Premera holds off on 2018 rates as state awaits waiver decision

May 31--Hoping to clamp a ceiling on Alaska's already high insurance rates, state officials are keeping an eye on Washington, D.C., for two developments.

One is an application for a federal waiver that would replace the state's one-year funding of $55 million in 2017 as a reinsurance program to halt a series of steep premium increases in the individual market.

The Alaska Division of Insurance applied to the U.S. Department of Health and Human Services for the 1332 waiver in January, but has not yet heard back from the federal agency.

The other developments are changes under debate now in the U.S. Senate that Premera Blue Cross/Blue Shield of Alaska hopes won't upset the few advantages Alaska has even as it's one of the states with the highest premiums in the country.

Rates for 2018 were due in May, but Premera is not yet prepared to submit them to the Division of Insurance given these two big developments on the outlook.

"We are not prepared to make any announcements about our 2018 rates," Premera spokesperson Melanie Coon said May 30. "During the first two years of the ACA, our Alaska customers saw premium increases of 37 percent in 2014, and 38 percent in 2015. Last year, the rate increase was under 10 percent, or about 35 percent less than what they would have paid without the reinsurance program. We believe continued support of a state reinsurance program is critical."

The federal funding of $55 million would redirect supplemental funding that currently comes to the state through another mechanism, Director Lori Wing-Heier said in April. About 90 percent of Premera's customers on the federal insurance exchange qualify for premium subsidies; therefore if the rates can be held down the federal subsidies can be smaller.

In 2016, Alaska's Legislature created the Alaska Comprehensive Health Insurance Fund that sunsets in June 2018, and authorized the Division of Insurance to apply for a 1332 waiver.

The fund is designed to reinsure Premera, the one remaining insurer in the individual market, for costs to treat people with life-threatening, chronic or high-cost conditions.

As a result the health insurer scaled back 2017 premium increases to 7 percent. Alaska funded the program by using $55 million of the $64 million generated in 2015 from a 2.7 percent tax on health insurance premiums.

The new law expanded the premium tax base to all insurance premiums -- not just health insurance, according to Alaska's Division of Insurance.

All eyes are on Alaska to see if this 1332 waiver request is approved, but as of May 31, the federal agency in charge of granting it had not yet issued a decision.

Senate's health care bill rewrite

Alaska's only health insurance carrier also is hopeful that any new health care act to emerge from Congress at the end of the U.S. Senate's work on the American Health Care Act that passed the House will keep subsidies and retain an Alaska poverty-line adjustment.

Jim Gazko, president of Premera Blue Cross Blue Shield of Alaska, predicts subsidies will not go away. But they most likely will be changed.

"There will be minor to almost no changes in 2018-2019, then we'll most likely be transitioning from income-based to age-based subsidies," Grazko said.

Presently Alaskans qualify for subsidies based on 133 percent of the federal poverty line. If this adjustment goes away, the concern is that insurance rates will become unaffordable to Alaskans, he said.

In an age-based subsidy system, premiums would be assessed on age rather than the current system of income.

People under the age of 30 would get a lower subsidy than a person over 50 years old, Grazko said. It would take two years to make the switch, to the year 2020.

"A 27-year-old, under a new age-adjusted flat tax rate, would get something that looks about two-thirds of what someone 45 years old would get," Gazko said in an interview with the Journal on May 25.

But all of this talk is theoretical until an actual bill emerges from the U.S. Senate. Grazko, like so many others in the industry, is keeping a close eye on what comes out of revisions to the House bill, which the Senate has vowed to rewrite.

The Congressional Budget Office report on May 24 estimated the House-passed health care bill would cause millions to lose insurance. It would potentially have the biggest impact on the least healthy.

On the same day, in the U.S. Senate, chairman of the Health Education and Labor Committee Sen. Lamar Alexander, said the Senate is writing its own bill. That in turn will get its own score from the CBO before the Senate votes, Alexander said in a statement.

Unlike other states and other insurance carriers, Premera is the lone company left standing to take care of Alaska on the open-market exchange. Events last year coincided with two insurers pulling out of the Alaska health individual insurance market, Moda Health and Aetna, leaving Premera Blue Cross/Blue Shield as the sole company remaining selling individual policies.

The deciding cause for the pullout related to high costs far exceeding the carriers' ability to balance their bottom lines.

Even Premera was at risk until the Legislature stepped in with the $55 million reinsurance subsidy from the state's general fund. That allowed a proposed 42 percent hike in 2017 premiums to be reduced to a 7 percent increase across individuals.

For 2018, Alaska is still looking to the 1332 waiver for a bridge over that $55 million gap.

New provisions may fix ACA

The new health care law debates in Congress raise worrisome challenges, Grazko said. Given the disagreements about provisions in the new health care bill presently under revision or new construction, key provisions are at risk.

"One of things we are most concerned about, especially in Alaska with premiums the highest in the country, is if the flat tax credit isn't adjusted for Alaskans," Grasko said. "A lot of other things are. The federal government uses the federal poverty line as an adjustment for the Alaska version of several programs in the Lower 48. It's been the same with Medicaid. It's our hope they can come up with a method that keeps the affordability here."

Grazko is also concerned about the elimination of Medicaid expansion -- a key House provision that Alaska's two U.S. Senators opposed. Rep. Don Young, however, voted in favor of eliminating the expansion of Medicaid when he voted "yes" on the House bill.

For Sen. Lisa Murkowski, one of her strongest reactions was against eliminating the Medicaid expansion, which she said would place 27,000 low-income Alaskans at risk.

Both she and Sen. Dan Sullivan support repealing the individual and employer mandates and want to keep the provision protecting those with pre-existing conditions.

The tax penalty for those who didn't buy into the insurance market or go on Medicaid, if they were eligible, was no longer enforced as soon as President Donald Trump hit office.

Maybe it wasn't a popular provision, but "anything you can do to encourage them to buy promotes market stability," Grazko said.

Premera is in favor of continuing with the individual mandate as opposed to consumers opting in only as they get sick.

Alaska's small insurance pool is the biggest reason rates are so much higher than the rest of the nation. A lot of discussion has centered on how to give a level playing field with other states.

Why not form an insurance compact with Washington, for example? Alaska's 18,000 insured would join with Washington's 300,000 insured, and rates would go down because they would cast a wider net.

That option wasn't available for a variety of reasons.

In a hypothetical scenario, Alaskans' higher insurance rates and higher risk patients would likely increase Washington's insurance rates, Grazko said. Alaskans are "higher risk" in insurance speak for higher rates of diseases and accidents.

Currently, for two states as different as Washington and Alaska to agree on one uniform set of rules is very difficult.

"I don't think it's been attempted," Grazko said.

The House bill gives the ability for states to opt out of certain "essential" health benefits mandated under the current Affordable Care Act, a solution that makes sense and Grazko hopes is adopted by the Senate.

Just as car insurance regulations allows consumers to select which kinds of coverage they prefer -- roadside assistance or extra collision, for example -- the House's version also allows for individuals to opt out of certain benefits.

"This gives more latitude to develop plans. Now, the ACA is prescriptive. (But) if they could redesign a product that goes outside of those lines to what can best be excluded that can't be excluded today, it can bring costs down," for the consumer, Grazko said.

Those are Grazko's hopes for what comes out of Congress. His fears are the loss of subsidies and curtailment of Medicaid expansion.

Loss of those would change the risk profile of exchange pools.

"A different person buys Medicaid verses exchange coverage," he said. "Right now when people are eligible for Medicaid, they don't buy into exchange pools. If don't get Medicaid they will buy into individual pools and that tends to be more expensive."

Because an estimated 5 percent of the people generate 50 percent of the costs, a small portion dictates costs for 95 percent of the pool, Grazko said. Without Medicaid to help defray costs, people who would normally qualify for it would be pushed into the exchange in order to have any coverage at all.

"Our commitment to the market runs deep no matter what. We did stay," Grazko said.

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

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