On November 30, 2012, the Office of Personnel Management published a proposed rule to implement the Affordable Care Act’s Multi-State Plan Program.  The MSPP represents an attempt by the ACA to increase the competitiveness of state individual and small-group insurance markets and improve consumer choice by introducing at least two new high-quality insurance products into every state’s insurance exchange.

The ACA directs the OPM, which administers the Federal Employees Health Benefits Program, to contract with at least two insurers (one of which must be a nonprofit) to offer multi-state plans, which must initially cover at least 31 states and by the end of four years be available in every state.  The MSPP will also make plans conveniently available from the same insurer to families and small businesses that reside or operate in more than one state.

The OPM has faced a difficult balancing act in crafting this rule.  On the one hand, for the MSPP to work, the OPM must convince at least two large private insurers that there is a reason to participate in this program.  The obvious advantage of the program is that insurers can contract with a single entity — the OPM — and by doing so can gain access to every state’s insurance exchange.  On the other hand, states and insurers, and for that matter consumers, are concerned that MSPs compete with other insurers in exchange markets on a level playing field, lest the MSPP destabilize insurance markets and encourage adverse selection.

The ACA addresses these issues by, on the one hand, providing that MSPs that contract with the OPM will be deemed to be certified in every state exchange, and on the other by requiring that MSPs be state-licensed and comply with all state laws that are not inconsistent with the ACA or the law governing the MSP program.  The ACA further provides that other state-licensed health plans need not comply with any state law governing 13 insurance issues if MSPs (and CO-OP plans) are not subject to the state law.  The ACA, therefore, offers little room to the OPM to offer any special benefits to MSPs.

The OPM and FEHBP. The OPM is no stranger to the exchange concept.  The OPM has for more than 50 years administered the FEHBP, which currently enrolls eight million federal employees, annuitants, and their families.  FEHBP enrollees can choose among a broad menu of plans, including six nationwide plans each of which offers coverage in all 50 dates.  The OPM negotiates rates and benefits with each of these plans annually, oversees contract compliance, reviews marketing, provides for external appeals, and ensures financial solvency of plans.

The ACA directs the OPM to implement and administer the MSPP “in a manner similar to” its administration of the FEHBP, but also requires that the MSPP be kept separate from the FEHBP program.  The MSPP risk pool will be independent of the FEHBP risk pool, the OPM cannot divert resources from the FEHBP to operate the MSPP, and any premiums collected for the MSPP will not be considered federal funds. The OPM reserves the authority to assess a user fee to pay for its MSPP supervisory functions.

The OPM will negotiate a contract with the MSPs, and is explicitly authorized to negotiate medical loss ratios, profit margins, premiums, and other plan terms and conditions.  The ACA requires MSPs to offer a uniform benefit package in each state that includes the essential health benefits.  States may require additional benefits, but must defray the cost of those benefits.  MSPs must comply with requirements of the FEHBP Act that do not conflict with the ACA.

Level playing field issues.  In establishing its proposed rules, the OPM has attempted to be sensitive to state concerns.  It articulates an intention that MSPs follow all state laws that fall into 13 level playing field categories: guaranteed renewal; rating; preexisting conditions; non-discrimination; quality improvement and reporting; fraud and abuse; solvency and financial requirements; market conduct; prompt payment; appeals and grievances; privacy and confidentiality; licensure; and benefit plan material or information. It has further attempted to establish standards and requirements that are consistent with existing state requirements.  Finally, it proposes establishing a formal dispute resolution process to work out future disputes with the states over regulatory requirements.

The OPM requests comments on three of the level playing field issues.  First, the OPM proposes to use its own appeal process for external review.  Plans would be subject to the ACA law and regulations governing appeals, which now apply to all health plans, so the OPM does not see this as a level playing field problem.  Second, the OPM sees the rating category as pertaining to the factors that can be considered in rating under the ACA, not to rate review as such.  The OPM intends to conduct its own rate review process, but will work with the states to resolve disagreements over rates.

Third, the OPM views the term “benefit plan material or information” as referring to explanations or descriptions of benefit plans, not to the content of the plans.  It intends to review and approve MSP policy forms itself.  If disagreements arise with states concerning the 13 categories, or on any other issue, the OPM will try to resolve the disagreement, using the dispute resolution process if necessary.

The proposed regulations address many of the issues that will arise under the MSPP.  An MSP may be a national issuer or a group of issuers, affiliated by common ownership or by a nationally licensed service mark.  One of the MSPs must be a nonprofit entity, but the proposed definition defines this to include a group of issuers “a substantial portion of which” are non-profits, thus potentially opening this opportunity to Blue plans, many of which are nonprofit but some of which are for-profit.

MSPs must offer at least one gold and one silver plan in the individual exchange and offer child-only coverage at both levels of coverage.  MSSP insurers are not required initially to offer SHOP coverage, but must be able to do so in all exchanges by the end of the four-year phase-in period.  The OPM also proposes to allow MSPs to offer limited geographic coverage in states initially (as long as the locations in which an MSP proposes to offer coverage are nondiscriminatory) but requests comment as to whether MSPs must offer statewide coverage by the end of the four-year period.  Given the statutory requirement that MSPs provide coverage in “all geographic regions,” and that one of the purposes of the MSPP is to provide a choice of plan to all Americans, it is odd that the OPM would consider this a question on which comments were necessary.

Defining essential health benefits for MSPs.  One of the most difficult issues facing the OPM is how to define the essential health benefits for MSPs.  It proposes that an MSPP insurer must either 1) offer a benefits package that is substantially equal to the state EHB benchmark plan for each state in which it operates or 2) any EHB benchmark plan selected by the OPM.  The OPM identifies its benchmark plan as any one of the three largest FEHBP plans, supplemented for pediatric oral and vision services and habilitation care and services.

An MSPP insurer must apply whichever option it chooses uniformly to all states in which it operates, except that a MSP using the OPM benchmark might have to use the state benchmark plan in states that do not allow substitution of benchmark plan services. (Presumably in states that do allow actuarially equivalent substitution of services, the OPM benchmark plan will be substantially equivalent to the state benchmark plan).   Additionally, MSPs must, for 2014 and 2015, cover all services required by state mandate as of December 31, 2011, in the market in which the plan operates.  The OPM must review and approve an MSP’s essential benefit package, including its prescription drug list.  Finally, by law at least one MSP must offer a benefits package that does not include abortion coverage.

The OPM proposes to follow HHS exchange rules as to network adequacy, but is aware that some states may have more specific rules on network adequacy and will consult with the states as to these requirements.  The OPM proposes that MSPP insurers adhere to the service areas defined by the exchanges but proposes to allow MSPs to serve only part of a service area initially (as long as the coverage is not discriminatory)  and leaves open the question of whether MSPs must phase-in full state coverage.

MSPs must be accredited, although plans that are not accredited initially will be given time as determined by the OPM to get accredited.  The proposed rule lists the data the OPM intends to collect from MSPs, including HEDIS and CAHPs data.  Benefit plan material and information must comply with federal and state laws, including minimum access standards for persons with limited English proficiency and disabilities, but the OPM does not propose to review all benefit plan material and information.   MSPs may say that their plan is OPM-certified, even in states that otherwise prohibit insurers from advertising that they are endorsed by a government agency.

The OPM proposes to negotiate premiums with each MSP issuer on an annual basis. It will attempt to follow state rating laws as much as possible so as not to distort local markets.  It will work with states that have prior approval processes in approving rates, but retains the final authority over rates and can approve rates that a state does not approve if it concludes that the state’s decision is arbitrary, capricious, or an abuse of discretion.

If an insurer offers both an MSP and other non-grandfathered plans in a state, MSP enrollees will be considered to be members of the same risk pool as all other enrollees of the same insurer in the individual or in the small group market.  If a state limits further the rating factors allowed by the ACA (for example, prohibits tobacco rating), an MSP must follow the state law.

The OPM does not propose to establish a nationally aggregated medical loss ratio.  It does retain authority to impose an MSP-specific threshold and to take appropriate action to enforce MLR requirements.  The OPM does not propose to set profit margins.  MSPs will participate in the reinsurance, risk adjustment, and risk corridor programs, including state reinsurance and risk adjustment programs.

The OPM proposes that MSP plans must have an internal appeals process consistent with HHS internal review requirements.  With respect to external review, however, the OPM proposes that enrollees have access to an OPM external review process, similar to that used in the FEHBP.  This will allow MSP enrollees uniform appeal rights and also facilitate OPM supervision of MSP compliance.  .

Finally, the proposed rules set out in some detail provisions for application, contracting, contract renewal, contract nonrenewal requirements, and compliance enforcement.