 national health plans to offer coverage in health insurance exchanges throughout the nation. By law, at least one of those plans must be a nonprofit health plan. (1) This new type of plan is called a Multi-State Plan (MSP). By law, MSP options must become available for US citizens in all 50 states and the District of Columbia by the end of 2017.

Enrollment in an MSP can be secured through either state-facilitated or federally facilitated exchanges. For 2014, Obama administration officials initially estimated that each national plan would enroll 750 000 persons at the end of the 2014 "open enrollment" period. (2) In fact, OPM contracted with only 1 national, nonprofit carrier, the Blue Cross and Blue Shield Association. As of November 2014, an estimated 371 000 people were enrolled in a MSP option nationwide. (3) As for insurer participation for 2015, thus far OPM has entered into a contract with just the Blue Cross and Blue Shield Association and the Consumer Operated and Oriented Plans (CO-OPs), the nonprofit plans established, with federal loans, under the Patient Protection and ACA. Altogether, for 2015, there are 212 MSP options on the exchanges in 35 states and the District of Columbia. The number available to any individual varies state by state.

Agents for Competition?

According to OPM, the need for increased competition motivated the creation of MSP options. (Although OPM and the ACA do not define the term competition, this article considers it to be the rivalrous act of 2 or more parties to independently obtain the business of a third party.) (4) Some analysts also assert that MSPs are an effort to increase competition. (5) The law's advocates have likewise argued that the goal of expanded competition would satisfy the Senate's original objective of a public option, a government-backed plan competing directly with private health insurance in the health insurance exchanges. (6)

The relationship between OPM and large health insurers, forged by the ACA, is designed to deliver on the promises of the law, including expanded competition. The failure of that collaboration in the MSP Program could initiate a second major debate on a "robust" public option. The federal government exercises formidable regulatory control over health plans, and nonprofit insurance required by the MSP Program could evolve into the equivalent of a public option. The purpose of this commentary is to provide an overview of the MSP option and what it may mean for health insurance markets.

What the Law Says

OPM is solely responsible for administering the MSP Program. Specifically, the director of OPM, pursuant to section 1334(a), must contract with at least 2 health insurers to offer "multi-state qualified health plans through each Exchange in each State. …

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