National insurance plans slow to emerge under new health law

July 4, 2013

National health insurance plans aimed at giving consumers more choice might be unavailable in some states next year, leaving residents with fewer options and potentially higher premiums.

Such “multi-state” plans were included in the federal health law to boost competition among insurers, particularly in states with few carriers. They were also seen as a consolation to supporters of the failed effort to require a government-run “public option.”

Debate continues about whether the plans would fulfill those aims, but the bigger question now is which states will have them in October, when new online marketplaces begin selling insurance to individuals and offering federal tax credits to help cover the cost of premiums to those who qualify.

The law requires at least two national plans in every state within four years, overseen by the federal Office of Personnel Management, which will negotiate rates and contracts. The law says at least one of the multi-state insurers must be a nonprofit organization and at least one must not offer abortion services.

OPM has declined to name the insurers or states under consideration, but the White House says there will be national plans in at least 31 states.

Blue Cross Blue Shield plans are expected to be among the multi-state plans. That raises questions about whether their inclusion will result in greater competition, because the Blues are already in every state and dominate some individual markets.

Arkansas Insurance Commissioner Jay Bradford said Blue Cross Blue Shield will offer a multi-state policy in his state, which already has a local Blues plan with 70 percent market share.

Bradford said he does not know whether the national and state plans will differ in price or benefits, because filings aren’t due until the end of June.

“It will be better for competition if they are somewhat different,” he said, adding that he has heard his state may get a second national option.

Blues plans have submitted their intent to offer a national plan that would be in 31 states next year, said Alissa Fox, the association’s senior vice president for policy. Those include New Mexico, Michigan, Kansas and Arkansas, according to public filings.

Even if the Blues are approved in those states, that may leave 19 states without any national plan.

Other insurers, such as Humana, have said they will not offer multi-state plans next year. A few, such as UnitedHealth Group, have been noncommittal.

“The idea was to offer at least two options” to consumers, no matter what other insurers might be there, said Timothy S. Jost, a professor at Washington and Lee University School of Law in Lexington, Va.

In some counties or regions, especially in rural areas, such plans may be the only coverage available to people, he said.

Initially, the plans must be able to offer coverage in at least 30 states, and in all states within four years — a significant hurdle for smaller insurers that don’t have robust national networks of doctors and hospitals.

Iowa Insurance Commissioner Nick Gerhart said he wants to boost competition and has asked OPM to give Iowa priority for a multi-state plan.

“Ideally, an exchange will have a variety of choices,” Gerhart said in an e-mail.

Final rules governing the plans were issued in March after the government reviewed more than 350 comments. The rules give insurers some leeway — allowing them, for instance, to cover portions of a state initially. Some fear that could lead plans to avoid geographic regions with higher rates of poverty and illness. OPM is supposed to ensure the provision is not used to discriminate.

Commenters also raised concerns about whether consumers will actually see more choice.

“Does this increase competition, or does it give the dominant insurers a bigger share of the market?” said Kirsten Sloan, vice president of the National Partnership for Women & Families, an advocacy group in Washington that submitted comments. “That remains a question for us.”

Robert Moffit of the conservative Heritage Foundation contends that the rules will actually hinder competition.

“What this does is, it will give larger plans an expanded market share,” he said. “My view is, you will see an acceleration of this consolidation in health insurance markets over time.”

But groups that had supported a government-run public option are cautiously optimistic.

The plans have “great potential,” but as with so much in the health-care law, “the execution makes a huge difference,” said Ethan Rome, executive director of Health Care for America Now, a liberal advocacy group. “In some states, it might depend on who the carrier is as to whether or not it increases choice and competition.”

— Kaiser Health News

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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