Kaiser Health News has a piece on the failure of multi-state plans to be successful in the exchanges. One of the big problems is pricing. They are expensive. And their analysts are confused why this is the case:
average monthly premiums for the most popular silver plans, which pay 70 percent of medical costs, were $447 for the regular Blues plans and $483 for the multi-state Blues plans.
“Because the multi-state plans are always priced higher, they’re not really increasing competition,” says Caroline Pearson, a senior vice president at Avalere. “They’re potentially providing a modicum of consumer choice. But they’re not injecting competition into the market.”…
It’s unclear why multi-state plans offered by the Blues or co-ops are pricier than their regular individual plan options on a marketplace, say experts. The plans are often similar in design. In fact, it may be hard for consumers to tell them apart.
The short answer is network and the longer answer is selection.
By definition a multi-state plan built on the same platform as a set of single state plans has a network no narrower than any single state network, and most likely broader. It is broader because the multi-state network is composed of multiple state networks, and more speculatively, the networks are designed to pass the approval of the strictest regulatory standard. If a network requires 1 PCP in every 15 miles for rural areas OR 1 PCP within 45 minutes in rural areas, the 15 mile standard is tighter and it would lead to new PCP recruitment in the looser state.
Furthermore, building a multistate network and multi-state plan is resource intensive. Creating a base multi-state network and getting it approved and then creating a low cost multi-state network that could be approved is a major administrative burden.
The networks are broader.
And that creates the selection problem. Broader networks, all else being equal, are more attractive to individuals with higher medical needs. A person with cancer who lives in Louisiana would very much care that MD Anderson cancer center in Houston is in their network. Their twin brother who lives down the street from them and who is healthy as a horse does not care that MD Anderson is in network. A resident of Manchester NH with Type 1 diabetes really cares that Joslin Diabetes Center in Boston is in network while their spouse with no metabolic issues is indifferent. Anyone in North Dakota who is chronically ill wants Mayo Clinic to be in network.
We’ve looked at risk selection plays on the other end where narrow, low priced networks are attempts to scoop up all the healthy people in a region. These multi-state plans are the opposite, they will scoop up a lot of very sick people. Sure, back-end risk adjustment will move money back to the issuers of the multi-state plans, but they have low initial enrollment that is comparatively sick and expensive to cover, so pricing gets ugly.