Management Alert - Status of the Multi-State Plan Program

Published by the Office of Personnel Management, Office of Inspector General on 2016-12-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)


                                                         Washington, DC 20415

  Office of the
Inspector General                                      December 8, 2016

                                                                       Report No. 4A-HI-00-17-013 (REVISED)

                   Acting Director

    FROM:                           NORBERT E.VINT
                                    Deputy Inspector General

    SUBJECT:                        Management Alert – Status of the Multi-State Plan Program

                                               Executive Summary

    The U.S. Office of Personnel Management’s (OPM) Office of the Inspector General
    (OIG) is issuing this Management Alert to highlight and bring to your immediate
    attention the status of the Multi-State Plan (MSP) Program.

         	 The MSP Program is experiencing a reduction in the number of options offered

            by MSP Issuers. We expect this to continue until the market stabilizes.

         	 The MSP Program currently faces many challenges. Some of these challenges

            are specific to the program while others are related to the Patient Protection and

            Affordable Care Act (Affordable Care Act).

         	 OPM’s National Healthcare Operations (NHO) is doing the best that it can to

            retain and attract MSP Issuers and state-level issuers1 into the program.

            However, the program is voluntary and the Affordable Care Act does not

            provide OPM with flexibilities, such as allowing the MSP Program to establish

            requirements that are consistent across all states, that can be used to attract and

            incentivize participation in the program. Legislative changes would be required

            to allow for such flexibilities.

     An MSP Issuer is a health insurance issuer or group of issuers that has a contract with OPM to offer MSP
    coverage. A State-level issuer is an issuer that is designated by an MSP Issuer to offer MSP coverage in all or part of
    one or more States, e.g., XYZ of Maryland.
Honorable Beth F. Cobert                                                                                    2

                                           Background Information

The MSP Program was established by Section 1334 of the Affordable Care Act. Under the
Affordable Care Act, OPM was directed to contract with private health insurers to offer MSP
products in each state and the District of Columbia. MSP Issuer products may be phased-in over
four years, with a requirement that MSP products be in at least 31 states in the first year; at least
36 states in the second year; at least 44 states in the third year; and all 50 states and the District
of Columbia in the fourth year. OPM negotiates contracts with MSP Issuers, including rates and
benefits, in consultation with states and marketplaces. In addition, OPM monitors the
performance of MSP Issuers and oversees compliance with legal requirements and contractual
terms. OPM’s NHO has overall responsibility for program administration.

The OIG has been tasked with oversight of the MSP Program and Issuers that have
contracted with OPM to provide MSP options. To date, we have issued five OIG audit
reports covering MSP Issuer compliance with its contract with OPM.

Currently, OPM contracts with two MSP Issuers, the Blue Cross Blue Shield Association
(Association) and an association of Health Insurance Cooperatives (Co-Ops). From these MSP
Issuers, the MSP Program universe consists of approximately 36 state-level issuers (SLIs)
covering 32 states and the District of Columbia.2

The ACA requires OPM to provide MSP options in all 50 states and the District of Columbia and
allows a four year phase-in to meet this requirement. However, through year three of the
program, there has been stagnation and even a reduction in the total number of MSP state-level

Listed below is the coverage data throughout the initial years of the MSP Program:

     Participation          Contract            Issuer         SLI's      States & Required Requirement
         Year                Year                                           DC      States     Met
             1                 2014         Association          35            31            31       Yes
             2                 2015         Association          38            34            36       No
             3                 2016         Association          36            33            44       No

             1                 2015            Co-Op             11            11            31       No
             2                 2016            Co-Op              2             2            36       No

    Some states include multiple state-level issuers that cover different regions within the state.
Honorable Beth F. Cobert                                                                    3

Per conversations with NHO, contract year 2017 will see additional reductions in
program participation as a result of several challenges that will begin to significantly
impact health insurance carriers participating in the MSP Program and the marketplaces
established by the Affordable Care Act as a whole.

                              Challenges to the Program

1. General Challenges

   There are challenges that affect all health insurers participating in the marketplaces
   established by the Affordable Care Act and which are not specific to the MSP
   Program. The implementation of the Affordable Care Act created a period of
   uncertainty for health insurers in terms of pricing and risk. In 2014, when the
   Affordable Care Act marketplaces came on-line and began to allow consumers to
   enroll in health plans, health insurers utilized many assumptions to underwrite their
   premium rates for a population segment that had been uninsured for many years.
   Because this population segment had so many unknowns, including demand for
   health services as well as payment history, the market experienced significant
   pricing volatility from 2014 to 2016 as health insurers began to gain data and better
   understand the population they were insuring. The population has proven to be
   more expensive to insure than originally anticipated due to higher instances of
   chronic conditions and use of high cost procedures. This initially made it difficult
   for health insurers to price products accurately and has led to large price increases
   from year to year.

   The Affordable Care Act originally had programs in place to alleviate issuer losses
   and stabilize premium rates. These programs are effectively known as the “3Rs,” or
   risk adjustment, risk corridor, and reinsurance. However, through a variety of
   legislative and budgeting measures, these programs have not been fully funded and
   health insurers have taken on more risk and financial losses than what was
   originally anticipated. Because of these additional risks and financial losses, some
   health insurers are passing on the costs to the consumer or withdrawing from the
   Affordable Care Act marketplaces altogether. The Co-Ops have been drastically
   affected by the changes to the 3R programs as well as the unhealthier than expected
   population. The current Co-Ops created under the Affordable Care Act do not have
   the financial strength to withstand the amount of losses and volatility presented and
   have, consequently, ceased their participation in the MSP Program. In fact, many
   have ceased operations completely. However, it is our understanding that a new
   Co-Op will enter the MSP Program in calendar year 2017.
Honorable Beth F. Cobert                                                                   4

   Another challenge that health insurers are facing is that enrollment in the
   marketplace options is not as high as originally forecasted. This population has also
   not included enough young, healthy people to offset the utilization of the
   unhealthier participants. Consequently, a smaller number of healthy participants
   have been priced at a level to cover the costs of a population with a higher than
   expected total claims experience.

2.	 MSP Program-Specific Challenges

   The MSP Program offers some unique challenges to MSP Issuers, as well as to the
   NHO as it tries to attract more MSP Issuers and state-level issuers. The biggest
   challenge that NHO faces is providing encouraging reasons for health insurers to
   join the program. The intent of the program is, ultimately, for consumers to have
   access to at least two high quality health options through their respective
   marketplace. This is a great benefit for consumers, however, there is not a clear,
   encouraging reason for a health insurer to offer MSP options in addition to any
   Qualified Health Plans (QHPs) that they offer through a marketplace.

   Some other MSP Program-specific challenges include, but are not limited to, the

      	 The MSP Program is totally voluntary and health insurers can choose to not
         participate. The regulations do not grant the Director of OPM any
         flexibilities to incentivize or encourage a health insurer to join the MSP

      	 Unlike the Federal Employees Health Benefits Plan (FEHBP), MSP Issuers
         are not exempt from state law and must follow all applicable state
         regulations. This creates a challenging regulatory environment for an issuer
         and eliminates the possibility of a simple, uniform MSP product.

      	 MSP Issuers have to operate in a dual regulatory environment with a parallel
         application approval process. OPM is responsible for the MSP application
         approvals, and the Department of Health and Human Services or the
         applicable state is responsible for the QHP application approvals.

      	 OPM, through section 1324 of the Affordable Care Act that relates to the
         Level Playing Field provision, is restricted from asking for a federal or state
         regulatory exemption in 13 defined categories because any request submitted
         by OPM would have to apply to all private health insurers. The Level
Honorable Beth F. Cobert                                                                        5

           Playing Field provision makes it practically impossible for an MSP Issuer to
           deviate from state requirements and offer a standardized benefit package
           across multiple states.

       	 MSP Issuers operate in a complex and potentially burdensome oversight
          environment. MSP Issuers are overseen by various agencies, including: the
          OPM/OIG, the Center for Consumer Information and Insurance Oversight
          (CCIIO), and other applicable state and federal oversight agencies, such as
          the Health and Human Services OIG and specific state Departments of
          Insurance. While the OPM/OIG has taken steps to coordinate with other
          agencies and reduce any duplicative audit work, constant oversight and audit
          requests could be resource-intensive for an MSP Issuer.

       	 As stated above, MSP Issuers are expected to provide coverage to all 50
          states and the District of Columbia by the fourth year of participation. This
          provision may limit interest in the program due to the nationwide coverage

       	 There are situations where differentiations between the MSP options and
          QHP options are difficult to achieve. Some states require standardized
          benefit packages for any plan offered on their marketplace. Also, health
          insurers are moving to narrower provider networks, which hinders network
          differentiation between options.

       	 There is confusion surrounding the “multi-state plan” name as MSP options
          do not provide for out-of-state health coverage.

                Steps NHO has Taken to Attract and Retain Issuers

While the MSP Program faces broad and unique challenges, NHO has taken many steps to try to
expand the number of MSP Issuers in the program and the number of states with MSP options.

For instance, NHO has conducted outreach to the FEHBP carriers and other health care
associations to attempt to attract health insurers to the MSP Program. Specifically, NHO has
hosted an MSP Issuer day the past two years in order to explain the value of the program to
potential MSP Issuers and also for potential and existing MSP Issuers to have in-person
communication with the NHO team and other relevant parties. In addition, NHO conducts
conference calls with Association plans and Co-Op state-level issuers that do not participate in
the program to determine why they are not currently participating and to gauge future interest in
program participation. Similarly, NHO performs outreach with Association state-level issuers
that decide to discontinue participation in the MSP Program in order to gather valuable feedback
Honorable Beth F. Cobert                                                                         6

regarding their decision, some of which has been presented above in the “Challenges” section of
this memorandum.

NHO also actively worked to recruit a well-established FEHBP carrier to join the MSP Program.
NHO walked the carrier through the regulatory environment, marketplace requirements, and a
potential partnership with another entity to offer MSP options. Although the carrier made a
business decision not to join the program, NHO was proactive in its recruiting efforts.

In addition to its outreach and recruiting efforts, NHO has actively promoted the MSP Program.
Specifically, NHO provided MSP Program welcome cards for participating MSP Issuers to
provide to new enrollees. NHO also worked with CCIIO to disseminate information about the
MSP Program and to ensure the information was accurate. Moreover, NHO instructs MSP
Issuers to utilize “a Multi-State Plan” as the second part of the plan option name. OPM has
registered “Multi-State Plan” as a service mark, and this may provide the MSP Issuers and
consumers with a level of distinction.

Finally, NHO helps alleviate the potential burden of dual regulatory approval processes for
MSPs and QHPs by coordinating the approval processes for the MSP options with all of the
applicable marketplaces. MSP Issuers can also coordinate with NHO in order to work through
issues and problems with the marketplaces and state regulators.


1. Continue to Pursue MSP Issuer and State Expansion

   We recommend that NHO continue to pursue MSP Issuer and state-level issuer expansion to
   attempt to meet the regulatory requirement of coverage in all 50 states and the District of

   We understand that the MSP Program is voluntary and OPM does not currently have tools at
   its disposal to encourage health insurers or state-level issuers to join the program. In
   addition, the health care environment will continue to be in a state of volatility for the near
   future as the experience and utilization data related to the Affordable Care Act becomes more
   established. While these realities present challenges to NHO in terms of recruitment, NHO
   should continue to try to meet the ultimate goal of having two health plan options for every
   consumer nationwide. NHO is already taking constructive steps to do this by health insurer
   outreach, open communication, and working with MSP Issuers to address problems, and we
   recommend that NHO build on these efforts for potential future recruitment. NHO should
   continue to pursue various strategies, including legislative changes, that would encourage,
Honorable Beth F. Cobert                                                                          7

   incentivize, and make program participation attractive to potential MSP Issuers and state-
   level issuers.

2. Communicate and Work With Successful State-Level Issuers

   We recommend that NHO communicate and work with state-level issuers that have
   developed unique ways to differentiate their MSP options and be successful. These could
   then be shared with other state-level issuers to increase their chance at success.

   During our initial years of auditing the program, we have interviewed many personnel at the
   various state-level issuers. As a result, we have found that some state-level issuers have used
   creative ways to attract membership into their MSP options.

   For example, Blue Cross Blue Shield of Michigan (BCBSM) has included family dental
   coverage in its MSP options in order to attract enrollment. This benefit is not available in
   any other QHP that BCBSM offers.

   Also, Arkansas Blue Cross Blue Shield (ARBCBS) has paired with the State of Arkansas to
   provide coverage through the state’s private option. ARBCBS contracts with the state to use
   an MSP option for enrollment through the state’s website for people below the poverty line.
   The enrollees get assigned to one of four options that the state offers in a sequential order,
   with one of the options being an ARBCBS MSP option.

   We have found that these state-level issuers are using creative methods to attract membership
   into their MSP options, and we recommend that NHO analyze these methods to determine if
   any are applicable to other state-level issuers. We understand that each state-level issuer
   operates in a unique business environment and that a one size fits all approach is not
   possible. However, open discussion and the exchange of ideas may create an environment
   where a state-level issuer begins to think about other ways to differentiate the MSP options
   and potentially grow membership in the MSP Program.

3. Clarify “Multi-State Plan” for the Consumer

   We recommend that NHO clarify the “Multi-State Plan” nomenclature for the names of MSP

   There may be continued confusion for the consumer regarding marketplace plans labeled as
   “Multi-State” plans. The name, taken by itself, is misleading to the consumer as they may
   not fully understand the program’s intent. Much of the uninsured population is gaining
   access to health insurance for the first time and health care literacy may be very low. Some
   consumers may not fully understand the benefit materials that are provided to them and think
Honorable Beth F. Cobert                                                                         8

   the title of the Plan would allow for coverage in multiple states. We understand that NHO
   has worked on developing a service mark for the “Multi-State Plan” moniker, but we
   recommend that NHO clearly explain that the plan option does not cover out-of-state health

This Management Alert has been issued by the OIG to OPM officials for resolution of the
recommendations contained herein. As part of this process, OPM may release the Management
Alert to authorized representatives of the audited party. Further release outside of OPM requires
the advance approval of the OIG. Under section 8M of the Inspector General Act, the OIG
makes redacted versions of its reports available to the public on its webpage.

In accordance with Office of Management and Budget Circular A-50 and/or Public Law 103-
355, all audit recommendations must be resolved (agreement reached on actions to be taken on
reported recommendations; or, in the event of disagreement, determination by the agency follow-
up official that the matter is resolved) within six months of the date of the report.

Since the OIG exercises oversight concerning the progress of corrective actions, we request that
NHO provide us with a report describing the corrective action taken, and in instances where the
corrective action differs from the recommendation, include the rationale for the resolution. If the
corrective action has not been completed, we ask that the NHO provide us with a report on the
staus every March and September thereafter until the corrective action has been completed.

Please provide a response, within 45 days of the date of this Management Alert, indicating
whether you agree or disagree with the recommendations. If you are in agreement with the
recommendations, please provide a corrective action plan that will resolve each issue.

Please contact me, on 606-1200, if you have any questions regarding this Management Alert, or
someone from your office may wish to contact Michael R. Esser, Assistant Inspector General for
Audits, on          , or                    , Chief, Community-Rated Audits Group, on

cc: 	Kiran A. Ahuja
    Chief of Staff

   Kathleen McGettigan
   Chief Management Officer

   John O’Brien 

   Senior Advisor 

Honorable Beth F. Cobert                                    9

  Alan Spielman 

  Director, Healthcare and Insurance 

  Elizabeth Hadley 

  Assistant Director for National Healthcare Operations


  Program Manager, National Healthcare Operations

  Jonathan Foley 

  Director, Planning and Policy Analysis 

  Mark W. Lambert 

  Associate Director, Merit System Audit and Compliance 

  Janet L. Barnes 

  Director, Internal Oversight and Compliance 

  Dennis D. Coleman 

  Chief Financial Officer