Lower claim costs lead to large reimbursement

Dec. 04--Alaska received a reimbursement check for $25 million from the lone company offering insurance on the individual market after lower-than-expected claim costs in 2017.

The payment to the Alaska Reinsurance Program, or ARP, came as part of a memorandum of understanding between the Alaska Division of Insurance and Premera Blue Cross Blue Shield. The company offered to make the reimbursement after finding that health insurance claims filed by Alaska customers in 2017 were trending at a 10-year low, according to Premera spokeswoman Melanie Coons.

Just a handful of customers can cause dramatic swings in the amounts paid out in claims, Coons said, given that only around 16,000 are currently enrolled on the insurance exchange in Alaska. To further make costs unpredictable, "30 percent of the customers enter or leave the market each year," she said.

At various times, the enrollment numbers climbed past 18,000, then back down again.

The ARP, operated by the state, covers claims in the individual market for people with one or more of 33 identified high-cost conditions. This isolates the pool so that high costs are not distributed over the entire insured population under Premera's plans.

Now, the $25 million is going back into the ARP to address the higher costs in the isolated pool, said Lori Wing-Heier, director of the Division of Insurance. This in turn should bring costs down for the entire pool, she said.

Wing-Heier directed the administrator of the ARP, the Alaska Comprehensive Health Insurance Association, "to use the contribution from Premera to fund high-cost health insurance claims in the individual market."

Gov. Bill Walker praised the agreement, which he said he believes will go toward stabilizing the individual health insurance market in Alaska.

"The success of the reinsurance program has driven insurance premiums the right direction -- down. Because the 2017 claims were lower than anyone expected, this agreement will pass benefits back to Alaskans," Walker said in a news release.

Along with Medicaid expansion, the ARP has been one of the key factors in alleviating what had been skyrocketing rates in the individual health insurance market in Alaska, said Wing-Heier, who had explained the Alaska process before a senate panel in September that looked at ways to amend the Affordable Care Act.

With a potential premium hike of 42 percent facing Alaskans in 2017 after increases of nearly 40 percent in 2015 and 2016, the Legislature passed House Bill 374 in 2016 to establish the ARP.

The Legislature subsequently appropriated $55 million to fund the program, which allowed Premera to raise rates by 7 percent instead of 42 percent.

The lower rates in 2017 subsequently helped the state receive a Section 1332 "innovation waiver" under the Affordable Care Act because the lower premiums required less federal money in subsidy payments to the roughly 90 percent of customers on the exchange who qualify for assistance. Because it would not add to the federal deficit, the 1332 waiver will have the federal government pay for about 80 percent of the ARP in 2018.

Alaska's contribution to the ARP in 2018 was to be about $11 million with $48 million paid by the federal government.

Because of the waiver and the ARP, Premera announced in October that rates for 2018 in Alaska will decline by 21 percent next year.

Back in April, Premera officials told the Journal they expected to draw on the full $55 million appropriated by the Legislature in 2017, but the company found that implementation of the reinsurance program and a decrease in the overall claims submitted led to more favorable market conditions than either Premera or the division expected, Wing-Heier said.

The resulting reimbursement from Premera will provide additional support to Alaska's individual health insurance market, continuing efforts to stabilize the tenuous market.

"Premera's preliminary 2017 results are better than expected, which indicates that the market may be beginning to stabilize. However, with a small pool of Alaskans in the individual market, it is difficult to predict whether the trend will continue," Wing-Heier said. "We will continue to work on additional measures to contain costs and increase enrollment numbers so that all eligible Alaskans can access affordable health insurance."

As for next year's insurance exchange enrollment numbers, those could climb if the first weeks of open enrollment hold. Coons reported new enrollment and many inquiries that haven't yet been quantified.

Open enrollment into the insurance exchange closes on Dec. 15. For more information, go to HealthCare.gov or contact Premera.

Naomi Klouda can be reached at naomi.klouda@alaskajournal.com.

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(c)2017 the Alaska Journal of Commerce (Anchorage, Alaska)

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