Reform Update: Blues wins first federal contract to offer multistate plans on insurance exchanges

The Blue Cross and Blue Shield Association is the first insurer to receive a federal contract to offer individual insurance coverage options across a majority of state insurance exchanges in 2014, as part of a program to boost competition and consumer choice under the Patient Protection and Affordable Care Act.

In a Monday announcement, the U.S. Office of Personnel Management, which will administer the multistate plan program, said the Blues will offer more than 150 plan options in 30 states as well as in the District of Columbia.

The multistate plans will be available on Oct. 1, when the exchanges' six-month open enrollment period begins, and coverage will begin on Jan. 1, said the OPM, which also runs the health benefits program for federal employees.

The Blue Cross and Blue Shield Association cheered the federal government's announcement and said it will offer a wide range of plans, including PPOs and HMOs, as part of its multistate options. Some of those plans will have national provider networks, said Alissa Fox, the Blues' senior vice president of policy and representation. With this latest contract, the Blues will be offering plans on nearly every state exchange, Fox added.

The healthcare reform law requires that multistate plans, or MSPs, be offered in at least 60% of states in 2014. By 2017, the law mandates that there be two multistate plans operating in each state exchange. The provision partly replaced the Democrats' controversial proposal to offer a Medicare-type public insurance option on each exchange to foster greater competition between health plans.

“Without the MSP option, in three states (Alaska, New Hampshire and West Virginia), there would be only one type of insurance plan for consumers to consider,” the OPM said in the announcement. “Additionally, MSP options will be offered in 10 federally facilitated marketplaces where there are five or fewer issuers offering qualified health plans.”

Federal officials said the multistate plan would also be in operation next year in Arkansas, California, Colorado, Delaware, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Mexico, New York, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and Wisconsin.

Observers had predicted Blue Cross and Blue Shield would receive an MSP contract, according to Sabrina Corlette, a research professor and project director at the Health Policy Institute at Georgetown University, Washington, D.C. “I think folks who are watching this issue closely are not terribly surprised that the Blues were named as an issuer,” Corlette said.

She also predicted that the Blues would be the only multistate issuer for 2014, despite the ACA's requirement that OPM certify at least two such companies.

Federal officials declined to confirm whether the Blues' application would be the only one approved for 2014's multistate plan program. But on the eve of the start of open enrollment on the exchanges, they offered no indication that they would award contracts to any other insurers.

Despite the program's intent, Corlette said it does little to address fundamental obstacles to competition among insurers, namely the challenges of “building and sustaining a competitive network.” Interest in the program may, however, ramp up in 2015, she said.

Nearly two-thirds of uninsured Americans say they will get insurance by Jan. 1 rather than pay a tax penalty fine as mandated by the Patient Protection and Affordable Care Act, while one in four say they will pay the fine, according to a Gallup survey.

That's good news for healthcare providers that serve patients with no current payment source. Less than half of the uninsured say they plan on getting health insurance specifically through a federal or state health insurance exchange. The Gallup survey of 5,099 Americans found that overall, 83% of respondents were aware that most Americans will be required to have health insurance or pay a fine. That awareness dropped to 68% among those who are uninsured, and 69% among 18- to 29-year-olds who are the most likely of any age group to be uninsured. While the uninsured's awareness of the mandate to buy coverage remained below the national average, it was up by 12 percentage points from a June 20-24 survey, when 56% of uninsured Americans said they were aware of it.

Market factors unique to California—large physician organizations experienced in managing financial risk for patient care, along with competitive pressure on both insurers and providers from the growing dominance of Kaiser Permanente Health Plan—have helped drive interest in developing commercial accountable care organization partnerships, according to a study by the Center for Studying Health System Change. The study found that while most commercial ACO initiatives nationally focus primarily on new provider payment approaches in existing insurance products, initial ACO collaborations in California have combined payment changes with new narrow-network ACO insurance products. These limited-network products include financial incentives for enrollees to use ACO providers; they typically are structured either as HMOs that restrict patient access only to ACO providers or as PPOs with reduced patient cost sharing for using ACO providers.

The study, Arranged Marriages: The Evolution of ACO Partnerships in California, explores factors that have spurred ACO activity in California, describes how the state's commercial insurance market has affected ACO product design, and identifies market conditions in local communities that affect ACO product development and structure. The analysis also considers how market factors are likely to affect the evolution of commercial ACO arrangements in California and the rest of the country.

Follow Maureen McKinney on Twitter: @MHMMcKinney