OPM Releases Proposed Rule on Establishment of Multi-State Plan Program for Affordable Insurance Exchanges

The Office of Personnel Management ("OPM") published in the December 5, 2012 Federal Register a proposed rule that would implement the Multi-State Plan Program ("MSPP"). Section 1334 of the Affordable Care Act ("ACA") creates the MSPP to foster competition among plans competing in the individual and small group health insurance markets on the Affordable Insurance Exchanges on the basis of price, quality, and benefit delivery. The ACA directs OPM to contract with private health insurance issuers to offer at least two multi-state plans on each of the Exchanges in the 50 states and the District of Columbia. Comments with respect to the proposed rule are due on or before January 4, 2013.  The first open enrollment period for MSPP plans begins on October 1, 2013 for coverage starting in January 2014.

Under the proposed rules, MSPP issuers must offer at least two plans (one silver and one gold) in each Exchange.  Issuers can phase-in coverage, but must offer coverage in all 50 States and the District of Columbia by their fourth year of participation.  Coverage must include all ACA-defined essential health benefits (EHB).  MSPP issuers can opt to follow the EHB package selected by the States in which they offer coverage, or the EHB package for one of the Federal Employees Health Benefits Plan (FEHBP) plan options selected by OPM.  A detailed discussion of issuer requirements, premiums and rating factors, medical loss ratio requirements, and issuer compliance rules are included below.

The proposed rule seeks to strike a balance between keeping a level playing field between MSPP issuers and other plans participating in the Exchanges, on the one hand, and facilitating nationwide expansion of participation by plans opting to participate via the OPM process, on the other. Throughout the proposed rule, OPM outlines the extent to which it will make its decisions, without being bound by state requirements, but indicates that in most instances it anticipates compatibility between its and the States' postures.

Summary by Topic

General Requirements for Participation

An MSPP issuer must be licensed as a health insurance issuer, insurance service or insurance organization (such as an HMO) in each State where it offers coverage.  MSPP issuers are subject to the same requirements on eligibility and enrollment as Qualified Health Plan (QHP) issuers.  They also must comply with the market reform requirements of the ACA as provided by Part A of Title XXVII of the Public Health Service (PHS) Act.  This means, among other things, that an MSPP must ensure guaranteed availability of coverage, accept every individual and employer in the State that applies for coverage, and renew coverage at the option of the plan sponsor or individual (subject to certain exceptions).

As required by the ACA (Section 1334(a)(3)), the proposed rule provides that OPM will enter into a MSP contract with at least one non-profit entity.  OPM defines the term "non-profit entity" to include a organization that is incorporated as a non-profit entity and licensed under State law as a health insurance issuer, or a "group" of licensed health insurance issuers, "a substantial portion of which" are incorporated under State law as non-profit entities.  Eligible groups include issuers who are affiliated by common ownership and control or by common use of a nationally licensed service mark, or an affiliation of health insurance issuers and an entity who is not an issuer but who owns a nationally licensed service mark.

Phased-in Coverage

Issuers may phase-in coverage over time.  They are required to offer coverage in at least 31 States in their first year of participation, but must offer coverage in all 50 States and the District of Columbia by their fourth year.  OPM also proposes that all issuers be required to offer coverage in the Small Business Health Options Program (SHOP) by their fourth year of participation.    

During the phase-in period, OPM is proposing that an issuer be permitted to offer coverage in only part of a State, but not necessarily the entire state.  However, if an issuer plans to cover less than all service areas for a State, it must obtain OPM approval.  For each state in which the MSPP issuer offers partial coverage, the issuer must provide a plan to OPM for expanding coverage throughout the entire State.  Pursuant to 45 CFR 155.1055, coverage areas generally must include at least an entire county or group of counties.  However, the OPM is considering permitting exceptions to this rule, so long as the selection of service areas is nondiscriminatory and does not suggest that "gaming" is involved.  The OPM is seeking comment on whether MSPP issuers should be required to provide coverage in all service areas in a State by the fourth year of participation.

Benefits

ACA mandates that an issuer offer a benefits package that is uniform within the State where it is offered and that consists of the EHBs described in the ACA.  The OPM proposes that MSPP issuers be provided two options to meet these requirements:  (i) they can opt to follow the State's EHB-benchmark plan for each State where they operate, or (ii) they can follow one of the EHB-benchmark plans selected by the OPM.  However, an issuer can't pick and choose between these approaches for different States, but must use the same approach for all States.  (The OPM seeks comments on whether providing these options would discourage or encourage an issuer's participation in the MSPP and whether the OPM benchmark option would make the playing field not level for State-only issuers). 

The OPM proposes selecting the three largest FEHBP plan options as its benchmark plans. However, it recognizes that these plans may not currently have all of the EHBs, such as coverage for pediatric oral and vision services and habilitative services and devices.  The OPM proposes that any missing pediatric oral or vision services be supplemented by the addition of the entire category of benefits from the largest Federal Employee Dental and Vision Insurance Program (FEDVIP) options.  To add habilitative services and devices, an MSPP issuer can follow State definitions, if available, or if not, the OPM itself will determine the services and devices to include in this category. 

OPM proposes that for plan years 2014 and 2015, any OPM EHB-benchmark plans would also include any State-required benefits that were enacted by December 31, 2011 and that are included in the State's EHB-benchmark plan.  Under the ACA, the State must assume the cost of such additional benefits over the EHB by making payments either to the enrollee or to the MSPP issuer on behalf of the enrollee.

An MSPP issuer must ensure that cost-sharing provisions of the MSP comply with ACA.  Individuals enrolled in an MSP are eligible for the premium tax credits and cost-sharing reductions just as they would be if purchasing any other insurance produce on the Exchange.

Levels of Coverage

An MSPP issuer must offer at least one plan at the silver and one plan at the gold level of coverage in each Exchange, and may also offer plans at the bronze or platinum levels.  For each level of coverage, an MSPP issuer must also offer a child-only plan.  An MSPP issuer can satisfy this requirement by offering the same product to consumers seeking child-only coverage as is offered to consumers seeking adult-only or family coverage, as long as the child-only coverage meets applicable rating rules.

Network Adequacy, Accreditation, Reporting and Plan Information

The OPM proposes that MSPP issuers must maintain a network that is "sufficient in numbers and types of providers to assure that all services will be accessible without unreasonable delay."  The network must include sufficient "essential community providers" that serve predominantly low-income, medically underserved individuals.

The OPM is proposing that MSPP issuers become accredited consistent with ACA and State rules.  An MSPP issuer will also be required to authorize the accreditation body to release a copy of its most recent accreditation survey and related materials such as corrective action plans and summaries of findings to the OPM and the State Exchanges. 

Rules on other reporting requirements by MSPP issuers are to follow.  At present, OPM proposes to follow the approach it uses for FEHBP plans, which would require MSPP issuers to provide financial, premium payment, enrollment and quality assurance reports.  Quality reporting will likely be made via HEDIS metrics and CAHPS surveys, which would facilitate comparisons between plans. 

While the OPM will review all policies and contracts for coverage, it will review other materials on a selective basis.  All applications and notices must be accurate, truthful, not be misleading, have no material omissions and be written in plain language.  While many States prohibit issuers from using advertisements that suggest that a plan has been endorsed by a government agency, the OPM will permit MSPP issuers to state that the OPM has certified the plan as an MSP and that it will oversee its administration.

Compliance with State Laws and "Level Playing Field" Requirements

MSPP issuers are generally required to comply with State laws.  However, in accordance with the doctrine of federal supremacy, MSPP issuers are not required to comply with State laws that are inconsistent with the MSPP statutes and regulations, or that prevent the application the health insurance market reform provisions of the PHS Act or other applicable requirements of the ACA. 

Consistent with the rules applicable to QHP's, MSPP issuers are also required to comply with the 13 categories of "level playing field" requirements of the ACA.  See 42 USC § 18044 (requiring compliance with Federal and State rules on guaranteed renewal; rating; preexisting conditions, etc.).  The proposed rules provide a mechanism to resolve disputes regarding State laws that are not related to these 13 categories.  The OPM also proposes three exceptions to these level-playing field requirements, which are discussed further in this report.  Namely, the OPM proposes: (1) to use its own process to resolve external claims appeals; (2) to conduct its own rate review process; and (3) as discussed above, to conduct its own review of policy forms, in addition to any State review.

Premiums, Rating Factors, Medical Loss Ratios, and Reinsurance

As it does for FEHBP, OPM will negotiate premiums annually with MSPP issuers.  However, unlike FEHBP, MSPP issuer premiums will be set on a State-by-State, not a nationwide basis. 

MSPP issuers will be subject to State rating laws as much as practicable.  However, the ACA limits issuers to the following rating factors: family composition, geographic area, age, and tobacco use.  OPM intends to follow State standards on rating factors, including permitting narrower ratios for age and tobacco use, and requiring the use of pure community ratings.  Issuers must calculate actuarial value in the same manner as QHP issuers.  Issuers must consider MSP enrollees to be members of the same risk pool as all other enrollees in the issuer's non-grandfathered plans in the individual and small group markets.

MSPP issuers will be subject to each State's rate review process, if one exists, or the HHS's rate review process.  If the State conducts the rate review, OPM retains authority to determine rates without State approval.  However, OPM plans to defer to any HHS rate review decision. 

OPM expects MSPP issuers to meet the medical loss ratio (MLR) requirements of the ACA.  However, the OPM has the discretion to impose a different, MSP-specific MLR, if it would be beneficial to the enrollees of the MSP.  OPM does not intend to apply a national aggregate MLR. 
If an MSPP issuer fails to meet MLR requirements, OPM may take appropriate actions, such as requiring the MSPP issuer to suspend marketing.  For widespread, repeated failures, the OPM could decertify the MSPP issuer in one or more States, or terminate its contract. 

OPM proposes that MSPP issuers participate in transitional reinsurance for the individual market, temporary risk corridors, and risk adjustment programs established under ACA, and comply with HHS and State requirements implementing those programs.

Contract Application Process

As with the FEHBP, the contracting process for the MSPP will proceed by application rather than request for proposal.  OPM can contract with as many applicants as meet MSPP requirements. 

OPM will establish a standard MSPP contract, but may negotiate additional terms.  Each contract will specify the Exchanges in which the issuer is authorized to participate, and the approved benefit packages and premiums.  MSPP contracts will run for terms of at least 12 months, which may or may not be a calendar year.  While the ACA creates an expectation that MSPP contracts will be automatically renewed, OPM may decline to renew an MSPP contract if: (1) OPM and the MSPP issuer do not agree on benefits and premiums for the subsequent year; (2) the MSPP has performance problems; or (3) OPM determines that the MSP issuer will not be able to comply with a material element of MSPP requirements.

If OPM and the issuer cannot agree on the subsequent year's benefits and premiums, unless one of the parties provides written notice of non-renewal or OPM withdraws certification for the MSP, the MSP would be offered on the Exchange with the current year's benefit package and premium rates.  Either OPM or an issuer may decline to renew a contract by giving notice of nonrenewal.  The MSPP issuer must comply with Exchange rules for terminating a QHP, including providing advance written notice to enrollees (generally 90 days under OPM rules).    

Compliance

Compliance standards proposed by the OPM require each issuer to have the financial resources to carry out its obligations, keep reasonable financial and statistical records, provide reports, permit inspection of the records by OPM, perform its MSPP contract in accordance with prudent business practices, and not engage in poor business practices.  

Prudent business practices include: (i) timely compliance with OPM instructions and directives; (ii) legal and ethical business and health care practices; (iii) compliance with the terms of the MSPP contract and agency guidance; (iv) timely and accurate adjudication of claims and rendering of services; (v) having a system of accounting for MSPP contract costs; (vi) applying MSPP contract quality performance standards; and (vii) having proper internal controls.  Poor business practices are largely the converse of prudent business practices, and include such specifics as providing false or misleading information in the rate setting process, having inadequate accounting systems, or incentivizing health care workers to restrict communications about medically necessary services.

OPM proposes to establish performance escrow accounts for each MSPP issuer, funded by assessments on issuers.  The OPM may also institute a compliance action against an issuer for failure to meet the requirements of the MSPP contract, failure to follow prudent business practices, or violations of law.  The OPM has flexibility to institute a corrective action plan or to impose sanctions. 

Enrollee Appeals of Denied Claims for Payment or Service

For internal claims appeals, the OPM proposes that MSPP issuers use a process consistent with the standards that apply to QHPs.  However, for external claims appeals, the OPM proposes that MSPP issuers use the OPM's external review processes, which will be similar to the claims appeal process for FEHBP.  OPM argues that this will ensure that an MSPP contract is "administered equitably throughout all 51 jurisdictions."

OPM decisions regarding an adverse benefit determination will constitute final agency action subject to review under the Administrative Procedure Act.  OPM will issue further guidance with details of the process for external review.

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The MSPPs, which are administered at the national level, but simultaneously attempt to respond to State-specific variations in coverage and premium levels, are a novel form of health insurance program.  If operated as envisioned, they could see the introduction of new and financially powerful competitors into the health insurance markets of many States.  Given their novelty, the necessarily broad scope of the MSPP regulations, and the repeated requests for comments in this NPRM, we could well see significant changes in rules proposed here, in addition to the promulgation of additional MSPP regulations.