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Office of Personnel Management Releases Multistate Rule

By Rebecca Adams, CQ HealthBeat Associate Editor

November 30, 2012 -- Under a proposed rule released last week, insurers that want to offer a national multistate plan would be allowed to phase in their participation in all 50 states over four years. In the first year, the plans would only have to operate in 31 states.

The health care law (PL 111-148, PL 111-152) requires at least two insurers or more to operate in each state's exchange as a multistate plan. The idea behind that was to ensure that every state had robust insurance options. It would particularly benefit people who live in more than one state, such as members of Congress, or small businesses that operate in several states but want to offer their employees uniform benefits. The program would be overseen by the Office of Personnel Management (OPM), which currently covers about 8 million workers and their families through the Federal Employee Health Benefit Program.

Currently, the federal program offers six national plans, each of which offers coverage throughout the country.

Federal officials had been trying to write the rule so that big insurance companies such as Aetna Inc. or Wellpoint would be interested in offering coverage. The four-year phase-in was included to make it easier for companies that currently don't operate in every state to build up the ability to go nationwide.

But it's unclear how many companies will be interested in doing that.

"I think the difficulty for some carriers will be, that would require an expansion of their market and the reason why those companies are not in those markets is because they're not successful in them," said Bill Hoagland, a senior vice president at the Bipartisan Policy Center and former top government relations official at Cigna.

The regulators who wrote the rule went out of their way to say that they are trying to create a level playing field between large national carriers and smaller local health plans that would be competing with them in exchanges.

But some analysts say that, regardless of the intentions, the bigger companies will have inherent advantages that are hard to overcome due to their size and the ability to limit costs through economies of scale.

"There's still a big open question about how level you can make the playing field through regulation," said Carly Kelly, an analyst at Avalere Health.

Kelly said that it will be will be interesting to see whether consumers choose local plans due to familiarity or whether they will tend to favor the larger plans. She said it will important to watch whether the larger insurers are able to offer lower-cost premiums to consumers in the exchanges when open enrollment starts Oct. 1.

The OPM proposal is the first rule put out on the multistate plans, although agency officials had indicated in other draft documents that it might phase in the 50-state requirement.

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