UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
Washington, DC 20415
Office of the
Inspector General December 8, 2016
Report No. 4A-HI-00-17-013 (REVISED)
MEMORANDUM FOR BETH F. COBERT
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.
1
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
issuers.
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
2
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
following:
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
Program.
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
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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
requirement.
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.
Recommendations
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
Colombia.
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
options.
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
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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
services.
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
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)