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Multi-state plans not living up to expectations

Intended to increase competition, MSP program may be doing the opposite

The multi-state plan (MSP) program was intended to amp up competition among state exchanges, but the chances of that happening are somewhat unlikely, according to a report by economists Robert Emmet Moffit and Neil Meredith from The George Mason University.

"We raise the concern that the MSP program may lead to further consolidation of the health insurance industry despite the program's stated goal of increasing competition by means of health insurance exchanges," the authors wrote.

Multi-state plans were created when the Affordable Care Act mandated that the Office of Personnel Management (OPM) contract with at least two national health plans to offer coverage to Americans. Currently, OPM has contracted with only one insurer: Blue Cross Blue Shield.

Because of OPM's contract with dominating Blue Cross, Moffit and Meredith believe the program favors only large insurers.

The program requires plans to have a presence in all state-run exchanges within four years of the launch of the plan. This may discourage competition from smaller insurers and establish an advantage for larger insurers.

"If the MSP Program should fail to generate competition, the original form of the public option--based on a nonprofit health plan--could indeed become a viable alternative for those who favor it," Moffit and Meredith wrote.

When the program was unveiled in 2012, insurers hoped OPM wouldn't create standards that undermine state regulations and thereby potentially create an uneven playing field in state insurance markets, FierceHealthPayer previously reported..

Yet there are advocates who want to see the program succeed. The authors reference Jacob Hacker, a professor of political science at Yale University, who argues for the Obama administration to make sure insurers carry out the goals of the law. "If insurers fail to live up to the obligations of the law and tackle rising costs, they will face the only form of accountability that really matters in the private market--losing customers."

For more:
- here's the report (.pdf)

Related Articles:
The pros and cons of selling health insurance across state lines
Which states will offer multi-state plans on exchanges?
Insurers fear national plans will create 'unlevel playing field'
National plans bring competition to insurance exchanges