Individual insurance pool to see sharp premium hikes

Sept. 11--Health insurers have filed for substantial increases in allowable premiums on individual non-subsidized health insurance plans issued through the federal Affordable Care Act, or ACA.

Under state law the state Division of Insurance approves increases in health premiums. Permission for as much as a 37 percent increase in 2015 has been granted, according to the division.

Premera Blue Cross of Alaska, one of two companies filing the request, said the increase is needed to cover large losses the company suffered in 2014 in its Alaska individual insurance plans.

The extent of Premera's losses are severe.

"Between Jan. 1 and June 30, 2014 we had more than $7 million in medical claims from only 33 members (of the plans). That's roughly one third of all the medical claims costs for the 7,000 members in the individual plans," Premera said in a statement.

"We're currently paying an average of $723 (per member) in medical claims per month and receiving an average of $540 a month (per member) on premiums. We expect to lose $3.7 million in 2014 serving the individual market on those claims.

"At the rate of those payments, the company would have to have a 71.5 percent average increase to break even in 2015. We have instead filed for and received approval for a 37.5 percent average rate increase," the company said.

Even with that increase Premera expects to lose $5 million in 2015, it said.

The increases will generally not affect lower-income Alaskans receiving federal subsidies for their individual health insurance plans.

The other company that filed for the increase is Moda Health. Premera and Moda Health are the only companies selling individual health insurance under the ACA plans.

"The problem is really the very small size of the Alaska individual market and the fact that we've had a number of people with significant health issues joining the plan and not enough healthy people to spread those costs," said Premera spokeswoman Melanie Coon.

In contrast, states with large numbers of people in the individual plans are seeing decreases in premiums in 2015, Coon said. The average premium in Washington is expected to decline 1.9 percent, and in Oregon an 11.3 percent decrease is expected, she said.

Those are average premiums filed by all insurers in those markets and not just Premera Blue Cross.

Competition among many insurance companies selling the plans, in contrast to just two in Alaska, may also result in lower rates but the effect of that can't be predicted yet, Coon said. More companies are signing up to sell insurance in 2015 than were selling in 2014, she said.

What allowed the premiums to drop was simply the very large numbers of people signing up under the ACA metallic plans in those two states in sharp contrast to Alaska. In both Washington and Oregon there are several hundred thousand people in the plans, which makes them big enough to absorb the costs of people with health problems.

About 16,000 Alaskans in total are covered under individual health insurance policies issued under the federal health care act, the state Division of Insurance said. Coon said about 7,000 of those are Premera's customers.

There are also a number of Alaskans with individual plans issued before Janurary 2014 that are "grandfathered" and not subject to the rate increases, for 2015 at least.

What aggravated the situation is that a large number of people with serious health conditions who were formerly enrolled in the state and federal high-risk pools opted to drop that coverage and enroll in one of the ACA "metallic" plans where premiums would be lower.

In the state high-risk pool the members paid premiums that were high but even those covered only part of the total costs of medical care. The remainder was paid, in effect subsidized, by all health insurance companies selling in Alaska through a "reinsurance" mechanism.

Coon said Premera believes a similar reinsurance mechanism to cover losses in the Alaska individual health insurance market is solution, and that has been proposed to the Division of Insurance.

Tim Bradner can be reached at [email protected].

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