Reinsurance bill passes House, still needs funding in budget

June 01--The Senate Finance Committee has heard and held a bill that would a secure $55 million to lower individual insurance premiums in Alaska. The bill's passage will be the difference between a potential 40 percent or 25 percent spike for individual premium rates in 2017.

The committee scheduled the bill's next hearing for June 2 at 1:30 p.m.

The Affordable Care Act, or ACA, drew high-risk patients away from the Alaska Comprehensive Health Insurance Association with its lower-cost, federal-subsidized plans. When federal reimbursements for insurer losses came up short, insurance companies hemorrhaged money and have been forced to raise insurance rates to recoup losses or leave the state altogether.

After Moda Health's announcement last month that it was leaving the state in 2017, Alaska's sole remaining individual insurer, Premera Blue Cross, said rates will increase no matter what due to the ACA side effect. The bill would only lower the rate of increase from as high as 40 percent to as low as 20 percent. Premera and Moda raised rates by 39 percent in 2016.

Without the bill's passage, Division of Insurance director Lori Wing-Heier said she "can't imagine that in 2018 we're going to have individual insurance throughout the state," though Premera has committed to staying through 2017.

The House approved a committee substitute of the bill on May 30 and was sent to the Senate Finance Committee.

The bill has widespread support, including from the Alaska Mental Health Board and Advisory Board on Alcohol and Drug Abuse, Premera, Moda Health, the Alaska Association of Health Underwriters, the Alaska Primary Care Association, and the Alaska State Hospital and Nursing Home Association.

Supporters say premium rates are too high as is, and yet another large spike will further exclude Alaskans from health care and behavioral care.

"There are many working Alaskan families who are ineligible for Medicaid who cannot afford the private health insurance plans available in the limited market," wrote Kate Burkhart, executive director of the Alaska Mental Health Board and Advisory Board on Alcohol and Drug Abuse. "This results in some families incurring debt for health care services due to high deductible, co-pay, or coinsurance costs. Other families go without insurance and without preventative therapeutic health care services."

The committee substitute keeps most of the bill's original provisions but specifies where $55 million in necessary reinsurance funds will come from.

Alaska levies a 2.7 percent insurance premium tax on every plan in the state. Last year, the tax generated $55 million, the amount of an earlier assessment on individual plans. The bill would designate the premium tax to pay for the reinsurance.

Currently, those funds go into the general fund. The committee substitute would establish an "Alaska comprehensive health insurance fund" in the general fund itself, and allow the Legislature use the annual estimated balance in the fund to make appropriations to the Department of Commerce, Community, and Economic Development to fund the reinsurance program.

During a House Finance hearing on May 27, legislative fiscal analyst David Teal explained to the committee the money would be a loss from the operating budget.

"There's no free money here," said Teal. "This is a loss of $55 million of general fund revenue."

The current fiscal year 2017 operating budget, approved by the Legislature late on May 30, doesn't include the $55 million that will have to go to the reinsurance program.

The ACA forces individual insurers to accept clients with pre existing conditions. In Alaska, those people used to buy insurance in a special high-risk pool operated by the Alaska Comprehensive Health Insurance Association, or ACHIA.

The high-risk pool plans were naturally more expensive, and when the change came in 2014 many ACHIA customers jumped ship to the cheaper federal marketplace.

The small Alaska individual insurance market providers then ate the new costs from the high-cost patients after federal subsidies were restricted by Congress to the amount that the government took in from insurers whose premiums exceeded their costs.

The federal government continued appropriating money in defiance of Congress, and a U.S. District Court judge ruled that the payments are unconstitutional because the funds were not approved.

Nationally, many state face the same problem. Rural states with decentralized populations like Wyoming and Alaska have been hit especially hard.

"The ACA was written as a one-size-fits-all, and it doesn't necessarily work for Alaska," said Wing-Heier during the May 27 hearing.

"We're much more rural than we are urban. We're farther away from metropolitan areas. We don't have the medical research universities that they have in Washington and Boston and San Francisco."

Committee members agreed.

"Under the people who said, 'I told you so,'" said Rep. Dan Saddler, R-Eagle River, "giving people with high cost, preexisting conditions guaranteed insurability clearly resulted in this kind of health insurance market dynamic distortion.

"While the intentions of the Affordable Care Act may have been noble and beneficent, the financial results are what we have before us now: problematic and endlessly expensive."

Alaska's four individual insurers lost money since 2014. Ranks whittled down to a single insurer after Moda Health announced it was leaving the Alaska market in January 2016.

Rates rose approximately 37 percent and 39 percent in 2015 and 2016, but Premera still loses money, spending $200 more per plan than it receives. The company has lost roughly $13 million since 2014.

Premera's average premium is $713 per person per month. Statewide, the average $700 per person per month is the highest in the nation, which averages $468 per person per month.

The company has until July 15 to file its fiscal year 2017 rates. After Moda Health left the Alaska market, the Division of Insurance gave Premera an extended deadline to incorporate the information from Moda's 14,000 customers.

DJ Summers can be reached [email protected].

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