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Daily Rules, Proposed Rules, and Notices of the Federal Government

OFFICE OF PERSONNEL MANAGEMENT

45 CFR Part 800

RIN 3206-AM47

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

AGENCY: U.S. Office of Personnel Management.
ACTION: Proposed rule.
SUMMARY: The U.S. Office of Personnel Management (OPM) is issuing a proposed rule to implement the Multi-State Plan Program (MSPP). OPM is establishing the MSPP pursuant to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, referred to collectively as 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). Under the law, an MSPP issuer may phase in the States in which it offers coverage over four years, but it must offer MSPs on Exchanges in all States and the District of Columbia by the fourth year in which the MSPP issuer participates in the MSPP. OPM aims to administer the MSPP in a manner that is consistent with State insurance laws and that is informed by input from a broad array of stakeholders.
DATES: Comments are due on or before January 4, 2013.
ADDRESSES: Federal eRulemaking Portal: http://www.regulations.gov.Follow the instructions for submitting comments.

Mail, Hand Delivery or Courier:National Healthcare Operations, Healthcare and Insurance, U.S. Office of Personnel Management, 1900 E Street NW., Room 2347, Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT: Julia Elam by telephone at (202) 606-2128, by FAX at (202) 606-4430, or by email atmspp@opm.gov.
SUPPLEMENTARY INFORMATION:

The U.S. Office of Personnel Management (OPM) is proposing this regulation to outline the Multi-State Plan Program (MSPP), a new program created pursuant to section 1334 of the Affordable Care Act to offer high-quality health insurance products on the Exchanges.

Abbreviations FEHBAFederal Employees Health Benefits Act (5 U.S.C. 8901 et seq.) FEHBPFederal Employees Health Benefits Program HHSU.S. Department of Health and Human Services HMOHealth Maintenance Organization MSPMulti-State Plan MSPPMulti-State Plan Program NAICNational Association of Insurance Commissioners OPMU.S. Office of Personnel Management PHS ActPublic Health Service Act QHPQualified Health Plan SHOPSmall Business Health Options Program Table of Contents I. Background A. Affordable Insurance Exchanges B. Objectives of the Multi-State Plan Program (MSPP) C. Review of OPM's Role in Contracting Under the Federal Employees Health Benefits Program (FEHBP) D. Overview of the MSPP's Statutory Requirements E. Stakeholder Interaction II. Proposed Regulatory Approach A. Overview of Regulatory Approach B. Governing Law III. Provisions of the Proposed Regulation A. General Provisions and Definitions B. Multi-State Plan Issuer Requirements C. Premiums, Rating Factors, Medical Loss Ratios, and Risk Adjustment D. Application and Contracting Procedures E. Compliance F. Appeals by Enrollees for Denials of Claims for Payment or Service G. Miscellaneous IV. Regulatory Impact Analysis V. Paperwork Reduction Act VI. Regulatory Flexibility Act VII. Unfunded Mandates VIII. Federalism I. Background

Section 1334 of the Affordable Care Act creates the Multi-State Plan Program (MSPP) to foster competition among plans competing in the individual and small group health insurance markets on the Affordable Insurance Exchanges (Exchanges) on the basis of price, quality, and benefit delivery. The Affordable Care Act directs the U.S. Office of Personnel Management (OPM) to contract with private health insurance issuers to offer at least two multi-State plans (MSPs) on each of the Exchanges in the 50 States and the District of Columbia. The law allows MSPP issuers to phase in coverage, but coverage must be offered on Exchanges in all States and the District of Columbia by the fourth year in which the MSPP issuer participates in the MSPP. The first open enrollment period for plans offered through Exchanges will begin on October 1, 2013, for coverage starting in January 2014.

A. Affordable Insurance Exchanges

The Affordable Care Act authorizes the establishment of Exchanges where individuals and small businesses with up to 100 employees can purchase qualified coverage. States have the option of defining a small group as one with up to 50 employees through 2016.1 Beginning January 1, 2014, the Exchanges will provide competitive marketplaces for individuals and small employers to directly compare available private health insurance options on the basis of price, quality, and other factors. The Exchanges will enhance competition in the health insurance market, improve choice of affordable health insurance, and give individuals and small businesses purchasing power comparable to that of large businesses.

1For purposes of this regulation, OPM refers to Affordable Insurance Exchanges and SHOPs as “Exchanges” collectively.

The U.S. Department of Health and Human Services (HHS) has issued a final regulation outlining standards to certify Exchanges and qualified health plans (QHPs) that will be offered on Exchanges.2 If a State does not elect to operate an Exchange or is not certified (or conditionally approved) to operate one by January 1, 2013, HHS will operate the Exchange in that State.

245 CFR Parts 155 and 156.

The purpose of this proposed regulation is to outline the process by which OPM will establish the MSPP, pursuant to section 1334 of the Affordable Care Act, to offer high-quality, private health insurance products on the Exchanges, as well as to establish standards and requirements for MSPs and MSPP issuers. This proposed regulation recognizes that the MSPP is an important tool for implementing the Affordable Care Act by fostering competition in Exchanges on the basis of price, quality, and benefit delivery, while ensuring that MSPs operate on a level playing field with other issuers operating in the Exchanges.

B. Objectives of the Multi-State Plan Program (MSPP)

The MSP is a new product and will be one of several private health insurance options offered on the Exchanges beginning in 2014. In administering the MSPP, OPM is advancing several important objectives:

• To ensure a choice of at least two high-quality products to consumers participating on each Exchange;

• To promote competition in the health insurance marketplace to the benefit of all consumers;

• To offer plans from the same issuer to families or small businesses that may reside or operate in more than one State;

• To provide strong, effective contractual oversight of the issuers that choose to offer MSPs; and

• To work cooperatively with States and HHS to ensure a level playing field between QHPs and MSPs.

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. Moreover, like the health plans offered in the Federal Employees Health Benefits Program (FEHBP), consumers will benefit from OPM oversight and contract negotiation experience to ensure consumers get the greatest value for their premium dollars. Section 1334 of the Affordable Care Act directs OPM to enter into contracts with participating issuers, including negotiating premiums and benefits, as is done in the FEHBP. In addition, OPM will monitor MSP performance in the market, and oversee plan compliance with legal requirements and contractual terms.

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. Specifically, section 1334(d) of the Affordable Care Act provides that health plans that meet OPM's requirements for MSPs are deemed certified to be offered on all Exchanges. In return for these administrative efficiencies, MSPP issuers will offer at least two plans (one at the silver level of coverage and one at the gold level of coverage) in each Exchange. The statute allows MSPP issuers to phase in their coverage in all States and the District of Columbia over four years, though MSPP issuers must offer coverage in at least 31 States in the first year of their participation.

Pursuant to section 1334 of the Affordable Care Act, the Director of OPM will set the standards for the MSPP. OPM expects that these standards will be consistent with the standards set for QHPs and QHP issuers by HHS and the Exchanges, although in some unique and specific circumstances, as addressed in this proposed rule, the MSP standards may differ from QHP requirements. In implementing the MSPP, OPM will promote a level playing field on each Exchange, meaning that, to the extent any of the rules governing MSPs and MSPP issuers differ from those governing QHPs, they will be designed to afford the MSPs and MSPP issuers neither a competitive advantage nor a disadvantage with respect to other plans offered on the Exchange. OPM will administer the MSPP in a manner that is sensitive to the significant State and Federal interests affected by the MSPP and that is informed by input from a broad array of stakeholders. Accordingly, OPM appreciates the coordination and cooperation with the States and HHS in administration of the MSPP.

C. Review of OPM's Role in Contracting Under the Federal Employees Health Benefits Program (FEHBP)

Section 1334(a)(4) directs OPM to implement the MSPP “in a manner similar to the manner in which the Director implements the contracting provisions with respect to carriers” under the FEHBP. OPM therefore intends to draw on its significant experience in contracting with and overseeing private issuers in administering FEHBP to develop and manage the MSPP.

The Federal Employees Health Benefits Act (FEHBA) was enacted in 1959 to provide health benefits to Federal employees, annuitants, and their dependents. OPM has more than 50 years of experience working with private issuers in the large group market. Approximately eight million employees, annuitants, and their family members are currently covered under the FEHBP. Enrollees can choose from among fee-for-service plans with preferred providers, local HMOs, consumer-driven health plans, or high-deductible health plan options. Among these options are six nationwide plans, each of which offers coverage in all 50 States and the District of Columbia. In 2011, 78.9 percent of Federal employees and annuitants chose to participate in the FEHBP nationwide plans, which offer portable coverage that continues when the enrollee or a covered family member moves to another State.3 OPM has been able to administer this robust health insurance program efficiently, keeping administrative costs low.

3U.S. Office of Personnel Management, Healthcare and Insurance, Federal Employee Insurance Operations (March 2011). This percentage includes participation in the following nationwide plans: Blue Cross Blue Shield (BCBS), Government Employees Health Association, Inc. (GEHA), Mail Handlers, American Postal Workers Union (APWU), National Association of Letter Carriers (NALC), and Special Agents Mutual Benefit Association (SAMBA).

In managing contracts with carriers in FEHBP, OPM negotiates rates and benefits annually, oversees contract compliance, reviews plan brochures, handles enrollees' complaints, contracts with an external entity for recommendations during OPM's review of disputed claims, and monitors the financial stability of all participating carriers, including the maintenance of adequate reserves in a dedicated fund. Through this process, OPM has developed relationships with health insurance issuers and plans around the country, including local, community-based plans. In the FEHBP, OPM acts on behalf of employees and annuitants of the Federal government. OPM has significant responsibility to ensure that FEHBP health plans provide the best possible coverage at the lowest cost.4

4It should be noted that § 1334(g)(2) directs OPM to treat MSPs as a separate risk pool from the FEHBP, and the MSPP will not affect FEHBP costs.

OPM currently only negotiates contracts with carriers in the large group market. While OPM intends to create a process for negotiating with issuers participating in the MSPP that is guided by its experience in the FEHBP, this process will necessarily differ in certain respects from the FEHBP process to account for the differences between the large group market, where OPM currently operates, and the individual and small group markets, which will be served by the Exchanges.

D. Overview of the MSPP's Statutory Requirements

Section 1334 of the Affordable Care Act directs OPM to administer the MSPP. Specifically, section 1334(a)(1) of the Affordable Care Act requires OPM to “enter into contracts with health insurance issuers, (which may include a group of health insurance issuers affiliated either by common ownership and control or by the common use of a nationally licensed service mark) * * * to offer at least 2 multi-State qualified health plans through each Exchange in each State.”5 OPM interprets section 1334(a)(1) as requiring OPM to contract with at least two issuers, which may be “groups of health insurance issuers affiliated either by common ownership and control or by the common use of a nationally licensed service mark.”6

5Affordable Care Act § 1334(a)(1).

6Affordable Care Act § 1334(a)(1).

The Director is authorized to implement and administer the MSPP “in a manner similar to the manner in which the Director implements the contracting provisions with respect to carriers under the Federal Employees Health Benefit Program.”7 Further, OPM may enter into these contracts without regard to competitive biddinglaws.8 Each MSPP contract must be for a term of at least one year, but can be automatically renewable in the absence of a notice of termination from either the MSPP issuer or OPM.9

7Affordable Care Act § 1334(a)(4).

8Affordable Care Act § 1334(a)(1).

9Affordable Care Act § 1334(a)(2).

The statute grants to OPM the authority to certify MSPs.10 Any MSPs offered under a contract negotiated with OPM are then “deemed to be certified by an Exchange for purposes of section 1311(d)(4)(A)” of the Affordable Care Act and would not need to apply separately for certification on each individual Exchange,11 as recognized in current regulations at 45 CFR 155.1010(b)(1). The Director is authorized to withdraw approval of an MSPP contract after notice and opportunity for a hearing.12 The Director is also given the explicit statutory authority to negotiate with each MSP “(A) a medical loss ratio; (B) a profit margin; (C) the premiums to be charged; and (D) such other terms and conditions of coverage as are in the interests of enrollees in such plans.”13

10Affordable Care Act § 1334(d).

11Affordable Care Act § 1334(d).

12Affordable Care Act § 1334(a)(7).

13Affordable Care Act § 1334(a)(4).

The Affordable Care Act directs that an MSPP issuer be licensed in each State where it offers an MSP14 and be “subject to all requirements of State law not inconsistent with this section [1334], including the standards and requirements that a State imposes that do not prevent the application of a requirement of part A of title XXVII of the Public Health Service Act (PHS Act) or a requirement of this title [I of the Affordable Care Act].”15 The Affordable Care Act directs that issuers must comply with the minimum standards for carriers under section 8902(e) of title 5 of the United States Code to the extent that the standards do not conflict with provisions of title I of the Affordable Care Act.16 Congress also authorized OPM to establish additional standards for MSPs that OPM, in consultation with HHS, deems “appropriate.”17

14Affordable Care Act § 1334(b)(2).

15Affordable Care Act § 1334(b)(2).

16Affordable Care Act § 1334(b)(3).

17Affordable Care Act § 1334(b)(4).

The Affordable Care Act authorizes an MSPP issuer to phase-in the States in which the MSP is offered.18 In the first year the MSP is offered, it must be offered in at least 60 percent of the States (31 States).19 In the second year, it must be offered in at least 70 percent of the States (36 States).20 In the third year, it must be offered in at least 85 percent of the States (44 States).21 In all subsequent years, the MSPP issuer must offer the MSP in all States and District of Columbia.22

18Affordable Care Act § 1334(e).

19Affordable Care Act § 1334(e)(1).

20Affordable Care Act § 1334(e)(2).

21Affordable Care Act § 1334(e)(3).

22Affordable Care Act § 1334(e)(4).

The statute gave the Director the authority to determine if the plan meets essential health benefits package requirements, meets qualified health plan requirements of title I of the Affordable Care Act, meets premiums rating requirements under part A of title XXVII of the PHS Act, and offers the plan in all geographic locations prescribed by the statute.23 The statute specifies that an MSP must offer a uniform benefits package in each State that includes essential health benefits pursuant to section 1302 of the Affordable Care Act.24 Under the statute, this does not prevent a State from requiring additional benefits25 so long as it defrays the costs.26 The MSPP issuer must offer the plan in all States after a phase-in, including those with adjusted community rating at the time of enactment of the Affordable Care Act.27 At least one MSP must not provide coverage of services described in section 1303(b)(1)(B)(i) of the Affordable Care Act as applicable.28 Finally, to the extent that they do not conflict with provisions in title I of the Affordable Care Act, requirements under chapter 89 of title 5 of the United States Code (the FEHBA) will apply to MSPs.

23Affordable Care Act § 1334(c)(1).

24Affordable Care Act § 1334(c)(1)(A).

25Affordable Care Act § 1334(c)(2).

26Affordable Care Act § 1334(c)(4).

27Affordable Care Act § 1334(c)(1)(D).

28See also Affordable Care Act § 1334(a)(6).

Though our experience with the FEHBP guides us in crafting the MSPP, the statute distinguishes the MSPP from FEHBP in important respects. Thus, the Affordable Care Act prohibits the Director from allocating fewer resources to administering the FEHBP in order to administer the MSPP and requires the Director to ensure that the two programs are kept separate.29 Any premiums paid for coverage under the MSPP are not to be considered Federal funds.30 Enrollees of each program must be treated as separate risk pools31 and FEHBP carriers are not required to participate in the MSPP.32

29Affordable Care Act § 1334(g)(5).

30Affordable Care Act § 1334(g)(5).

31Affordable Care Act § 1334(g)(2).

32Affordable Care Act § 1334(g)(6).

We are also guided by the level playing field provision of the Affordable Care Act. Section 1324 of the Act specifies that if an MSP or Consumer Operated and Oriented Plan (CO-OP)33 is not subject to any Federal or State law related to one of the 13 categories listed in section 1324(b), then neither shall any health insurance coverage offered by a private health insurance issuer be subject to such law.34 The categories listed in section 1324(b) are: guaranteed renewal, rating, preexisting conditions, non-discrimination, quality improvement and reporting, fraud and abuse, solvency and financial requirements, market conduct, prompt payment, appeals and grievances, privacy and confidentiality, licensure, and benefit plan material or information. Beginning in 2014, the Affordable Care Act sets Federal standards for categories such as guaranteed renewal, preexisting conditions, and non-discrimination that will apply in all States.

33Affordable Care Act § 1322.

34Affordable Care Act § 1324.

E. Stakeholder Interaction

In order to assess the level of interest in participating in the MSPP, and to obtain feedback from stakeholders about the program, OPM issued a Request for Information (RFI) on June 16, 2011.35 OPM received 19 responses representing the views of 39 groups and organizations. Responses came from health insurance issuers (including dental and vision insurance vendors), employer organizations, labor organizations, consumer groups, patient organizations, and provider associations. This proposed rule does not directly respond to each of the responses from the RFI. However, these responses informed the drafting of this proposed rule.

35The RFI is available athttps://www.fbo.gov/index?s=opportunity&mode=form&id=677e422dd3f2bc983cb985eb73995b63&tab=core&_cview=1.

In addition to the RFI, OPM has held meetings and phone calls with numerous stakeholders to seek input and guidance before engaging in proposed rulemaking, including from the National Association of Insurance Commissioners (NAIC), States, tribal representatives through the tribal consultation process, consumer advocates, health insurance issuers, labor organizations, provider associations, and trade groups. OPM values the participation of a broad array of diverse stakeholders, and OPM encourages them to submit comments on this proposed rule.

II. Proposed Regulatory Approach A. Overview of Regulatory Approach

OPM's approach to the development of this proposed regulation seeks to:

• Create a program that will attract issuers to apply to offer a new product in each Exchange in 50 States and the District of Columbia.

• Balance 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.

Ensure a level playing field such that neither MSPs nor plans offered by non-MSPP issuers are advantaged or disadvantaged on Exchange marketplaces.

OPM seeks comment on whether these proposed regulations satisfy these goals.

B. Governing Law

The Affordable Care Act generally requires that the MSPP be governed by all State and Federal laws that apply to QHPs. The Act, however, grants discretion to the Director to administer the MSPP in a manner that fulfills 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. OPM recognizes that potential MSPP issuers seek administrative simplicity and some uniformity of standards in the MSPP. Accordingly, in unusual circumstances, it may be necessary for the Director to adopt standards or requirements for the MSPP that differ from standards and requirements applicable to QHPs under either State or Federal law. This proposed regulation, however, reflects the Director's intention for the MSPs and MSPP issuers to adhere to all State and Federal laws applicable to QHPs and QHP issuers, except to the extent any such laws are inconsistent with these regulations, OPM guidance, or OPM's contracts with MSPP issuers.

It is not possible at this time, however, to identify with specificity the laws that OPM deems to be inconsistent with these regulations, OPM guidance, or OPM's contracts with MSPP issuers. OPM will monitor future developments around the State specific requirements that will be in place in 2014 and beyond and identify inconsistencies as they arise.

OPM has addressed the evolving nature of the law and OPM's interest in providing meaningful guidance to the public regarding the standards and requirements that apply to the MSPP in four primary ways. First, OPM has identified the currently existing provisions of Federal law that govern QHPs and, thus, the MSPP. Second, OPM has asserted its intention to require MSPs and MSPP issuers to follow all State law requirements with respect to the 13 categories of laws set forth in section 1324(b) of the Affordable Care Act, the level playing field provision. Third, OPM has set forth the standards and requirements that will govern the MSPP, which it has established based on its research into currently existing State and Federal requirements. OPM believes that these standards and requirements are consistent with State legal requirements. Fourth, OPM has proposed establishing a dispute resolution process to be used after these regulations are published in final form to resolve future disputes about the applicability of State law requirements to the MSPP. OPM believes this approach affords it sufficient flexibility to administer the MSPP in 50 States and the District of Columbia without disrupting State markets. OPM requests public comment on whether these proposed standards and requirements will ensure a level playing field between MSPP issuers and QHP issuers, whether the standards and requirements OPM is proposing for the MSPP are consistent with applicable State and Federal requirements for QHPs, and whether the MSPs or MSPP issuers will be at a competitive advantage or disadvantage under this approach with respect to the QHPs offered on the Exchanges.

Level Playing Field

As discussed above, OPM is proposing to require compliance with State and Federal laws related to the 13 categories listed in section 1324(b) of the Affordable Care Act. There are, however, three categories of law among the 13 listed in section 1324(b) of the Affordable Care Act for which OPM would like specifically to solicit public comment: appeals, rating, and benefit plan material or information.

Appeals

OPM proposes to resolve external appeals pursuant to its own process, which will be similar to the disputed claims process used in the FEHBP. OPM interprets section 1334(a)(4) of the Affordable Care Act to require OPM to maintain authority over external review because Congress directed that OPM implement the MSPP in a manner similar to the manner in which it implements the contracting provisions of the FEHBP. In the FEHBP, OPM resolves all external appeals as a part of its contract administration responsibilities. OPM similarly believes that it is necessary to decide these appeals in the MSPP in order to ensure that the MSPP contract is administered equitably throughout all 51 jurisdictions and to provide enrollees an avenue of redress for all denied claims. This proposed approach would not trigger the level playing field provisions of section 1324 because MSPP issuers will still be subject to the same law as other issuers. The law governing external appeals for all issuers is found in section 2719 of the PHS Act and its implementing regulations at 45 CFR 147.136. The Departments of Health and Human Services, Labor, and the Treasury intend to propose amendments to those regulations to apply to the MSPP process the same standards that apply to State external review processes.

Rating

For purposes of compliance with section 1324(b)(2) of the Affordable Care Act, OPM has defined “rating” to require compliance with the rating factors permitted by section 2701 of the PHS Act. Thus, the proposed rule would require MSPP issuers, in proposing premiums for OPM approval, to use only the rating factors permitted by section 2701 of the PHS Act. It would also require MSPP issuers to comply with State laws relating to rating factors.

With regard to the MSPP, OPM does not consider “rating” to be the same as “rate review.” As directed by section 1334(a)(4) of the Affordable Care Act, the Director negotiates premiums, a medical loss ratio, a profit margin, and such other terms and conditions as are in the best interest of enrollees. With respect to rate review, OPM intends to conduct its own rate review process, and provide its rate review analysis to each State in which the MSP is operating. Each State also would have the opportunity to review the MSP rates under its own procedures. If a State disagrees with OPM's determination to approve the MSP rates, OPM would work with the State to attempt to resolve the differences. We expect that few such disagreements will arise and, if they do, that we will be successful in resolving them in a manner that is acceptable both to OPM and the State. In the event that a State withholds approval of an MSP rate for reasons that OPM determines, in its discretion, to be arbitrary, capricious, or an abuse of discretion, the Act authorizes the Director to make the final decision to approve rates for participation in the MSPP notwithstanding the absence of State approval. We expect that the Director will rarely, if ever, have to exercise this authority to approve MSP rates over the objection of a State. . OPM welcomes comments on whether this is an appropriate approach and on the impact of this approach.

Benefit Plan Material or Information

MSPs will be subject to Federal and State laws with respect to benefit plan material or information, including requirements proposed in § 800.113. OPM has defined the term “benefit plan material or information” to include explanations or descriptions, whether printed or electronic, that describe a health insurance issuer's products. The term does not include a policy or contract for health insurance coverage. While OPM intends to review and approve policy forms for health insurance coverage, OPM expects MSPP issuers to comply with related state law requirements for policy form review. OPM expects that that few disagreements will arise between OPM and a state regarding policy form review and, if they do, that we will be successful in resolving them in a manner that is acceptable both to OPM and the State at issue. As it does in the FEHBP, OPM will review and approve the policy or contract for health insurance coverage. In § 800.113, OPM has proposed reserving its authority to request benefit plan material or information (other than the policy document or information) for review by OPM in addition to any State review. In § 800.113, OPM also has proposed to allow an MSPP issuer to state that OPM has certified a plan and will oversee its administration. OPM solicits comments on whether it is appropriate to exclude policies and contracts from the definition of “benefit plan material or information.”

Process for Disputes Regarding State Law

OPM is sensitive to the impact that its decisions with respect to the standards and requirements applicable to the MSPP could potentially have on State insurance markets. For this reason, with respect to the 13 categories listed in section 1324(b) of the Affordable Care Act, as stated above, OPM's proposal is to require MSPP issuers to comply with all State laws in those categories, as defined in these regulations. There may be other State laws, however, that are not related to the 13 categories listed in section 1324(b) for which compliance would prevent OPM from administering the MSPP. In those circumstances, the State law requirements may be inconsistent with these regulations, OPM guidance, or OPM's contracts with MSPP issuers. With respect to those non-1324(b) provisions, OPM is proposing a process for States to seek changes to the regulations, OPM guidance, or OPM's contracts with MSPP issuers in order to bring them into compliance with applicable State law.

The proposed process is intended to allow for a targeted analysis of particular State law provisions and its impact on OPM's ability to administer the MSPP. This process is particularly important given that many States are still developing their Exchange standards. OPM invites comments on this process, including its scope, the factors OPM should consider when determining whether State law is applicable or whether the relevant market has been or will be disrupted by the inapplicability of State law and whether the process will be an effective way to resolve any such disputes.

OPM also invites comments on whether it should include in this process States' having concerns about MSPP issuer compliance with State law requirements related to the 13 categories listed in section 1324(b) of the Affordable Care Act. As discussed above, OPM's intention is to ensure that MSPP issuers comply with all State law requirements concerning the 13 categories, and OPM appreciates comments on whether this proposed rule has met this intent. However, OPM recognizes that future issues could arise regarding whether MSPs and MSPP issuers are properly made subject to State and Federal laws related to the section 1324(b) categories. OPM is asking for comment on whether the dispute resolution process should also be available as another avenue for addressing any such concerns.

III. Provisions of the Proposed Regulation A. General Provisions and Definitions (Subpart A, 800.10 and 800.20)

The purpose of this subpart is to define the basis and scope of part 800. In addition, this subpart sets forth definitions for terms that are used throughout this part.

1. Basis and Scope (§ 800.10)

The primary authority for the establishment of the MSPP is section 1334 of the Affordable Care Act. In addition, section 1324 of the Affordable Care Act is the level playing field provision. It addresses MSP compliance with applicable Federal or State law in 13 categories. Other relevant statutory provisions of title I of the Affordable Care Act are enumerated in § 800.102. In addition, MSPP issuers and MSPs must comply with all provisions of part A of title XXVII of the PHS Act enumerated in § 800.102.

Section 800.10 proposes the scope of this proposed regulation, which is to establish standards for the following:

(1) Health insurance issuers wishing to contract with OPM to participate in the MSPP;

(2) Health insurance issuers to appeal a decision by OPM either to non-renew or terminate a health insurance issuer's contract to participate in the MSPP; and

(3) Enrollees in an MSP to appeal denials of payment or services by an MSPP issuer.

2. Definitions (§ 800.20)

Section 800.20 proposes definitions for terms that are used throughout part 800. In general, the definitions contained in § 800.20 come from three sources: title I of the Affordable Care Act and the final Exchange regulation at 45 CFR parts 155, 156, and 157; title XXVII of the PHS Act and the regulations at 45 CFR part 144; and the FEHBA at chapter 89 of title 5, United States Code and the regulations governing the FEHBP at 5 CFR part 890 and 48 CFR 1609.70. Some new definitions were created for the purpose of implementing the MSPP. The application of the terms defined in this section is limited to this proposed rule.

Several defined terms in this section are in common use and are defined as such. These include:

• FEHBP

• HHS

• HHS Secretary (“Secretary”)

• OPM

• OPM Director (“Director”)

Several terms are based on definitions in the Affordable Care Act or regulations issued to implement 45 CFR Parts 155, 156, and 157. These include:

• Cost sharing (defined in 45 CFR 155.20).

• Exchange (defined in 45 CFR 155.20).

• Level of coverage (defined as one of four standardized actuarial values, or AV, of plan coverage specified in section 1302(d)(1) of the Affordable Care Act).

• Plan year (defined in 45 CFR 155.20).

• QHP (defined in 45 CFR 155.20).

• SHOP (defined in 45 CFR 155.20).

• Small employer (defined in 45 CFR 155.20).

• State (defined in 45 CFR 155.20).

OPM proposes definitions for several terms based on three HHS proposed rules. First, HHS published a proposed essential health benefits (EHB) rule in theFederal Registeron November 26, 2012 to provide standards related to EHB, actuarial value (AV), and accreditation. Second, HHS published a proposed rule in theFederal RegisteronNovember 26, 2012 to provide standards related to fair health insurance premiums, guaranteed availability, guaranteed renewability, risk pools, and rate review (the proposed health insurance market rules). Third, HHS will soon publish a proposed rule in theFederal Registerto provide notice of standards relating to benefit and payment parameters for 2014, including standards related to advance payments of the premium tax credit and cost-sharing reductions (the proposed payment rule). OPM expects to follow the definitions promulgated by HHS. The proposed definitions include:

Actuarial value (AV)(defined in proposed 45 CFR 156.20).

EHB-benchmark plan(defined in proposed 45 CFR 156.20).

Indian(defined in proposed 45 CFR 155.300(a)).

Zero cost sharing plan variation(defined in proposed 45 CFR 156.400).

Percentage of total allowed cost of benefits(defined in proposed 45 CFR 156.20).

Plan variation(defined in proposed 45 CFR 156.400).

Silver plan variation(defined in proposed 45 CFR 156.400).

Standard plan(defined in proposed 45 CFR 156.400).

Several terms are given the same definition as previously released regulations pertaining to the PHS Act, the Affordable Care Act, and the FEHBA. These include:

Health insurance coverage(defined in 45 CFR 144.103).

Health insurance issuer, or issuer,means an insurance company, insurance service, or insurance organization (including an HMO) that is required to be licensed to engage in the business of insurance in a State and that is subject to State law that regulates insurance (within the meaning of section 514(b)(2) of the Employee Retirement Income Security Act (ERISA)). This term does not include a group health plan as defined in 45 CFR 146.145(a).

Several terms below are given specific definitions for use in this regulation and should only be read to apply to this proposed rule. OPM proposes the following definitions to implement this regulation.

Applicantmeans an issuer or group of issuers that submitted an application to OPM to be considered for participation in the MSPP.

Benefit plan material or informationmeans explanations or descriptions, whether printed or electronic, that describes a health insurance issuer's products. The term does not include a policy or contract for health insurance coverage.

Group of issuersmeans (1) a group of health insurance issuers who are either affiliated by common ownership and control or by common use of a nationally licensed service mark, or (2) an affiliation of health insurance issuers and an entity who is not an issuer but who owns a nationally licensed service mark.

Licensuremeans the authorization obtained from the appropriate State official or regulatory authority to offer health insurance coverage in the State.

MSPmeans a private health plan that is offered under a contract with OPM pursuant to section 1334 of the Affordable Care Act and meets the requirements of this part.

MSPPmeans the program administered by OPM pursuant to section 1334 of the Affordable Care Act.

MSPP issuermeans a health insurance issuer or group of issuers, as defined in this proposed rule, that has a contract with OPM to offer health plans pursuant to section 1334 of the Affordable Care Act and meets the requirements of this part.

Nationally licensed service markmeans a word, name, symbol, or device, or any combination thereof, that an issuer or group of issuers uses consistently nationwide to identify itself. Section 1334(a)(1) states that issuers applying for an MSPP contract may include a group of issuers affiliated either by common ownership and control or by the common use of a nationally licensed service mark. Licensing of service marks can take place by private agreement between two or more issuers.

Non-profit entitymeans: (1) An organization that is incorporated under State law as a non-profit entity and licensed under State law as a health insurance issuer, or (2) a group of health insurance issuers licensed under State law a substantial portion of which are incorporated under State law as non-profit entities. Pursuant to section 1334(a)(3), at least one MSPP contract is to be with a non-profit entity. OPM has interpreted this requirement with the goal of attracting a broad pool of potential issuers that will provide high-quality private health insurance coverage to consumers.

Prompt paymentmeans a requirement imposed on a health insurance issuer to pay a provider or enrollee for a claimed benefit or service within a defined time period, including the penalty or consequence imposed on the issuer for failure to meet the requirement.

Ratingmeans the process, including rating factors, numbers, formulas, methodologies, and actuarial assumptions, used to set premiums for a health plan.

State insurance commissionermeans the commissioner or other chief insurance regulatory official of a State.36

36This definition is used in many of the models issued by the NAIC. See, for example, NAIC Unfair Trade Practices Model Act § 2.B. and accompanying Drafting Note (July 2008).

B. Multi-State Plan Issuer Requirements (Subpart B, 800.101 Through 800.116)

The purpose of this subpart is to set forth standards for MSPP issuers in order to participate in the MSPP pursuant to section 1334(b) of the Affordable Care Act. The following proposed provisions of the regulation implement this statutory provision.

1. General Requirements (§ 800.101)

This section proposes standards to implement section 1334(b) of the Affordable Care Act. It also proposes that an MSPP issuer must offer a choice of plans (i.e., at least one of each at the silver level of coverage and gold level of coverage) on the individual Exchange and in the SHOP, if the MSPP issuer chooses to participate in the SHOP. In addition, OPM proposes that the MSPP issuer will, pursuant to its contract with OPM, offer child-only coverage for each level of coverage that it makes available in each Exchange. An MSPP issuer must ensure that all MSPs it offers meet the requirements of this proposed rule.

Regarding eligibility and enrollment, OPM proposes that MSPP issuers meet the same requirements as those that apply to QHP issuers under the Exchange rules in 45 CFR parts 155 and 156. OPM seeks comment on any unique enrollment and eligibility issues that might affect MSPs.

2. Compliance With Federal Law (§ 800.102)

The purpose of this section is to specify the laws with which MSPP issuers must comply as a condition of participation in the MSPP. Section 1334(b)(2) of the Affordable Care Act directs an MSPP issuer to be licensed in every State and be “subject to all requirements of State law not inconsistent with this section [1334], including the standards and requirements that a State imposes that do not prevent the application of a requirement of part A of title XXVII of the PHS Act or a requirement of this title [I of the Affordable Care Act].” Section 1334(b)(3) further directs an MSPP issuer to comply “with the minimum standards prescribed for carriers offering health benefits plans under section 8902(e) of title 5, United States Code, to the extent that suchstandards do not conflict with a provision of this title [I of the Affordable Care Act].” In addition, section 1334(c)(1)(B) requires an MSP to meet all the requirements of title I of the Affordable Care Act with respect to a QHP, and section 1334(f) states that “the requirements under chapter 89 of title 5, United States Code, applicable to health benefits plans under such chapter shall apply to multi-State qualified health plans provided for under this section [1334] to the extent that such requirements do not conflict with a provision of this title.” OPM has performed a detailed analysis of title I of the Affordable Care Act and part A of title XXVII of the PHS Act. The list contained in the appendices of the proposed rule is intended to clarify for applicants and MSPP issuers the exact provisions of these laws that they must comply with in order to enter into an MSPP contract with OPM and maintain that contract.

This list is focused exclusively on title I of the Affordable Care Act and part A of title XXVII of the PHS Act. It is not intended to specify every legal requirement that applies to MSPP issuers and MSPs. In addition to the statutory provisions that are listed, MSPP issuers must comply with any applicable regulations implementing those provisions. For example, MSPP issuers must ensure guaranteed availability of coverage, and MSPP issuers offering MSPs in a State must accept every individual and employer in the State that applies for coverage, subject to certain exceptions, as outlined in § 147.104 of the HHS proposed health insurance market rules (including any modifications adopted in the final HHS rules). Additionally, MSPP issuers must ensure guaranteed renewability of coverage, and MSPP issuers offering MSPs in a State must renew coverage at the option of the plan sponsor or individual, with certain exceptions, as outlined in § 147.106 of the HHS proposed health insurance market rules (including any modifications adopted in the final HHS rules). OPM will coordinate its approach with the final HHS health insurance market rules.

OPM notes that the preamble to the regulations implementing 45 CFR parts 155, 156, and 157 leaves to the discretion of each Exchange whether to require a QHP issuer to participate in both the SHOP and the individual market Exchanges.37 Given that MSPP issuers are required to make MSPs available in 31 States in the first year and must build the capacity to be available in all States and the District of Columbia by the fourth year, OPM is proposing to allow MSPP issuers flexibility to phase in coverage to the SHOPs. Accordingly, MSPP issuers may offer coverage in the individual Exchange, and not the SHOP, throughout the duration of the phase-in period. MSPP issuers that initially choose to offer coverage only in the individual Exchange and not the SHOP must provide to OPM their plan to expand coverage to the SHOP in all States. In any event, OPM proposes that by the end of the phase-in period, MSPP issuers are required to offer coverage on the SHOP in addition to the individual Exchange. We solicit comments on this approach to SHOP participation, including on whether participation in SHOP should be required from the outset or, whether we should allow MSPP issuers to provide a plan that requires a period longer than the phase-in period to fully participate in the SHOP.

3777 FR at 18401 (March 27, 2012).

3. Authority To Contract With Issuers (§ 800.103)

In this section, OPM specifies that it may enter into an MSPP contract with a group of issuers affiliated either by common ownership and control or by the use of a nationally licensed service mark, or an affiliation of health insurance issuers and an entity that is not an issuer but that owns a nationally licensed service mark, as set forth in section 1334(a)(1) of the Affordable Care Act.

4. Phased Expansion (§ 800.104)

This section implements provisions of section 1334(e) of the Affordable Care Act. OPM proposes to allow for contracting with an issuer that offers coverage in part of a State, but not necessarily the entire State. OPM proposes that, for each State in which the MSPP issuer offers partial coverage, the issuer's application for participation in the MSPP under § 800.301 and the MSPP issuer's information submitted to support renewal of the contract under § 800.305 must include a plan for offering coverage throughout the State. OPM will monitor the MSPP issuer's progress in implementing the plan as part of its contract compliance activities under subpart E. OPM requests comment on whether an MSPP issuer should be required to offer coverage statewide by the fourth year of participation in the MSPP, when coverage must be offered in each Exchange in 50 States and the District of Columbia. OPM will evaluate MSP issuers to ensure that the locations in which they propose to offer MSP coverage have been established without regard to racial, ethnic, language, health status-related factors listed in section 2705(a) of the PHS Act, or other factors that exclude specific high utilizing, high cost, or medically-underserved populations. OPM also proposes to clarify that, during each year of the phase-in period, an issuer need only be licensed in the States where it is offering coverage during that year, and not in all States.

5. Benefits (§ 800.105)

The RFI did not ask specific questions about the health benefit packages that would be offered by MSPs.38 However, some respondents mentioned benefits package design in addressing questions about the level of interest in the MSPP, enrollment and marketing, and operations. Some respondents preferred a uniform benefits package for MSPs. For instance, one respondent stated that consumers would benefit from having an MSP structured as a national plan offering uniform benefits across all States. Other respondents raised the concern that a uniform package would be inconsistent with or inadequate in comparison to State benefit mandates. Another respondent stated that if OPM requires MSPP issuers to provide benefits that are not required for QHP issuers, MSPs may attract higher risk individuals, making the MSP less competitive on an Exchange.

38Responses to the RFI were due on September 9, 2011 to OPM, which was before HHS published its proposed rule on essential health benefits.

Section 1334(c)(1)(A) of the Affordable Care Act directs that an MSP offer a benefits package that is uniform in each State and consists of the essential health benefits described in section 1302 of the Affordable Care Act. OPM proposes to implement this provision through proposed § 800.105. OPM has developed its proposed benefits policy in coordination with HHS, which has already promulgated the EHB proposed rule. HHS proposes that EHB would be defined by a benchmark plan selected by each State, or in the absence of a State benchmark designation, a default benchmark. These proposed base-benchmark plans would be supplemented, if necessary, to ensure they meet EHB standards including coverage in each of the 10 coverage categories set forth in the statute.39 HHSalso proposed at 45 CFR 156.105 that MSPs must meet benchmark standards set by OPM.

39The four benchmark plan types for EHB proposed by HHS for 2014 and 2015 are: (1) The largest plan by enrollment in any of the three largest small group insurance products in the State's small group market; (2) any of the largest three State employee health benefit plans by enrollment; (3) any of the largest three national FEHBP plan options by enrollment; or (4) the largest insured commercial non-Medicaid Health MaintenanceOrganization (HMO) operating in the State. See proposed 45 CFR 156.100.

In § 800.105(a)(1), OPM proposes that an MSPP issuer must offer a uniform benefits package for each MSP. OPM proposes that the benefits for each MSP must be uniform within a State, but not necessarily uniform among States. In § 800.105(a)(2), OPM proposes that the benefits package noted in § 800.105(a)(1) must comply with section 1302 of the Affordable Care Act as well as any applicable standards set by OPM or HHS in regulations. Together, these two provisions clarify that MSPP issuers must comply with applicable HHS requirements and that OPM may issue additional guidance regarding any issues unique to MSPs.

In § 800.105(b)(1), OPM proposes allowing potential MSPP issuers to offer a benefits package, in all States, that is substantially equal to either (1) each State's EHB-benchmark plan in each State in which it operates; or (2) any EHB-benchmark plan selected by OPM. The second option offers administrative efficiencies for MSPP issuers, who face a number of challenges in being able to offer MSPs in all 50 States and the District of Columbia. We note, however, that issuers could potentially accomplish a similar consistency in their benefits offerings by adhering to State EHB benchmark plans and applying the EHB substitution rules proposed at 45 CFR 156.115. We request comment on these options, including on whether either option would discourage or encourage an issuer's participation in the MSPP and whether or not, given the proposed substitution rules, the allowance of the OPM benchmark option disrupts State level playing fields.

No matter which option an MSPP issuer chooses, it would need to apply that benefits package option uniformly to each of the States in which the MSPP issuer proposes to offer MSPs. That is, except as discussed below with respect to § 800.105(c)(5), our proposed approach does not permit an issuer to use a State benchmark plan in some of the States in which it is operating and an OPM-chosen benchmark plan in others.

In § 800.105(c)(1), OPM proposes selecting, as EHB-benchmark plans, the three largest FEHBP plan options by enrollment that are open to Federal employees, and annuitants, which have been identified by HHS pursuant to section 1302(b) of the Affordable Care Act. On July 3, 2012, HHS identified the largest three FEHBP plan options, as of March 31, 2012, to be the following: Blue Cross Blue Shield (BCBS) Standard Option, BCBS Basic Option, and Government Employees Health Association (GEHA) Standard Option.40 An MSPP issuer that selects one of these benchmarks must have a uniform benefits package in all States in which it operates an MSP.

40Centers for Medicare and Medicaid Services, Essential Health Benefits: List of the Largest Three Small Group Products by State, available athttp://cciio.cms.gov/resources/files/largest-smgroup-products-7-2-2012.pdf.PDF(July 3, 2012).

Upon initial comparative research, it appears that the proposed OPM-selected EHB-benchmark plans are largely similar in scope of benefits covered as those benchmark-eligible plans in the small group markets.41 This research also indicates that the proposed OPM-selected EHB-benchmark plans, like other benchmark-eligible plans, may lack coverage for pediatric oral services, pediatric vision services, and habilitative services and devices. Moreover, the EHB-benchmark may also lack State-required benefits. Accordingly, OPM is proposing standards for supplementing the proposed OPM-selected EHB-benchmark plans in proposed §§ 800.105(c)(2)-(4).

41U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, ASPE Research Brief, Essential Health Benefits: Comparing Benefits in Small Group Products and State and Federal Employee Plans, available athttp://aspe.hhs.gov/health/reports/2011/MarketComparison/rb.pdf(December 2011).

In § 800.105(c)(2), OPM proposes that any OPM-selected EHB-benchmark plan lacking coverage of pediatric oral services or pediatric vision services must be supplemented by the addition of the entire category of benefits from the largest Federal Employee Dental and Vision Insurance Program (FEDVIP) dental or vision plan option, respectively, pursuant to 45 CFR 156.110(b) and section 1302(b) of the Affordable Care Act. On July 3, 2012, HHS identified the largest FEDVIP dental and vision plan options, as of March 31, 2012, to be, respectively, the following: MetLife Federal Dental Plan High Option and FEP BlueVision High Option.

In § 800.105(c)(4), an MSPP issuer must follow State definitions where the State chooses to specifically define the habilitative services category pursuant to proposed 45 CFR 156.110(f). In the case in which a State chooses not to define this category, OPM proposes that if any OPM-selected EHB-benchmark plan lacks coverage of habilitative services and devices, then OPM may determine what habilitative services and devices are to be included in that EHB-benchmark plan.

In § 800.105(c)(5), OPM proposes that, for at least years 2014 and 2015, OPM's EHB-benchmark plans would also include, for each State, any State-required benefits enacted by December 31, 2011 that are included in a State's EHB-benchmark plan or specific to the market in which the MSP offers coverage. Accordingly, these State-required benefits would be treated as part of the EHB. However, consistent with proposed 45 CFR 155.170, OPM is proposing that State-required benefits enacted after December 31, 2011 would be in addition to the EHB. Under section 1334(c)(4) of the Affordable Care Act, a State must assume the cost of such additional benefits over the EHB by making payments either to the enrollee or on behalf of the enrollee to the MSPP issuer, if applicable. An MSPP issuer must calculate and report the costs of additional State-required benefits pursuant to 45 CFR 155.170.

OPM is proposing that if an MSPP issuer chooses to use an EHB-benchmark plan selected by OPM in all States, the MSPP issuer would need to use a State-selected benchmark only in States that do not allow substitution for services at all within the benchmark benefits. MSPs using an OPM benchmark in States that require all plans to offer the same set of benefits would be different from all of the other plans offered on the market, potentially causing adverse selection. OPM seeks comment on this proposal.

In § 800.105(d), OPM proposes that an MSPP issuer's benefits package, including its prescription drug list, must be submitted to and approved by OPM, which would determine whether a benefits package proposed by a MSPP issuer is substantially equal to an EHB-benchmark plan, in accordance with the guidelines set forth by HHS in the proposed EHB rule. In determining whether an MSPP issuer's benefits package should be approved, OPM proposes to follow the HHS approach set forth at proposed 45 CFR 156.115, 156.120, and 156.125 (subject to any changes adopted in the final HHS rule). Proposed 45 CFR 156.115(b) allows issuers to make benefit substitutions within each EHB category, and directs issuers to submit evidence of actuarial equivalence of substituted benefits to a State. OPM requests comments on whether MSPP issuers should submit evidence of actuarial equivalence of substituted benefits to the OPM in addition to, or in lieu of, their submission to a State.

In reviewing an MSPP issuer's proposed benefit design, OPM plans to review an MSPP issuer's benefits package for discriminatory benefit design pursuant to section 1302(b)(4) of the Affordable Care Act and proposed 45 CFR 156.110(d), 156.110(e), and 156.125. OPM will work closely with States and HHS to