Highlights and updates
- Looking ahead to 2019: Rate filings due in July.
- Insurers must file 2 sets of rates, with and without silver loading for CSR
- Premera still the sole individual market insurer
- Rates dropped sharply in 2018, thanks to reinsurance
- Rates would have decreased even more without Trump’s CSR funding cut
- CMS approval of 1332 waiver provides federal funding for reinsurance
- Will other states follow Alaska’s successful reinsurance model?
- 80th percentile rule: protecting patients, or driving up costs?
Alaska exchange overview
The individual market in Alaska has just one carrier — Premera — offering coverage for 2018, as was the case in 2017. Moda also offered plans in 2016, but exited the state’s individual medical market at the end of 2016. Moda is continuing to offer individual dental coverage (via Delta Dental), along with medical coverage in the group market. But their 14,000 members who had health insurance in the individual market in 2016 — both on and off-exchange — needed to switch to a plan from Premera for 2017.
And Premera is still the only insurer offering coverage in Alaska’s individual market in 2018. During open enrollment for 2018 coverage, 18,313 people signed up for coverage in Alaska’s exchange. That’s about 4 percent lower than the 19,145 people who enrolled in coverage through the Alaska exchange during the prior year’s open enrollment period. But open enrollment was also much shorter for 2018 coverage, lasting just over six weeks, instead of the three-month window that had been used in prior years. And the Trump Administration slashed funding for exchange marketing and enrollment assistance in the weeks leading up to open enrollment, which further hampered enrollment.
Of the people who had effectuated coverage in Alaska’s exchange in 2017, nearly all of them — 93 percent — were receiving premium subsidies versus 84 percent of enrollees nationwide. Premium subsidies extend to higher income levels in Alaska, due to the higher threshold for the federal poverty level in the state (for 2018, a family of four qualifies for premium subsidies in Alaska with an income up to $123,000, versus $98,400 in the continental US). During open enrollment for 2018 coverage, 89 percent of the people who enrolled in Alaska were eligible for premium subsidies. The decreasing average premiums in Alaska referred to pre-subsidy premiums, so they made coverage more affordable for people who don’t qualify for premium subsidies, making some of them more likely to purchase coverage than they had been in 2017.
Although Alaska has the highest health insurance premiums in the country, their percentage rate increase for 2017 was much lower than the national average, due to the state-based reinsurance program that Alaska implemented in 2016. And they had a sharp premium decrease for 2018, due to the success of the reinsurance program. For 2018, Alaska received approval, via a 1332 waiver, for federal funding that will cover the bulk of the cost of the reinsurance program. Federal funding for the reinsurance program will continue through 2022, under the terms of the five-year waiver. And somewhat ironically, Alaska’s individual market claims ended up at a ten-year low in 2017, resulting in a $25 million contribution to the state’s reinsurance program from Premera.
Insurers that wished to offer coverage in Alaska’s individual market for 2018 had to file proposed rates with the Alaska Division of Insurance by July 17, 2017, and Premera was the only insurer that filed plans. There were four other states in 2017 with just one exchange insurer: Oklahoma, South Carolina, Wyoming, and Alabama. In 2018, Alabama has two insurers in the exchange, but four more states are down to just a single insurer offering exchange plans: Delaware, Mississippi, Iowa, and Nebraska.
Looking ahead to 2019
Insurers that wish to offer 2019 individual market coverage in Alaska must file forms by June 20, 2018, and rates by July 13, 2018. Individual market insurers that offer on-exchange coverage (in 2018, that’s only Premera) have been instructed to file two sets of rates for 2019: One that adds the cost of cost-sharing reductions (CSR) to on-exchange silver plans, and one that doesn’t.
Presumably, this is just so that the Alaska Division of Insurance can ascertain how much the cost of CSR is adding to premiums, since federal CSR funding was eliminated in October 2017 and funding has not been allocated by Congress, meaning that insurers must add the cost to their premiums in order to keep the market sustainable (insurers have to provide CSR benefits regardless of whether they’re getting reimbursed for doing so; if the federal government isn’t covering the cost, their only other option is to add the cost to premiums).
In the rate filing with the cost of CSR added to silver plans, any silver plans that are sold only off-exchange will not have the cost of CSR added to their premiums.
Alaska implemented a reinsurance program (details below) in 2017 that resulted in modest rate increases for 2017 and a significant rate decrease for 2018. Federal funding for the reinsurance program was approved by CMS through 2022, so it will continue to stabilize premiums over the next few years.
2018 rates sharply lower, thanks to reinsurance, but not as low as they would have been if CSR funding had continued
Alaska’s reinsurance program took effect in 2017, and is receiving federal funding as of 2018 (details below). As a result, premiums rose modestly for 2017, and decreased sharply for 2018.
Premera initially filed an average rate decrease of 22 percent, and that was based on the assumption that cost-sharing reduction (CSR) funding would be eliminated by the federal government in 2018.
But Premera announced in mid-September 2017 that their revised rate proposal called for a 26.5 percent average decrease, based on the assumption that CSR funding would continue. The overall rate decrease was attributed to the new reinsurance program.
However, the smaller premium decrease (which is still substantial) was implemented after all, as the Trump Administration announced in October 2017 that CSR funding would end immediately. According to Alaska Public Media, rates for silver plans in 2018 are about 5 or 6 percent higher than they would have been if CSR funding had continued. There is still an overall decrease in premiums, as the reinsurance program is a much more significant factor than the CSR funding cut. But the cost of CSR has been added to silver plan premiums in Alaska for 2018 (this approach to dealing with the CSR funding issue ends up protecting most consumers from having to bear the brunt of the added cost, as it results in larger premium subsidies for all subsidy-eligible enrollees, and people who don’t get premium subsidies can pick a plan at a different metal level instead).
But the fact that silver plan premiums are lower in 2018 than they were in 2017 means that premium subsidies are smaller in Alaska in 2018, because they don’t need to be as large in order to keep coverage at an affordable level. But more importantly, it means that people who don’t get premium subsidies have some relief in terms of the magnitude of their premiums, which had become overwhelming in recent years for people with income just a little above the subsidy-eligibility threshold (400 percent of the poverty level — scroll to the second chart here for Alaska numbers).
State shores up individual market with reinsurance program, receives federal funding with a 1332 waiver
Even with the high premiums in the individual market in Alaska, insurers continued to lose money. In the first half of 2015, Premera – which insured about 8,500 people in the individual market in 2015 – had roughly $45 million in claims in the individual market, but $11 million of that came from just 37 members. And in a sparsely-populated state with small enrollment in each plan, the impact of spreading those costs across the pool of insureds results in astronomical rate hikes for everyone.
Premera is the only carrier that remained in Alaska’s exchange for 2017, and the expectation was that they were going to have to raise rates by at least 40 percent for 2017 in order to cover claims costs. Premera made it clear that they could not continue to absorb losses in the individual market.
In February 2016, Alaska’s Insurance Commissioner, Lori Wing-Heier, presented lawmakers with a summary of the state of the health insurance market in Alaska. Wing-Heier explained that the small group market was doing well, but that the individual market was struggling. In addition to the possibility of a state reinsurance program, Wing-Heier also floated the idea of combining the individual and small group markets into a single risk pool (this is allowed under the ACA, but only Massachusetts and Vermont have done so thus far). She also mentioned the possibility of creating a regional exchange in partnership with other states in the western US, or drafting a 1332 waiver proposal to implement the ACA in an Alaska-specific way (1332 waivers are available to every state, but most have not pursued them; Alaska did ultimately submit a waiver proposal, along with several other states. Alaska’s waiver proposal was approved in July 2017).
In an effort to address the problem caused by the very small individual market in Alaska, legislation was introduced in March 2016 to create a supplemental reinsurance program for Alaska that would help to cover the individual market’s largest claims (the reinsurance program covers claims that insurers would otherwise face when insureds have one of 33 high-cost medical conditions). The legislation was passed in June 2016 by the Republican-dominated legislature, and Governor Bill Walker signed H.B.374 into law in July 2016. Although it had the effect of shoring up Obamacare in the state, lawmakers were quick to point out that they were still opposed to the ACA, but considered the legislation to be the best way to avoid having the state’s individual health insurance market collapse altogether.
H.B.374 utilized an existing 2.7 percent assessment on all insurers (including home and auto) that was being sent to the general fund, and directed it instead into a reinsurance fund for the individual market. Prior to 2014, the Alaska Comprehensive Health Insurance Association—a high-risk pool—was the only way people with serious pre-existing conditions could get coverage in the non-group market; instead of funding ACHIA, the money is now used to fund the reinsurance program. Insureds whose claims end up being covered under the reinsurance program are still covered by the same individual market coverage as everyone else; they are not enrolled in separate plans, so this is different from the way ACHIA used to work.
H.B.374 was a temporary program, and was only funded by the state for 2017. For 2017, the reinsurance program received $55 million of the $64 million that was collected by the existing insurance assessment in 2015; in the first quarter of 2017, Alaska’s reinsurance program paid about $5 million in claims. But ironically, 2017 claims ended up being the lowest in a decade in Alaska’s individual market, and Premera agreed in December 2017 to make a one-time deposit of $25 million into the Alaska Reinsurance Program Fund, helping to cover its costs in future years.
In an effort to garner long-term funding from the federal government (as opposed to taxing Alaska insurance companies), in November 2016, the state posted a draft proposal of a 1332 waiver, and opened a one-month public comment period. The official waiver proposal was sent to HHS in late December 2016. The waiver requested five years of federal funding for the Alaska Reinsurance Program, with an option to renew after that.
The state proposed that the federal money that would otherwise be used for premium subsidies (to offset the higher premiums that would apply without the reinsurance program) be funneled instead into the reinsurance program. They estimate that 1,485 additional people will have coverage in Alaska’s individual market from 2018-2022 with the reinsurance program. But the cost of the program is substantial. Their waiver proposal states that the reinsurance program will result in a $51.6 million reduction in premium subsidy payments from the federal government in 2018, and Alaska sought permission to use that money to fund the state reinsurance program, with supplemental funding appropriated by the state.
In January 2017, just before Trump took office, then-Secretary of HHS, Sylvia Burwell, wrote to Alaska Governor Bill Walker, noting that the state’s 1332 waiver was complete and under review. The letter indicated that the 1332 waiver was likely to be approved, although the state would need to pass additional legislation first in order to ensure ongoing state funding for the reinsurance program beyond the end of 2017.
Alaska’s 1332 waiver proposal was approved in July 2017. The approval was conditioned upon lawmakers passing legislation to fund the state’s portion of the cost of the reinsurance program for 2018. Alaska lawmakers passed H.B.57 in 2017, which provides $55 million in funding for the reinsurance program, to be used over five years. The state will pay $11 million in 2018, and the federal government will pay $48 million. The federal government’s projected spending on Alaska’s reinsurance program will grow with time, reaching $76 million in 2022 (and the state will pay $14 million), the last year that the waiver is valid.
But Wing-Heier notes that the exact amounts that the federal government will pay are uncertain, as they’re based on enrollment — the more people who enroll, the more funding the state will receive, as the federal government will be spending less on each person’s premium subsidies than they would have spent without the reinsurance program in place.
Prior to developing the reinsurance program, Alaska lawmakers and the state Division of Insurance spent months considering possible fixes to the impending “death spiral” in Alaska’s individual health insurance market. Although subsidies offset the high premiums for those who are eligible for subsidies, they do nothing for the people whose income puts them just a little over the subsidy-eligible level (in 2017, the average subsidy in Alaska was $976 per month, compared with an average of $371 per month nationwide; the dramatically higher subsidy amount is necessary in Alaska in order to bring premiums down to the same level as the rest of the country).
Alaska’s affordability solution as a national model? States are interested, but it may be more challenging in other places
Alaska’s insurance market is quite small, so the exceedingly high costs of just a few hundred individuals can drive up the overall costs for everyone, to levels that became unaffordable for many people who earned a little too much to qualify for subsidies (Alaska is an excellent example of a place where the ACA’s subsidy cliff exists, although as noted above, the subsidy cliff kicks in at higher income levels in Alaska, due to the higher federal poverty level). On the other hand, Alaska can also easily experience a very low-claims year and it can’t be interpreted as a trend, since a few large claims the following year could put overall claims into the much higher range again.
In 2016, lawmakers passed legislation to create a state-funded reinsurance pool to prevent premiums from skyrocketing even further (details above). They initially only funded the program for 2017, however, and the state drafted a 1332 waiver proposal seeking five years of federal funding to continue the Alaska Reinsurance Program (ARP). HHS indicated in a January 17 letter (just days before Trump took office and former HHS Secretary Sylvia Burwell left her post at HHS) that the application was complete and under review, and that it would likely be approved, assuming Alaska passed legislation to fund the state’s portion of the ARP for years after 2017. Ultimately, HHS approved the waiver proposal in July 2017, and the federal government will fund more than 80 percent of the ARP in 2018.
There’s uncertainty in terms of the future of the ACA (including 1332 waivers, which are part of the ACA) under the Trump Administration. But 1332 waivers are used to implement state innovation, and some expect them to be granted with more leniency under the Trump Administration. In a March 2017 letter to governors, then-Secretary of HHS, Tom Price, used Alaska’s reinsurance program as an example of a successful approach to holding down premium hikes, and indicated that the state’s 1332 waiver application was likely to be approved, noting that HHS was reviewing the application and would “work with [Alaska] on any updates or adjustments necessary for receipt of pass-through funding consistent with the statute.”
Alaska’s program could end up being more widespread (with federal funding) under the Trump Administration if lawmakers see it as a viable way to keep the individual market viable while providing coverage for pre-existing conditions. State of Reform lists it as one of the six best policy ideas that states can implement to stabilize their insurance markets during the volatile time that’s likely to exist during the transition to whatever comes next.
Minnesota, Oklahoma, and Iowa also submitted 1332 waiver proposals that include federal funding for state-based reinsurance programs, although both Oklahoma and Iowa withdrew their waiver proposals when it became apparent that they wouldn’t obtain HHS approval in time for the 2018 plan year (both states submitted their waiver proposals late in the year, in mid-August 2017, only about two and a half months before the start of open enrollment).
Other states are likely to follow suit now that Alaska’s waiver has been approved (Minnesota’s 1332 waiver was approved in September 2017, albeit with a substantial cut to the state’s Basic Health Program funding), and several states have indicated that this is a priority for them in 2018.
But Erin Mershon, writing at RollCall, has an excellent explanation of how challenging it was to get Alaska’s reinsurance program approved by state lawmakers, and how ongoing state-based funding requirements could present challenges. Alaska’s situation is unique in many ways, and a reinsurance program modeled on Alaska’s might not work — or gain approval from local stakeholders — in other states.
80th percentile rule: protecting patients, or driving up costs?
Since 2004, Alaska has had a regulation known as the 80th percentile rule, which applies to all individual plans as well as fully-insured large and small group plans (it does not apply to self-insured plans, which is the preferred insurance approach for very large employers). When out-of-network care is billed to insurers, the insurers are required to pay an amount that is at least as much as the 80th percentile of billed charges for that service in that geographical area. In other words, if you rank all the providers charges in a given area for a given service from highest to lowest, the 80th percentile would be an amount that’s higher than 80 percent of the charges on the list.
The 80th percentile rule was implemented to protect consumers from unaffordable balance billing from out-of-network providers. As an example, let’s consider what would happen without the 80th percentile rule if a provider charges $2,000 for a service, but an insurance company — with which the provider is not in network — says that the usual and customary charge is $300. In that case, the provider can bill the patient for the other $1,700 (balance billing does not happen with in-network providers, because the provider agrees to accept the insurer’s negotiated rates as payment in full; for in-network providers, the patient only has to pay their normal cost-sharing, in terms of copays, deductible, and coinsurance).
So the 80th percentile rule was implemented to ensure that health insurance plans pay out-of-network providers an amount that’s mostly in line with what providers in a given area are charging, and that’s well above the median charge (which would be the 50th percentile when all of the charges are arranged from highest to lowest).
But the problem that arises is that providers can increase their charges over time, and insurance company reimbursements have to keep pace with the cost increases. This serves to disincentivize providers from joining insurance networks, and drives up the cost of insurance. The Alaska Division of Insurance held a public hearing in January 2017 to consider the possibility of changing the 80th percentile rule (transcripts available here). But as of April 2017, the 80th percentile rule was listed in the network adequacy section of the filing instructions for 2018 coverage.
Notably, Alaska also requires health plans to cover out-of-network care — utilizing the 80th percentile rule for determining payment. Alaska also requires health plans to eliminate the possibility for “surprise” balance billing from out-of-network providers when a patient is at an in-network facility and is treated by an out-of-network provider without being given an option of an in-network provider (including a scenario in which no in-network provider is available).
The result of the 80th percentile rule and Alaska’s approach to out-of-network care is that providers get paid regardless of whether they contract with insurance companies, but it may be inadvertently driving up the cost of care. And even though the insurance plan pays at the 80th percentile, the remaining balance that’s billed to the patient can still be substantially higher than it would be in other areas of the country.
Alaska and the Graham-Cassidy amendment
In September 2017, Senate Republicans revisited their efforts to repeal the ACA with the Graham-Cassidy-Heller-Johnson amendment.
BCRA would have significantly harmed older, middle-class Alaska residents
Alaska’s individual health insurance market has been by far the most expensive in the country over the last few years. But the state-based reinsurance program is helping to stabilize the market, and the state’s uninsured rate has dropped significantly under the ACA, particularly since Alaska expanded Medicaid in late 2015.
And the ACA has two mechanisms for keeping coverage affordable for low-income and middle-class Alaska residents, which has largely protected them from the higher-than-average prices in the state: First, ACA subsidies are tied to the cost of coverage in each area, which means the subsidies are bigger in areas where coverage is more expensive (like Alaska) and smaller in areas where coverage is already more affordable. And second, the ACA’s subsidies are based on an applicant’s income relative to the federal poverty level, and the federal poverty level is higher in Alaska than it is in the lower 48 states. So for 2017 coverage (with ACA subsidies based on 2016 federal poverty guidelines), a family of four in the lower 48 states qualifies for subsidies with an income up to $97,200. But in Alaska, a family of four can get subsidies with an income as high as $121,520 in 2017.
Under the Better Care Reconciliation Act (BCRA) that Senate Republicans introduced in June, older Alaska residents with income just above 350 percent of the poverty level would get the short end of the stick, by a wide margin.
The Senate is still working to overhaul the legislation they initially introduced, in an effort to garner enough Republican support to pass it. But the current version of the bill would cap premium subsidies at 350 percent of the poverty level, instead of the ACA’s 400 percent (based on 2017 poverty levels, that would be $52,710 in income in Alaska, as opposed to $60,240 under the ACA). And even among people who would continue to receive premium subsidies, older people would pay a lot more in net premiums under the BCRA than they pay under the ACA.
The chart on page 6 of the bill shows the percentage of income that people would have to pay, after subsidy, for a “benchmark” plan; note that a person over age 59 earning 350 percent of the poverty level would have to pay 16.2 percent of their income for a benchmark plan — as opposed to 9.69 percent of their income in 2017. And importantly, that percentage of income would buy a bronze plan under the BCRA, as opposed to a silver plan under the ACA. People over the age of 40 with income above roughly 200 percent of the poverty level would be paying more in net premiums under the BCRA, and would be getting significantly worse coverage. According to the CBO analysis of the bill, average silver plan deductibles in 2017 are roughly $3,600, while average bronze plan deductibles are roughly $6,000. And the BCRA would make bronze plans the benchmark.
House health care reform bill would have been even worse for Alaska
It’s notable that the House version of health care reform, the American Health Care Act (AHCA), passed in May, would have been even worse for Alaska than the BCRA. The Senate has made significant changes to the legislation via the BCRA, but under the bill that House Republicans passed, subsidies wouldn’t vary by region or with the cost of health insurance. They also wouldn’t depend on a family’s income until it exceeded $75,000 for an individual and $150,000 for a couple — as opposed to the ACA subsidies, which are significantly larger for lower-income enrollees.
Today, under the ACA, Alaska families with income up to 400 percent of the poverty level receive by far the largest average subsidies in the country (in 2017, the average subsidy is $848/month in Alaska, versus $323/month across all the states that use HealthCare.gov). Under the House version of the AHCA, subsidies would have only varied based on age. So Alaska families would have received the same subsidies under the AHCA as same-age families in states with much lower-cost health insurance. That means people in Alaska would have had to cover a much larger portion of their premiums than they do today, making coverage much less affordable for the average lower-income and middle-income households.
The Center for Budget and Policy Priorities estimated that AHCA subsidies would have been an average of $10,517 lower in Alaska in 2020 than ACA subsidies would be. That’s nearly double the drop in subsidy amounts that the next-closest state, North Carolina, would experience (here’s more information from the CBPP in terms of the impact the AHCA would have had in Alaska, including the impact if the state were to seek an AHCA waiver from ACA consumer protections)
2017 Premera rate increase: just 7.3 percent, thanks to reinsurance
On July 18, 2016—the same day Governor Walker signed H.B.374 into law—Premera announced that they had filed rates with an average increase of 9.8 percent for 2017. The rate increase is significantly lower than the carrier’s rate increases were in 2015 and 2016, and Premera attributed that to the new reinsurance program.
A month later, on August 19, Premera filed a new rate proposal, requesting an average rate increase of just 7.3 percent for 2017. State regulators approved the 7.3 percent average rate increase a few days later, and the rates will take effect in January.
Average rate increases will be higher for current Moda members, as their rates are currently lower than Premera rates, and they will have no choice but to switch to Premera—with rates an average of 7.3 percent higher than Premera’s current rates — for 2017.
For perspective, for a 40-year-old in Anchorage, the lowest-priced plan from Moda in 2016 is $579 per month, while the lowest-priced plan from Premera is about 12 percent higher, at $649 per month. Members who currently have Moda plans will see overall rate increases that amount to an average of 7.3 percent higher than the current Premera rates.
Open enrollment for 2017 coverage began on November 1. A week later, Donald Trump won the presidential election, casting a cloud of uncertainty over the future of the ACA. For the time being, however, nothing has changed. Coverage — including subsidies for those eligible — is available regardless of pre-existing conditions.
19,145 people enrolled in coverage through the Alaska exchange during the 2017 open enrollment period (November 1 through January 31), including new enrollees and those who already had coverage in 2016 and either actively renewed it (or picked a different plan) or were auto-renewed for 2017. That’s a 17 percent reduction from the year before, when 23,029 people enrolled. And it’s even lower than the 2015 enrollment total, when 20,897 signed up during open enrollment.
There was about a 5 percent decline in average enrollments for 2017 across all the states that use HealthCare.gov, so Alaska’s percentage drop-off in enrollments is one of the biggest in the country. But despite the smaller-than-average percentage rate increase for 2017, Alaska still has by far the most expensive health insurance in the country, and the possibility of GOP legislation to repeal the individual mandate penalty resonated more with Alaska residents than it did in states where unsubsidized coverage is more affordable.
Moda enrollees who had coverage through the exchange were mapped to a Premera plan for 2017 if they didn’t return to the exchange to pick their own plan by December 15. Lori Wing-Heier, Director of the Alaska Division of Insurance, noted that the process of mapping Moda enrollees to Premera plans was conducted jointly by the Alaska Division of Insurance and CMS. In an email, she explained that “the division [Alaska DOI] reviewed the Moda and Premera plans to match the plans as closely as we could … The actual mapping was done by the Centers for Medicare and Medicaid Services (CMS) as they hold the data that is available on healthcare.gov. The division does not have names of actual Alaskan consumers and the plans that they have chosen so we do not know which plan any one individual is on.”
But Moda enrollees — along with anyone else — also had the option to pick their own 2017 plan from Premera.
2016 market share
In 2014, Premera had 58 percent of the individual market in Alaska, Moda had 36 percent, and the remaining six percent were distributed across Time, Celtic, and Aetna. These figures included grandfathered plans, grandmothered plans, and ACA-compliant plans both on and off exchange.
By 2015, Premera’s market share had dropped to 43 percent, and Moda’s had increased to 51 percent. Moda’s total individual market enrollment in 2015 was 14,825, but had dropped to under 10,000 people by January 2016, when Moda briefly exited the individual market.
According to Moda’s press release regarding their exit from the individual market in Alaska at the end of 2016, their individual medical plans covered “nearly 14,000” members as of May 2016. The revised rate proposal that Premera filed in August 2016 indicated that Moda had 13,634 members, and Premera was expecting all or most of them to transition to Premera for 2017. Premera’s membership at that point stood at 6,800 people, but will grow substantially in 2017.
All of Moda’s individual market plans in Alaska were ACA-compliant by 2015 (this includes plans sold outside the exchange since 2014), but Premera still has grandfathered and grandmothered individual plans in the state.
As of 2015, there were 2,466 people with individual grandfathered plans in Alaska (mostly Premera, but 192 had coverage from Aetna), and 2,345 people with grandmothered plans from Premera. All grandmothered plans must terminate no later than December 31, 2017, although Premera also has the option to terminate them before that date.
By March 31, 2016, effectuated enrollment in the Alaska exchange stood at 17,995 people, and 90 percent of those enrollees were receiving premium subsidies.
Because Alaska’s average premiums are dramatically higher than anywhere else in the country, subsidies play a particularly important role in keeping net premiums affordable for low-income and middle-class Alaskans.
Although open enrollment for 2016 ended January 31, enrollment is available year-round for Native Americans and Alaska Natives. People eligible for Medicaid or CHIP can also enroll year-round. Other than these populations, enrollment after January 31 is limited to people who have a qualifying event that triggers a special enrollment period. The next open enrollment period – for coverage effective in 2017 – will begin on November 1, 2017.
Moda and Premera both offer plans in the Alaska exchange in 2016, and rate increases of nearly 40 percent were approved for each of them:
- Premera Blue Cross Blue Shield: 38.7 percent average rate increase.
- Moda Health: 39.6 percent average rate increase.
The steep rate hikes for 2016 came on the heels of an average rate increase of 31 percent for 2015; Alaska’s average premiums were already the highest in the country in 2015, and they’re dramatically higher than the rest of the country for 2016.
For now, premium subsidies bear the brunt of the rate hikes in Alaska – but only for people who earn up to 400 percent of the poverty level. People with incomes a little over that amount are facing health insurance costs that are truly unaffordable.
But for people who do qualify for subsidies, the subsidies ensure that the cost of the benchmark plan remains at a level deemed affordable under the ACA. Of the people who enrolled in coverage for 2016, 86 percent are receiving premium subsidies. The average subsidy in Alaska in 2016 is $737/month – more than two and a half times as high as the $290/month average across all the states that use Healthcare.gov.
Premium subsidies are particularly important in Alaska; they’re higher there than anywhere else in the US, thanks to the fact that unsubsidized premiums are so much higher than they are in the rest of the country.
For people who enrolled in a health plan through the Alaska exchange during the 2016 open enrollment period, the average pre-subsidy premium was $863/month. This is more than double the $396/month average across all states that use Healthcare.gov. But for the 86 percent of enrollees who are receiving a premium subsidy, the average after-subsidy premium is just $126/month.
This is slightly higher than the $119/month average in 2015, but the average pre-subsidy premium was $652/month in Alaska in 2015. So while the average pre-subsidy premium increased by more than $200/month, subsidies mitigated almost the entire increase (for additional perspective, the average after-subsidy premium in 2014 was $94/month in Alaska).
Obviously this doesn’t help the 14 percent of enrollees who aren’t receiving premium subsidies, or the people who enrolled in plans outside the exchange, without access to premium subsidies (anyone eligible for subsidies should make sure to purchase a plan through the exchange, as subsidies aren’t available off-exchange).
Moda remained in for 2016, but did not stay for 2017
Moda Health Plan Inc. had a tumultuous couple weeks in early 2016. But they ended up remaining in Alaska’s individual market for 2016, although they will not participate in 2017. Here’s what happened:
On January 28, 2016, the Alaska Division of Insurance announced that Moda Health’s financial losses and dwindling capital reserves had reached the point where the carrier could no longer sell or renew policies in the individual market in Alaska (Oregon, the only other state where Moda was still operating, came to the same conclusion). In 2015, Moda lost $58 million, and ended the year with lower enrollment than they had projected. As was the case with several CO-OPs at the end of 2015, Moda’s financial losses were tied in large part to the risk corridor shortfall that was announced in October 2015.
At that point, regulators in Oregon had given Moda until January 29 to come up with a business plan that would make them viable, and regulators in Oregon and Alaska were working together on the issue. It was a more significant problem in Alaska, since Moda’s exit from the individual market was going to leave Alaska with just one carrier – Premera Blue Cross Blue Shield – offering plans in the individual market, both on and off-exchange.
As of late January, there were about 9,800 people in Alaska with individual plans from Moda. The Division of Insurance reassured insureds that as long as they continued to pay their premiums, their claims would still be paid. And as of late January, insureds were told that if their plans were to terminate at a later date, enrollees would have access to a special enrollment period during which they’d be able to switch to a plan from Permera.
But on February 8, regulators in Alaska and Oregon reached an agreement with Moda that allowed the carrier to resume selling and renewing coverage in the individual markets in both states. Part of the agreement was a commitment from Moda to continue to service individual market policy-holders until at least the end of 2016. Ultimately, the carrier decided to exit the state’s individual market at the end of 2016, so individual plans will terminate on December 31, 2016.
Ultimately, the carrier decided to exit the state’s individual market at the end of 2016, so individual plans will terminate on December 31, 2016.
Moda has said that they will revisit this decision next year, and the carrier might eventually return to the individual market in Alaska. But they noted that “the market requires significant reform in order to be sustainable for Alaskans and for Moda.” Moda’s Director of Alaska Sales & Service, Jason Gootee, explained that “our preliminary calculations showed that we would need a significant premium increase in 2017 to be sustainable on the individual market. At some point, you can’t keep passing these significant costs on to consumers.” Gootee noted that the decision was a difficult one for Moda.
Enrollment grew in 2015
During 2015 open enrollment, 20,897 Alaskans selected qualified health plans (QHPs). About 24 percent of the residents who were eligible to use the marketplace signed up for QHPs for 2015. For 2014, only 15 percent of eligible residents enrolled in QHPs.
But some enrollees never paid their initial premiums, so their coverage was never effectuated. And others cancelled their coverage early in the year, for one reason or another. By the end of March, 18,320 people had in-force private plan coverage through the Alaska exchange. The attrition rate in Alaska was slightly less than the national average, and attrition is a normal part of the individual insurance market. By the end of June, total enrollments nationwide had dropped slightly lower than they were in March. But in Alaska, effectuated enrollment grew by more than a thousand people in the second quarter of 2015. 19,380 people had in-force private plan coverage through Alaska’s exchange by June 30.
Even after accounting for attrition, enrollment in Alaska’s exchange was nearly 50 percent higher in 2015 than it was in 2014. The stronger enrollment in 2015 came despite an average 31 percent increase in marketplace premiums for 2015. The 2015 average cost for a silver plan in Alaska is higher than in any other state.
The good news is that subsidies are tempering the higher cost for most enrollees. Of the Alaska enrollees with effectuated coverage as of June 2015, 88.8 percent had premium subsidies, and 53.3 percent had cost-sharing subsidies.
According to Gallup data, the uninsured rate in Alaska was 18.9 percent in 2013, and had dropped to 10.3 percent by the first half of 2015.
Even higher penalties for being uninsured in 2016 and 2017 – but the AHCA would eliminate them
Starting in 2014, the IRS began assessing penalties on people who went without health insurance despite the availability of affordable options. The penalty started out small, but ramped up to its full amount in 2016 (future year increases are only for inflation).
If you remained uninsured in 2016 and didn’t qualify for an exemption, you’ll have to pay the higher of:
- 2.5% of annual household income, up to a maximum of the national average premium for a bronze plan. For 2016, the national average cost of a bronze plan was $2,676 for a single individual, and $13,380 for a family of five or more.
- $695 per adult or $347.50 per child under 18. The maximum penalty per family using this method is $2,085.
For 2017, there was no inflation adjustment, so the penalty is still 2.5 percent of household income OR $695 per uninsured adult. The maximum penalty will be higher, however, since the average cost of a bronze plan has increased.
All of this could be a moot point, though, if the AHCA passes. It calls for the elimination of the individual mandate penalty back to the beginning of 2016. This has also been a feature of most of the other Republican ACA repeal/replace proposals, and if legislation does pass, it’s likely to include the elimination of the penalty. However, there’s no guarantee that repeal legislation will pass, given the razor-thin margin that Republicans hold in the Senate, and the House Freedom Caucus’s opposition to anything less than a full repeal of the ACA.
For the time being, you can use this penalty calculator to see how much you may have to pay. Note: Native Americans and Alaska Natives are exempt from the penalty. There are many other situations that trigger an exemption, so check with your exchange to see specifics for your situation.
Small businesses can enroll year-round
Alaskan businesses with 50 or fewer employees can now enroll online in the Small Business Health Options Program (SHOP). Employers set up an account, and then employees enroll in coverage online. Employers can work with an agent or broker if they want help with the process.
Small businesses can sign up on the SHOP at anytime and offer coverage to their employees throughout the year. Unlike the marketplace for individuals, there is no specific open enrollment period for small businesses.
In 2015, the total small group market in Alaska covered 21,645 people, but the majority of them had coverage outside the SHOP exchange.
Subsidies mitigate rate hikes in 2015
Alaska insurance officials announced significant premium increases for 2015: 35 to 40 percent for policies sold by Premera Blue Cross and 22 to 29 percent for policies sold by Moda Health. According to the Commonwealth Fund, Alaska had the biggest average premium increase in the nation: 31 percent. The Commonwealth Fund also found that Alaska has the highest average cost for silver plans in 2015: $583, before subsidies.
Insurance Commissioner Lori Wing-Heier said the rate increases were justified. The state’s small population and limited marketplace enrollment makes for a small risk pool. With high claim costs and few people to spread those costs across, insurance companies raised rates to cover their expenses.
While the rate increases in 2015 were certainly a burden for some, the impact was muted for most consumers. Wing-Heier pointed out that people who qualify for subsidies — 88 percent of Alaskans using the exchange in 2014 — didn’t bear the brunt of those increases.
Fewer than 13,000 Alaskans enrolled in private health insurance through the federal marketplace during the 2014 open enrollment period. Just Wyoming, the District of Columbia, North Dakota, and Hawaii had lower enrollment in private health plans. About 4,200 people qualified for Medicaid or the CHIP. Alaska’s uninsured rate remained high in 2014, at 16.1 percent.
Among Alaska residents selecting a QHP, 88 percent qualified for financial assistance, compared to 85 percent nationally. A report released in June by the U.S. Department of Health and Human Services showed the average monthly premium, after tax credits, for Alaska consumers was $94. Among states using the federal marketplace, the average was $82. 42 percent of Alaska enrollees in 2014 paid $50 or less per month for coverage in 2014.
In 2014, twenty-seven percent of Alaska residents selected a bronze plan (20 percent nationally), 65 percent selected a silver plan (65 percent nationally), 8 percent selected a gold plan (9 percent nationally), 0 percent selected a platinum plan (5 percent nationally) and 1 percent selected a catastrophic plan (2 percent nationally). Twenty-nine percent of Alaska enrollees were between the ages of 18 and 34.
Alaska’s position on exchange, Medicaid expansion
Alaska is among the 26 states that opted to use the federal health insurance marketplace. Alaska refused all federal funding to evaluate and implement a health insurance marketplace, and it was one of the first states to announce it would leave responsibility for its marketplace in the hands of the federal government. While former Gov. Sean Parnell officially announced his decision in July 2012, he had previously made his opposition to the Affordable Care Act well known.
Parnell also opposed expanding the Medicaid program. Medicaid expansion was originally an integral, mandatory portion of the ACA, but in 2012 the Supreme Court ruled that Medicaid expansion would be optional, paving the way for states to keep their Medicaid programs as-is and essentially condemn their low-income residents to the coverage gap. Parnell rejected an expansion in late 2013, saying that Alaska wouldn’t be able to afford the program if the federal government were ever to cut funding. (The federal government will pay 100 percent of Medicaid expansion through 2016, after which the states will gradually assume a small portion of the bill – starting in 2020 the federal government will be paying 90 percent of the cost of Medicaid expansion, and it will remain at that level going forward.)
In January 2014, Democrats proposed legislation to expand Medicaid, and they included a provision to return to the current eligibility standards if federal funding drops below 90 percent. Even with that safeguard, the bill did not make it out of committee before the legislature adjourned.
However, the new governor — Bill Walker, an Independent who was formerly a Republican — vowed to reverse the course on Medicaid expansion. Walker took office Dec. 1, 2014, and announced his intention to authorize expansion within his first 90 days in office. With expanded Medicaid, the state will receive about $2.1 billion in federal funding through 2020 according to an Urban Institute study.
Valerie Davidson, Alaska’s health department commissioner, appointed Chris Ashenbrenner to the new role of Medicaid expansion project director to help execute on Walker’s pledge. Ashenbrenner, Davidson, and Walker worked to convince the Republican-controlled legislature to help fund expansion costs and fix existing problems with the state’s Medicaid systems. The recent drop in oil prices has created a huge budget problem in Alaska, so no funding requests are being warmly received, least of all one related to Obamacare.
In late February 2015, the House Finance Committee stripped Medicaid funding from Walker’s budget and called for Walker to introduce legislation to expand Medicaid. The administration countered that Democratic legislators had already introduced such a bill. In early March, Republican Sen. Pete Kelly announced he would introduce a bill to reform, but not expand, Medicaid. Kelly said the bill would include a managed care provision and health savings accounts (Alaska is currently one of just 12 states that does not contract with managed care organizations for at least a portion of its Medicaid program).
Governor expands Medicaid on his own
In July 2015, Governor Walker announced that he would use his executive power to expand Medicaid, since lawmakers had rejected the inclusion of Medicaid expansion in the state budget, and had also ended the 2015 legislative session without a vote on the bill that would have expanded Medicaid. Walker noted that he had tried all of the other options for working with the Republican-controlled legislature on the issue, and had eventually run out of possibilities.
Under Walker’s executive authority, Medicaid expansion took effect in September 2015 in Alaska. In the first month, 2,000 people enrolled under the new guidelines, and by December 30, enrollment in the state’s expanded Medicaid had grown to 7,700. GOP lawmakers filed a lawsuit to block expansion, but the case was dismissed in March 2016. The Alaska House of Representatives filed an appeal, but dropped it in June 2016.
About 45 percent of the newly-eligible population is employed but with household incomes under 138 percent of the poverty level. Prior to expansion of Medicaid, the coverage gap was particularly onerous in Alaska, since people who didn’t qualify for Medicaid or premium subsidies (ie, people with incomes below the poverty level) were entirely unable to pay the sky-high premiums that are charged in Alaska for people who don’t have premium subsidies.
Alaska health insurance exchange links