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Blues Multistate Exchange Plans: Next Best Thing to Public Option?

By John Reichard, CQ HealthBeat Editor

October 4, 2013 -- Americans bitter about the health care law's failure to include a so-called public option in insurance exchanges could console themselves this week with other choices in insurance exchanges that materialized: multistate Blue Cross Blue Shield plans negotiated by the federal Office of Personnel Management (OPM).

The choices "ensure that Americans across the country have access to high-quality health insurance plans with reliable benefits," OPM said in a fact sheet announcing the Blues plans.

The agency said it brings to its job of running the multistate insurance plan program under the health law more than 50 years of running the Federal Employees Health Benefit Program.

The plans "have a broad network of providers, a high percentage of spending on health care rather than administrative costs, and strong consumer protections," OPM said. "These plans may also provide families with members who live in different states the option of being enrolled in the same plan."

Aggressive Bidding

The public option would have been designed by federal officials. It likely would have appealed to Americans who are leery of for-profit insurance, like the idea of government-run, single payer health care, and are fans of the Medicare program for example. But private insurers were able to keep it from being included in exchanges. They argued that a powerful federal government would have had an unfair advantage in negotiating lower rates with providers.

At first glance, the Blues multistate plans wouldn't figure to come in as the lowest cost plans given OPM's comments that they have broad networks of providers.

That's "a reasonable theory," says Caroline Pearson, vice president of the Avalere Health consulting firm, "but it isn't what we've seen thus far."

Pearson notes that the Blues are dominant in the individual insurance market and says they are bidding aggressively for market share under the health law by coming in with either the lowest or second-lowest rates in exchange markets. While Pearson said her firm hasn't seen all the price data yet for the Blues multistate offerings, they are likely to match or be close to the premium rates charged by Blues plans sold in exchanges that aren't multistate plans.

She says that while the multistate plans are offering national provider networks, it's likely they are limiting the size of their local networks in order to be able to charge lower premiums. If that's so, they won't have one element that makes Medicare attractive to people—the ability to see a wide range of providers.

The Blues are offering 150 multistate plan options in 30 states. The health care law (PL 111-148, PL 111-152) requires that multistate plans be offered in all states, but not right away—within four years.

The multistate plans are adding choices to markets that lack them, OPM said in its fact sheet. Without the plans Alaska, New Hampshire, and West Virginia would have only one exchange plan, OPM said. The plans also will be offered in 10 states served by the federal exchange where there are five or fewer plans offering health plans.

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