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Economist: Give would-be multi-state plans a discount

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Neil Meredith says federal regulators should do more to help small carriers enter the new Multi-State Plan (MSP) market if they really want it to make the health insurance market more competitive.

Meredith, an economist at West Texas A&M University, makes that case in a commentary distributed by the Mercatus Center. 

The drafters of the Patient Protection and Affordable Care Act (PPACA) created the MSP program in response to concerns that, in many U.S. communities, one or two big insurers dominate the market. PPACA calls for each state to have a public health insurance exchange, and for each exchange to offer consumers access to at least one for-profit MSP and one nonprofit MSP.

The U.S. Office of Personnel Management (OPM) — the agency that manages the highly regarded Federal Employees’ Health Benefits program — runs the MSP program.

For 2014, OPM attracted only one MSP issuer — the Blue Cross and Blue Shield system — and it had to phase in a requirement that the MSP issuer offer coverage in all 50 states and the District of Columbia over four years. The MSP issuer actually offered 150 plan options through 31 exchanges.

This year, two MSP issuers are offering 200 options through 36 exchanges, Meredith writes.

The 2014 MSP plans have been providing coverage for 371,000 and collecting a total of about $1.4 billion in premium revenue, or $350 per enrollee per month, according to OPM figures.

Regulators in some states have expressed concerns about what they would do if an MSP issuer violated state laws or regulations.

Meredith says the immediate problem is that MSP rules may not make the program very attractive to typical issuers. One requirement — that an issuer provide coverage in throughout the United States within four years — is especially daunting to smaller issuers, he says.

OPM itself recently proposed changing MSP regulations to make them somewhat more flexible for issuers.

Meredith says OPM could make the MSP program more attractive by giving the MSP issuer more flexibility in the area of benefits design; giving an issuer much more time to offer coverage nationwide; and, possibly, offering an MSP issuer a break on exchange user fees.

OPM officials have estimated that the 2014 MSP issuer spent about 0.2 percent of MSP premium revenue on exchange user fees. That issuer probably paid less than $3.2 million in exchange user fees, Meredith says.

Temporarily waiving the user fees might help attract issuers without doing much damage to exchange revenue, Meredith says.

See also: Feds still working on multistate plans