Is the nascent multi-state plan program a threat to health insurance competition, or possibly a surreptitious route to a public option? The Blues and co-ops will be how the market finds out.
Not all that long ago, Democratic lawmakers and President Obama wanted a "public option" in the Affordable Care Act, a publicly-funded health plan Americans could buy into as an alternative to private insurance (and as an alternative to the kind of "Medicare for all" single payer program championed by the Democratic party's progressive wing). In lieu of a public option are the ACA's exchanges, a part-market-based system and part-public utility for low-income Americans to obtain insurance.
Yet, the ACA's new multi-state plan program, which will bring multi-state health plans to all 50 states by 2017, could be another sort of public utility, administered via private companies, with market distortions, argue economists Robert Emmet Moffit and Neil Meredith, from George Mason University's Mercatus Center.
In a new study, Moffit and Meredith wonder if the multi-state plan program could at once end up as a de facto public option and a driver of insurance market consolidation.
The ACA places the administration of the MSP not under the Department of Health and Human Services but the Office of Personnel Management, which contracts with insurers for federal employee health benefits. With regulatory authority to negotiate premiums, benefits, provider networks, cost ratios and profits, the OPM is directed to contract with at least two national health plans to operate in each state by 2017, with the stipulation that at least one of the plans be nonprofit and not cover abortion services.
For 2014, OPM secured a contract with just one insurer, the Blue Cross and Blue Shield Association, which offered 154 different products in 30 states, including Alaska, California, Illinois, Pennsylvania and Texas. Enrollment in MSP plans for the first year was projected 750,000, but turned out to be about half that, some 371,000.
Nonetheless, the program is pressing on. For this year the OPM expanded multi-state plans to another six states, and secured another issuer -- an association of cooperative insurers selling in Colorado, Connecticut, Illinois, Kentucky, Michigan, Nevada, New Mexico, Oregon, South Carolina, Tennessee, and Utah.
In total this second open enrollment period, some 200 multi-state plans are available in 36 states, leaving the program on a mixed though still promising trajectory for the Obama Administration.
Consolidation and the public option
Moffit and Meredith, however, believe the program may not turn out to be a good deal for consumers or the insurance market. For one thing, they argue, the program seems bound to favor only large, established insurers like the Blue Cross network.
"OPM's requirement that insurers offer coverage in every state by the fourth year of the contract will make it difficult for all but the largest insurers to enter a health insurance exchange," they wrote. "Health insurance markets are already heavily consolidated, and OPM's authority to selectively contract may further consolidate the industry rather than increasing competition." (The emergence of cooperative multi-state plans do not support that notion, although it is true the MSP may be bolstering the dominance of the Blues, who with some exceptions flooded the public exchanges.)
For another thing, Moffit and Meredith ask what would happen if the MSP program ends up not increasing competition, as measured by plan choice.
"If the MSP Program should fail to generate competition, the original form of the public option -- based on a nonprofit health plan -- could indeed become a viable alternative for those who favor it."
Yale political science professor Jacob Hacker is one advocate of that idea. "A simple, Medicare-like public plan could build on the provisions of the law that create at least one national nonprofit plan," Hacker wrote in the Democracy Journal. "If insurers fail to live up to the obligations of the law and tackle rising costs, they will face the only form of accountability that really matters in the private market -- losing customers."
Moffit and Meredith speculate the the OPM could use its contracting authority to manage large-membership mutli-state plans that are in effect a public option. "OPM could revive the public option by restricting entry to the market and setting premiums that make it difficult for private plans to compete," they wrote.
In that case, would a low-cost multi-state plan with a range of benefit and network choices actually be bad for consumers, compared to today's options on and off the exchange?
It's not clear how multi-state plans have compared to others in their premiums, although there have been some consumers with complaints about them.
One Maine resident, a former state Centers for Disease Control manager who blew the whistle on favoritism in public health grants, thought the Anthem Blue Cross multi-state plan she purchased included coverage for healthcare beyond her home state. When she was diagnosed with a pancreatic tumor and tried to get surgery at Massachusetts General Hospital, though, the coverage was denied; as of last fall it was under appeal.