Perhaps the most controversial issue raised by the entire health reform debate in the fall and winter of 2009 to 2010 was whether the final legislation would include a “public plan.”  In part, the issue was whether or not Americans would be denied the choice of purchasing health insurance from the government rather than from private insurers, but in part the issue was simply one of increasing competition and ensuring choice in insurance markets that often offer few private insurer choices and are essentially noncompetitive.

Although the final legislation did not include a public option, it did contain two provisions to increase competition and choice in local market, one creating a consumer cooperative program and the other creating multi-state plans.The multi-state plan program (MSPP) provision of the ACA requires the Office of Personnel Management (OPM), which operates the Federal Employee Health Benefits Program (FEHBP), to contract with at least two insurers (one of which must be non-profit) to offer health plans in every state in the country.

Although the ACA specifies that plans that meet OPM requirements must be certified as qualified health plans in every exchange in which they are available, the ACA also contains a level-playing field requirement; this provides that, if multi-state plans are not required to abide by certain federal or state law requirements, no other insurance plan will be bound by those requirements, either.  OPM has faced a difficult task, therefore: creating a program that will offer enough regulatory advantages to attract participation by private plans on the one hand, but that will also not undermine the regulatory authority of the states on the other.

A proposed rule to this end was published earlier and analyzed here.  On March 1, 2013, OPM released the final MSPP rule.

OPM received about 350 comments on its proposed rule, of which about 105 were unique comment letters.  In the end, the proposed rule was adopted largely unchanged, although some issues were clarified in the final rule, and some technical and a few substantive changes were adopted.  The definitions found in the proposed rule are adopted largely unchanged, including its definition of non-profit entity to include a group of insurers, “a substantial portion of which” are non-profit entities.  The definitions also clarify that OPM’s contract is with the multi-state plan issuer (which can include a group of issuers), rather than with specific multi-state plans.

In general, MSPP issuers must comply with state licensure requirements and OPM program and contract requirements.  These include non-discrimination requirements, including a prohibition on discrimination on the basis of gender identity or sexual preference.  They also include any state-law requirements that are more protective of consumers than the MSPP program requirements.  The final rule omits appendices found in the proposed rule listing federal requirements that govern MSPs out of concern that the list might not be comprehensive and that requirements change over time.

Phased coverage expansion.  Among the most commented-on provisions of the proposed rule were the sections on phased expansion.  The MSPP statute does not contemplate MSPs being available in every state on January 1, 2014, but rather that a MSPP issuer must have a plan available in at least 60 percent of the states, with coverage increasing incrementally each year until all states are covered after four years.  In the proposed rule, however, OPM also proposed that MSPP issuers be able to phase in coverage within states as well as SHOP-exchange coverage.

Commenters expressed concerns that this might undermine the goal of the MSPP to expand coverage in underserved areas and could permit red-lining and cherry-picking.  Nevertheless, the final rule permits partial state coverage as long as an MSPP issuer has an approved plan for coverage expansion and complies with service-area coverage requirements that apply to all QHPs in the state.  The rule does not explicitly require that this coverage expansion must be completed within four years, but commits OPM to ensuring that partial-state coverage is not used to discriminate or risk select.

The final rule only requires MSPs to provide SHOP coverage if they are required to do so by either state law in states with state-based exchanges or under the new federally-facilitated exchange rule (which only requires insurers to offer SHOP coverage if they or an affiliate had at least a 20 percent small-group market share prior to 2014).  An MSPP issuer must also offer individual and small-group coverage for states with merged markets.  The rule also retains an OPM discretion to allow phase-in of SHOP coverage even where it is required.

Benefit package.  Another controversial issue was the benefit package.  OPM proposed allowing MSPs to offer a benefit package substantially equal to either the state’s EHB (essential health benefit)-benchmark plan in each state in which it operates or to any EHB-benchmark plan selected by OPM.  OPM adopts this as its final rule, with the understanding that the OPM-benchmark plan will be substantially equivalent to state benchmark plans.  However, in states where the state standardizes benefits or prohibits substitutions, an MSP must offer the state-benchmark benefits.  MSPP issuers must apply the option they choose (state or OPM EHB-benchmark) in all states in which they operate.

OPM has chosen the three largest Federal Employees Health Benefits (FEHB) plans as its benchmark plans.  It also specifies FEHBP vision and dental plans that will be used as necessary to supplement pediatric vision and oral coverage.  Habilitative services will be supplemented according to state requirements or, where there are none, through OPM contract negotiations.  State mandates adopted prior to December 31, 2011 will be included in EHB, but states must pay for later-adopted mandated benefits.  OPM must approve actuarially-equivalent substitutions.

MSPP issuers must comply with federal and stricter state requirements as to cost-sharing limits.  They must offer at least one plan at the silver and one plan at the gold level of coverage.  At least one MSP in each state must be available that does not cover abortions for which federal funding is not available.

OPM will not collect a MSPP assessment or user fee for 2014.  It may begin doing so in 2015, but any user fees would be offset against state or federal exchange user fees the MSPP issuer would otherwise have to pay.  That is to say, the MSPP issuer would pay the same exchange user fee as any other QHP, but part of the fee would go to OPM.

Network requirements.  MSPs must maintain networks that “include sufficient numbers and types of providers to ensure that all services will be accessible without unreasonable delay,” meet guaranteed availability network plan requirements, and include essential community providers.  OPM refused to specify this requirement further in the final rule, but said that it would issue guidance requiring MSPs to comply with time and distance network availability standards based on those used for Medicare Advantage and Part D drug plans.  MSPs must also make available their provider directories on line, and when requested, in hard copy.  MSPs must also meet the time frame for accreditation found in the federal rules and state law, although OPM reserves the right to extend the time frame if necessary.

OPM will review and approve policy or contracts as it does with the FEHBP.  MSPP issuers must also comply with state laws as to form review, but state approval of a policy is not a precondition for OPM approval.  As in other areas, OPM expects few disagreements with the states and will work with them to resolve discrepancies.  Benefit plan material or information must comply with federal and state requirements and be accurate, truthful, and not misleading.  It must also comply with standards on language accessibility to be included in future guidance.  OPM will review and approve certain, but not necessarily all,  plan material or information.  MSPP issuers can advertise that they are MSPP-certified.

State-law compliance.  The most sensitive issue addressed by the regulations is no doubt the question of compliance with state law.  The proposed regulation specified that MSPP issuers did not need to comply with state laws that were inconsistent with the MSPP law, with the health reforms found in the ACA, or with title XXVII of the Public Health Service Act; the proposed rule included a four-factor test for determining if a state law fit into one of these categories.

In light of comments expressing concern over the four-factor test, OPM has dropped the factors from the final rule.  OPM states that it will instead consider all facts and circumstances in determining whether a law should be preempted, but that it will generally require compliance with state law and work collaboratively with the states where there are conflicts.  The guiding concern is to ensure that MSPs are neither advantaged or disadvantaged relative to other QHPs (qualified health plans).  MSPs, however, will not be required to contract with exchanges that take an active purchaser or selective-contracting approach.  The rules provide a dispute resolution process for when a state requests a reconsideration of a determination that its law is preempted.

The ACA specifically requires that if MSPs are not subject to federal or state laws covering thirteen areas of law (such as guaranteed renewal, rating, nondiscrimination, etc), no private insurance plan will be subject to those laws.  In general, MSPs must comply with state laws governing these areas, but special provisions are made with respect to three areas: rate review, benefit plan material or information, and external review.  The regulations specify that rate review is not one of the thirteen categories (although “rating” is); that plan contracts are not included in plan material and information; and that OPM external review processes are sufficiently similar to those applied under state law to not invoke the level playing field provision.

Dispute resolution.  As is true with other health plans, MSP decisions involving medical judgment will be subject to binding review by independent review organizations.  Additionally, however, OPM will itself provide external review for disputes involving contact coverage that do not involve medical judgment.  OPM will retain jurisdiction to hear these disputes to ensure uniform resolution across states and to collect information on contract compliance.  OPM decisions are subject to judicial review under the Administrative Procedures Act; IRO decisions are not.

Premiums and rating.  OPM will negotiate premiums with MSPP issuers, as it does under the FEHBP.  MSPP issuers are also subject to state rate review programs, but OPM has the last say if it determines that state action would impede the federal objective by preventing OPM from operating the MSPP.  MSPP issuers must comply with state, as well as federal, rating requirements, however.

Enrollees must also be considered by an MSPP issuer to be members of the same risk pool as all other enrollees of non-grandfathered plans offered by the MSPP issuer in the individual or small group market.  MSPP issuers must calculate medical loss ratios on a state-by-state rather than national basis, and pool MSP with non-MSP experience within a state.  OPM reserves the authority to negotiate MSP-specific MLRs, but does not anticipate doing so.

Applications and contracting. The MSPP final rule includes provisions on applications and contracting procedures.  OPM has released a draft application form.   The rule also describes the process for review of the application and processing.  It includes provisions governing nonrenewal of contracts, including a provision that MSPP issuers give enrollees 90 days notice if they decide to non-renew.

The final rule sets forth standards and requirements with which MSPP issuers must comply and a non-exhaustive list of actions OPM may take to enforce the MSPP contract.  The contract compliance requirements include specific prudent business practices that an MSPP issuer must demonstrate and poor business practices it must avoid. The OPM must notify state or exchange officials when it takes certain compliance actions, such as withdrawal of certification.