One of the key mechanisms for expanding health insurance coverage under the Affordable Care Act (ACA) was the creation of insurance exchanges—Marketplaces, where people can compare qualified private health plans on benefits, quality and price; find out if they qualify for financial assistance; and use a premium subsidy to buy insurance. All plans sold on the exchange must offer 10 essential health benefits, creating more standardization among plans and providing more comprehensive options than previously seen in the individual market. One goal of the ACA is to make shopping for health insurance easier, but a secondary goal is to create plan choice and stimulate competition through health insurance exchanges. In most states the insurance markets for individuals and small businesses are highly concentrated.
For example, in 30 states a single insurance company accounts for more than half the enrollees in the individual market, and in most states one or two insurers dominate the small-group market. One insurance company may sell dozens of different plans in a given market, so even though a market offers plan choice, it still may not be competitive.
Before the ACA was enacted, many policy-makers and advocates argued that allowing insurers to offer plans across state lines—despite states’ different regulatory environments—would spur competition and keep premiums low. Under the law, this idea took the form of the Multi-State Plan Program (MSPP). However, in practice, the MSPP is likely only to offer additional plan choice to the exchanges, not necessarily additional competition. Any carrier that is in the position to apply to offer a multistate plan is likely already selling plans on the individual market in nearly every state. The Office of Personnel Management (OPM), which administers health insurance programs for federal employees and members of Congress, administers the MSPP and will contract with health insurance issuers to offer at least two plans in every exchange within four years.
This policy brief updates an earlier brief on the MSPP based on the experience of the program during the first open enrollment period.
This update examines how the concerns initially raised by state insurance regulators played out and whether the addition of the multistate plans increased competition in states with highly concentrated insurance markets.