July 12, 2013

Patient Protection and Affordable Care Act; Establishment of the Multi-State Plan Program for the Affordable Insurance Exchanges

Summary

Score: 16 / 60

Additional details
Agency
Office of Personnel Management
Regulatory Identification Number
3206–AM47
Rule Publication Date
12/05/2012
Comment Closing Date
01/04/2013
Dollar Year
Not Reported by Agency
Time Horizon (Years)
Not Reported by Agency

RULE SUMMARY

The US Office of Personnel Management (OPM) is issuing a proposed rule to implement the Multi-State Plan Program (MSPP) pursuant to the Affordable Care Act. Through contracts with OPM, health-insurance issuers will offer at least two Multi-State Plans (MSPs) on each of the Affordable Insurance Exchanges (exchanges). The five main objectives are (1) to ensure a choice of at least two high-quality products to consumers participating on each exchange; (2) to promote competition in the health-insurance marketplace to the benefit of all consumers; (3) to offer plans from the same issuer to families or small businesses that may reside or operate in more than one state; (4) to provide strong, effective contractual oversight of the issuers that choose to offer MSPs; and (5) to work cooperatively with states and HHS to ensure a level. Under the law, an MSPP issuer may phase in the states in which it offers coverage over four years, with at least 60 percent of the states (31 states) in the first year, at least 70 percent (36 states) in the second year, and at least 85 percent (41 states) in the third year. It is the OPM’s statutory responsibility to ensure that there are at least two issuers offering MSPs on each exchange in every state and the District of Columbia.

COMMENTARY

This is another Affordable Care Act rule that was quickly written without the due diligence required to appropriately assess the effects of setting up a multi-state health-insurance program. Instead, it appears that the agency knew only one regulatory action would be considered and has produced the provided RIA in an effort to minimize both the time and effort costs to satisfy the requirements of Executive Order 12866. The rule repeatedly makes claims with no citations, such as that "across the country, consumers shopping for insurance in the individual and small group market often have limited options. In some States, the market is extremely concentrated. The MSPP will provide consumers in every Exchange with the additional choice of two high-quality health insurance plans, thereby further promoting competition on the Exchanges." Or the proposed rule fails to back up claims such as that "issuers participating in the MSPP will benefit from market efficiencies because they will contract with a single agency—OPM—which will enable them to participate in all Exchanges." The rule relies on the OPM's experience at negotiating on behalf of federal employees in large plans, yet this is the first time they will be negotiating over small and individual plans. The proposed rule is careful to note that these risk pools will be separate from the federal-employee plans, so that costs of the federal plans are not affected. But if it is really the case that there are efficiencies that can be realized with a larger pool, then merging the pools should lower the costs of the federal plan. That OPM is worrying about this does reveal that the premiums of these new multi-state plans might be quite high. This might be due to the fact that even though the OPM has "explicit statutory authority to negotiate with each MSP a medical loss ratio; a profit margin; the premiums to be charged; and such other terms and conditions of coverage as are in the interests of enrollees in such plans," the OPM "may enter into these contracts without regard to competitive bidding laws."

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
The rule was easy to find using both a keyword search ("Multi-State Plan Program") and an RIN search using Google. RIN and keyword searches on Regulations.gov produce the rule's documents. A search of the OPM webpages returns limited information on the rule and the multistate program and directs interested visitors to Regulations.gov.
4/5
2. How verifiable are the data used in the analysis?
A minority of claims are empirically supported. Less than half of the claims that are empirically supported provide citations. There are a number of claims that do not cite data sources—for instance, "across the country, consumers shopping for insurance in the individual and small group market often have limited options. In some States, the market is extremely concentrated" (p. 72,583). Yet no citation is given. OPM admits to lacking "data to quantify most of these benefits, costs, and transfers." As such, no original analysis is conducted. All but two references to other studies of policies similar to or related to this proposal are brief statements of their qualitative findings with no mention of the quantitative findings.
2/5
3. How verifiable are the models and assumptions used in the analysis?
There is a vast set of assumptions, such as that "issuers participating in the MSPP will benefit from market efficiencies because they will contract with a single agency—OPM—which will enable them to participate in all Exchanges" (p. 72,583), that not only are not supported by any data or models, but that could potentially be false.
1/5
4. Was the analysis comprehensible to an informed layperson?
The analysis, if it can be called such, is written in understandable language. However, given the lack of analysis, it is not clear how one reaches the conclusions of this proposed rule. The proposed rule's writers fail to provide any detailed analysis on how these new regulations will actually be implemented or how suppliers and consumers will respond to the exchanges, let alone to these multistate plans.
2/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
2/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The rule attempts to "[c]reate a program that will attract issuers to apply to offer a new product in each Exchange in 50 States and the District of Columbia" and "[b]alance State and Federal regulatory interests in a manner that will enable MSPP issuers to offer viable plans on Exchanges while maintaining a level playing field between issuers." The rule also attempts to "ensure a level playing field such that neither MSPs nor plans offered by non-MSPP issuers are advantaged or disadvantaged on Exchange marketplaces." According to the rule, the Affordable Care Act’s goal is providing "more competition in the health insurance markets and expanding coverage of the uninsured." Better health is only mentioned in passing.
3/5
Does the analysis identify how these outcomes are to be measured?
The rule only mentions insurance coverage. Moreover, the rule fails to estimate how this regulatory change will alter the number of people covered. The rule only reports the total effect of the Affordable Care Act: "CBO and JCT estimated that 'from 2016 on, between 23 million and 25 million people will receive coverage through the [E]xchanges.'" Unfortunately, the agency "lack[s] the information necessary to make assumptions about the potential enrollment penetration for MSPs on the Exchange but seek[s] comment on the number of states where MSPs will participate and the influence of current market dynamics on enrollment in MSPs" (p. 72,598). Without a plan to measure how this single regulatory change alters coverage, the agency will not know whether "lower rates for individuals in the individual and small group market who are older and/or in relatively poor health, and women; and potentially higher rates for some young men which will be mitigated by provisions such as premium tax credits, risk stabilization programs, access to catastrophic plans, and the minimum coverage provision" (p. 70,606).
2/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The theory is that increasing the size of the risk pool will reduce the effect of adding those with greater health risks and increasing coverage limits. By enabling issuers to offer plans across states, premiums will go down, or at least not go up as much as they would without this option.
3/5
Does the analysis present credible empirical support for the theory?
Finkelstein's work is cited to show that "improved access to health care services has been shown to lead to higher use of preventive services and health improvements, such as reduced hypertension, improved vision and better self-reported health status, as well as better clinical outcomes and lower mortality." Recent work by Finkelstein that was released after the RIA was issued actually contradicts some of those of her preliminary findings that are cited in the RIA.The rule also cites Finkelstein and McKnight, who look at Medicare and who benefits, but unlike with Medicare, under this rule people may opt out by choosing to pay the penalty instead of an insurance premium. In addition, the Medicare population may not be representative of the general population.
2/5
Does the analysis adequately assess uncertainty about the outcomes?
If one were to accept the acknowledgement that "OPM lacks data to quantify most of these benefits, costs, and transfers," then yes, the analysis adequately assesses uncertainty about the outcomes. However, their claims of qualitative impacts are stated as fact, with no commentary concerning any uncertainty in those relationships. It is assumed that these multistate plans will increase the number of people in small and individual plans. It is assumed that having more people with insurance will increase access to healthcare services.
1/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
2/5
Does the analysis identify a market failure or other systemic problem?
Although no citations are given, according to the rule, "across the country, consumers shopping for insurance in the individual and small group market often have limited options. In some States, the market is extremely concentrated" (p.72,583). There are no reasons presented for why this might be the case, such as current government regulation or adverse selection. Though the rule later mentions moral hazard as an issue in health insurance, this is more of a problem with people who have insurance and do not bear the direct costs of the healthcare procedures they demand.
2/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
The rule states simply that it is often difficult for individuals to buy small-group and individual health insurance. There is almost no discussion about why this is the case.
1/5
Does the analysis present credible empirical support for the theory?
There is very little empirical evidence presented. None of the empirical evidence touches on how health insurance across states will enhance health outcomes. Some empirical evidence from related studies is presented supporting the claims regarding the number of uninsured and the resulting financial insecurity. But overall there is little evidence to show that these plans will lower the costs of obtaining insurance and ultimately increase coverage and access.
2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
According to the rule, the "CBO and JCT estimated that 'from 2016 on, between 23 million and 25 million people will receive coverage through the [E]xchanges'" (p. 72,598). But the agency admits that they "lack the information necessary to make assumptions about the potential enrollment penetration for MSPs on the Exchange" (p. 72,598).
1/5
7. How well does the analysis assess the effectiveness of alternative approaches?
0/5
Does the analysis enumerate other alternatives to address the problem?
No. This is a one-size-fits-all regulation of how to "promote competition in the health insurance marketplace to the benefit of all consumers" (p. 72,582). Scorers agree.
0/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
There are no alternatives considered.
0/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
There is little evaluation of the single proposal.
1/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
No, it assumes only that through negotiations with the Office of Personnel Management will competitive multistate insurance plans come to be.
0/5
8. How well does the analysis assess costs and benefits?
1/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
The agency identifies a small fraction of the costs of the single regulatory method presented. The agency also admits that it cannot perform the task of quantifying these costs: "OPM lacks data to quantify most of these benefits, costs and transfers. Perhaps most notably, OPM cannot isolate the effects of MSPs from forecasts of the overall effects of the Affordable Care Act coverage provisions, and, therefore, requests comments on any aspects of this proposed rule’s cost-benefit analysis" (p. 72,598).
1/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
The proposed rule does identify a number of expenditures, all of which it seeks to pass on to the insurers. For the issuers, these costs include costs associated with accreditation, network adequacy standards, and quality improvement strategy reporting. Transfers are also discussed. It fails to quantify any of the expenditures it identifies.
2/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
The proposed rule assumes that the administrative efficiencies associated with meeting any EHB-benchmark plan selected by OPM and the larger risk pool will offset the increased risk of those signing up for the small-group and individual plan. This is somewhat expected, given that such a multistate policy is not currently available. However, the proposed rule does not cite any research looking at whether this is the case in states that require health insurance that have implemented similar rules.
1/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
There is no analysis of costs, let alone one that includes the response of potential insurance customers to changes in premiums due to changes in how risk is priced. The analysis does mention the possiblity of a moral-hazard problem as a result of the increase in the number of insured individuals. This effect is largely dismissed, based on a study of Medicare which concluded that "the cost of this inefficiency is likely more than offset by the benefit of risk reduction."
1/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
There are no explicit data on costs presented, let alone any presented as uncertain. Scorers agree.
0/5
Does the analysis identify the alternative that maximizes net benefits?
There are no alternatives presented. Scorers agree.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
There are no alternatives presented. Scorers agree.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
The analysis does identify the primary parties who would incur costs; however, the rule imposes a user fee to cover the agency's "administrative costs of performing the contracting and certification of MSPs and of operating the program" (p. 72,590), without estimating the fraction of the fee that will be passed on to those purchasing insurance.
2/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
The analysis cites research that shows that health insurance is associated with better health outcomes, but it does not discuss whose health outcomes might be improved or by how much.
2/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
No. It is clear that the policy was already decided upon—following the lead set forth by Congress in the Affordable Care Act—prior to conducting the analysis.
0/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
The policy was chosen based on the directions set forth in the Affordable Care Act. The proposed rule fails to quantify many of the potential costs and benefits. No alternatives are presented on which to choose.
0/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
The agency does have a list of goals: (1) to ensure a choice of at least two high-quality products to consumers participating on each exchange; (2) to promote competition in the health-insurance marketplace to the benefit of all consumers; (3) to offer plans from the same issuer to families or small businesses that may reside or operate in more than one state; (4) to provide strong, effective contractual oversight of the issuers that choose to offer MSPs; and (5) to work cooperatively with states and HHS to ensure a high level of healthcare. If the health of citizens, instead of coverage, were the outcome, the score would be zero.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
While the proposed rule presents no formal provision for assessment, one could presume that the agency could track the number of enrollees via the exchanges and track the number of uninsured individuals.
1/5
 
Total 16 / 60