On Nov. 30, 2012, a few weeks after the announcement of government sponsorship of multi-state plans took existing insurers and CO-OP developers by surprise, the Office of Personnel Management (OPM) published the proposed rule on these plans. Under these multi-state plans, health insurance operated under contract with the federal government will be available to consumers in every state through state insurance exchanges. The impetus behind these plans is the belief that a government sponsored multi-state plan will increase competition and lead to more competitive pricing in health insurance markets.

According to OPM, there are five primary objectives of the proposed rule:

1. Ensure the choice of at least two high-quality products to consumers participating in each exchange
2. Promote competition in the health insurance market
3. Offer plans from the same issuer to families or small business that may reside or operate in more than one state
4. Provide strong, effective contractual oversight of the multi-state plans
5. Work cooperatively with states and the Department of Health and Human Services to ensure a “level playing field.”

This last objective is of particular concern to private insurers. The Affordable Care Act (ACA) provisions pertaining to multi-state plans do not specify how these plans will comply, if at all, with requirements under various state laws. Private insurers worry that if state laws do not apply, these multi-state plans may have an unfair competitive advantage over other insurers who are subject to state-specific requirements. While the proposed rule includes the ACA directive that the multi-state plans be governed by all state and federal laws that apply to qualified health plans, it also carves out an exception “to the extent any such laws are inconsistent with these regulations, OPM guidance, or OPM’s contracts.”

The comment period for this rule will be open from Dec. 5, 2012 through Jan. 4, 2013, and OPM has stated that the final rule will be released next year.