Premera expects a 21.6 percent decrease in Alaska’s individual market premiums for 2018

Aug. 02--WASHINGTON -- Premera, the sole insurer in Alaska's individual insurance market, announced Tuesday that it expects those rates to drop more than 20 percent in 2018, a major turnaround for the beleaguered market.

Premera attributes the requested rate decrease of 21.6 percent -- yet to be approved by the Alaska Division of Insurance -- largely to the state's reinsurance program, which shifts claims from some of the highest-cost customers to a separate federal funding program.

"This rate decrease can be attributed to a number of factors, including the payment of high cost claims through the state's reinsurance program and a significant reduction in the use of medical services by our customers," Premera spokeswoman Melanie Coon said in an email.

But she cautioned that the rates -- effective Jan. 1, 2018 -- were a good sign but not a final one.

"While the rate decrease is an encouraging sign that the Alaska market is becoming more stable, we caution against drawing conclusions based on one or even two years of results. The Alaska market, due to its small size, remains volatile where the medical claims of a relatively small number of customers have the potential of greatly influencing financial results," Coon said.

Premera submitted the rate request on July 18, and the Centers for Medicare and Medicaid Services (CMS) posted it on its website Tuesday. The CMS website posts an even deeper cut in rates -- 22.23 percent -- than that provided to Alaska Dispatch News by Premera. That's because CMS calculated an average by equally weighing plan rates across the total population. Premera calculated the average by taking into account the actual number of people on the various available plans, Coon said.

The rate decrease assumes that Premera does not receive subsidies from the federal government known as cost share reductions (CSRs), Coon said.

That makes the proposed rate cut all the more remarkable, at a time when many markets are on shaky ground. If the state does receive the CSRs, the rate cut could grow even larger.

President Donald Trump has repeatedly raised the possibility that he will order the federal government to stop making the subsidy payments after the Senate's failed attempts to pass health care legislation.

The federal government spends about $7 billion a year on subsidies to insurance companies to reduce deductibles and co-payments for people of modest income. The Trump administration has the power to end those payments, and has been approving them on a month-to-month basis since the president took office.

On Tuesday, Sen. Lamar Alexander, R-Tenn., who chairs the Senate Health, Education, Labor & Pensions Committee, announced that the committee plans to begin holding health care hearings the week of September 4. The focus will be on "actions Congress should take to stabilize and strengthen the individual health insurance market so that Americans will be able to buy insurance at affordable prices in the year 2018," Alexander said.

Insurance companies that operate on the federal exchange must sign contracts with the federal government by Sept. 27, Alexander said.

"There are a number of issues with the American health care system, but if your house is on fire, you want to put out the fire. And the fire in this case is the individual health insurance market. Both Republicans and Democrats agree on this," he said.

Alexander said he expects that the Senate will be able to take bipartisan action on the limited role of federal subsidies in the individual insurance markets by the end of September.

Until then, he said, he has asked the president "to temporarily continue the cost sharing reduction payments through September, so that Congress can work on a short-term solution for stabilizing the individual market through 2018."

In exchanges outside Alaska, estimates have shown that premiums could go up 20 percent without the subsidy payments.

Premera calculated its rate decrease assuming that there would be no CSR payments in 2018. But with the results of the reinsurance program and the federal "1332 waiver," there was still a stark drop in premium prices.

The waiver program will send $300 million in federal funds to Alaska over the next five years for a program designed to drive down premiums. The program covers claims in the individual market for people with one of 33 high-cost conditions, so that costs can remain stable for others in the program. Alaska's relatively small individual health insurance market has struggled with the costs imposed by a small number of people with extremely high-cost health care needs.

The Alaska Division of Insurance has asked Premera to revise its filing to include an assumption that the state would also receive subsidy payments.

"That work is underway and would likely cause the decrease to change," Coon said.

Asked about the Senate's trajectory for health care legislation Tuesday, Alaska Sen. Dan Sullivan said that he's going to continue working on proposals and legislation to "help the people who are hurting." He said he expects anything that would come out of the committee to "be more piecemeal."

"I think the next question of what has to happen is the payment right now," he said. Sullivan said he doesn't "want people to get hurt. So I would be supportive of making those payments."

Speaking before Premera released the numbers, Sullivan said he had been given advance information from the insurance company, but he was hesitant to share the details while the numbers were still under revision.

Nationally, things are looking worse, he said.

But given the 1332 waiver, Sullivan said that the company was signaling that "we'll see for the first time a reverse in the spike in premiums that you know Alaska has been subject to more than any other state in the country."

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