Robert Pear wrote this weekend about the “multi-state health plans” that the United States will soon launch. The federal government will negotiate the “premiums and benefits” for this insurance coverage, which legislators included as a substitute for the public option.
These plans are not, however, actual public options. “This is not government-sponsored, and it’s not a public plan,” says Tim Jost, a law professor at Washington and Lee University who focuses on health policy. “These are plans that contract with the federal government.”
The health law’s multi-state plans function in a much different way that a public plan would, relying on a private carrier to administer benefits. There’s even concern among some consumer advocates that these plans could hurt the health-care law, as they get an exemption from key Affordable Care Act requirements.
The original idea of the public option was to have the federal government act as an insurance company. That would mean going to doctors and negotiating how much they charge patients for everything from an annual physical to an ambulance trip to the hospital. If enough people enrolled, the thinking went, the public option would have greater leverage in demanding lower prices. That’s how Medicare and Medicaid work right now. Perhaps the public option could even join forces with Medicare and Medicaid, further increasing its leverage.
By late 2009, it became clear that this insurance plan was not going to happen. The public option did not have enough support to pass through Congress. Sen. Chuck Schumer (D-N.Y.) worked with nine of his colleagues to come up with a backup plan.
“One idea was the multi-state plan, which everybody thought was fine,” recalls John McDonough, who worked at the time as a health policy adviser to Sen. Ted Kennedy “The other was allowing folks over the age of 55 to opt into Medicare. [Sen. Joseph] Lieberman sabotaged that second part, so the other piece was all that remained.”
No one at the time, however, thought the multi-state plan would work much like a public option at all. “It’s not really similar at all,” says McDonough, now a professor at the Harvard University School of Public Health. “It’s something that’s going to be more like one private plan choice.”
For the multi-state plans, the Affordable Care Act requires the federal government to contract with two pre-existing insurers that will run health plans that will be available in all 50 states. One of those insurers must be not-for-profit.
The nationwide plans are meant to increase competition in the state health insurance markets, as these two options will be available in every state. In smaller states where a single insurer is dominant, this might mean competition and price pressure where it wouldn’t otherwise exist — a role that the public option was meant to play.
The federal government will negotiate with those two insurers over how much they charge and the benefits they cover. Being a nationwide plan that has the potential to deliver a large number of members, it might get some leverage to negotiate lower prices — just like a public option would.
The government will not, however, get into the nitty gritty of figuring out how much it wants to pay doctors for a given procedure. That will be left to the two insurance providers themselves. ”One would expect that one of the plans will be one of the big insurers,” Jost says. “The statute just requires them to be available in every state within the next few years.”
Jost, a consumer advocate with the National Association of Insurance Commissioners, worries that there might be a downside to these plans, too. The multi-state plans might actually hurt consumers under the Affordable Care Act because the national plans face fewer regulations than those that operate in a given state.
Every state, beginning in 2014, will have a health insurance exchange where consumers can compare and purchase insurance. Any insurer who wants to sell on that exchange must meet a set of requirements laid out by the state. Any insurer, that is, except for the multi-state plans.
Those two plans essentially get a free pass to sell on any state exchange, even if they don’t meet certain requirements. They do, however, have to meet a set of 13 criteria which includes things like not denying coverage to those with pre-existing conditions (the true wonks can see them here, in Section 1334 of the law.)
There are some states that look pretty likely to go beyond those basic requirements. California, for example, has committed to being an active purchaser: It will limit the number of plans allowed to sell on its exchange, making carriers compete for a spot. Multi-state plans, however, would be exempt from that competition; they’re guaranteed a slot, even if they offer a less robust benefit package.
“Consumers are actually quite concerned that these plans may not be as robust as state-certified plans, and might not comply with all the requirements,” Jost says. “If you have a multi-state plan that offers some different benefit package, it could undercut the market.”
McDonough thinks that these plans do have the potential to increase competition, just as they were meant to do. They could also disrupt insurance markets, an outcome he attributes to the rushed nature of the discussions.
“It’s happened so fast, in a brief window, that there was not a lot of time for robust conversation,” he says. “The conversation was like, ‘this is a good idea, let’s cook something up.’ It was definitely not a thoughtful, nuanced conversation.”