Highlights and updates
- Open enrollment for 2020 coverage in Alaska will run from November 1 to December 15, 2019. Outside that window, residents need a qualifying event in order to enroll.
- Moda is rejoining Alaska’s exchange for 2020, and Premera has proposed a small average rate decrease.
- Premiums dropped in 2019, after also dropping sharply in 2018, thanks to reinsurance.
- Short-term health plans in Alaska can have initial plan terms up to 364 days.
- Alaska no longer has the highest rates in the country
- Premera has been the sole individual market insurer since 2017, but that will change in 2020 with Moda’s re-entry.
- Alaska’s reinsurance program has been in effect since 2017, and the state received more than anticipated in federal reinsurance funding for 2018.
- 80th percentile rule: protecting patients, or driving up costs?
Alaska exchange overview
Premera has been the only insurer offering coverage in Alaska’s individual market since 2017. But the market is much more stable than it once was — largely as a result of the state’s new reinsurance program — and premiums are expected to decrease in 2020 for the third year in a row. As a result of the more stable market environment, Moda plans to return to Alaska’s exchange in 2020, so their plans will be available alongside Premera’s when open enrollment begins on November 1, 2019.
Moda returning for 2020, Premera proposes slight rate decrease
Moda plans to return to Alaska’s exchange for 2020, and Premera has proposed a slight average rate decrease for 2020. The proposed rate drop averages just half a percent (with a small increase for New Preferred plans and a small decrease for New Preferred HSA plans), but it’s the third year in a row of decreasing premiums for Premera’s individual market plans.
The stabilizing market and decreasing premiums are due in large part to Alaska’s reinsurance program (details below), which took effect in 2017 and began receiving federal pass-through funding in 2018. For 2020, Alaska’s reinsurance program will reimburse insurers a total of $69,000,000 in reinsurance claims.
Insurers in Alaska’s individual market will continue to add the cost of cost-sharing reductions (CSR) to on-exchange silver plans rates for 2020. Plans that are only sold off-exchange will not include the cost of CSR in their premiums.
A redacted rate filing for Premera is available on the federal rate review site, but Moda’s filing is not available since they don’t have an applicable rate change for 2020. The Alaska Division of Insurance confirmed that they keep all filing data confidential until the plans take effect—which, in this case, will be January 2020. So they were unable to confirm any details about Moda’s filing, including how widespread their coverage area will be. A representative for Moda, however, said that the current expectation is that the plans will be available statewide, although they confirmed that’s subject to change between now and open enrollment.
Insurer participation in Alaska’s exchange
From 2014 through 2016, plans were available in Alaska’s exchange from both Moda and Premera. But for 2017 through 2019, Premera has been the only insurer offering individual market plans in Alaska, including on the exchange (Wyoming, Delaware, Mississippi, and Nebraska also have just a single insurer offering plans in their exchanges for 2019, but Bright Health is joining the exchange in Nebraska for 2020).
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 (Time, Celtic, and Aetna were only available outside the 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 (described in more detail below).
Moda Health Plan Inc. had a tumultuous couple weeks in early 2016, although they ended up remaining in Alaska’s market until the end of that year. In October 2015, Moda had exited the market in Washington and California, in order to focus on Oregon and Alaska.
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).
At that point, there were about 9,800 people in Alaska with individual plans from Moda. 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, which they did. But Moda’s plans were no longer available after the end of 2016, and Alaska’s exchange—and individual market—has only had plans from Premera ever since.
But for 2020, Moda will rejoin the exchange, providing additional options for residents who purchased their own health insurance. Delta Dental of California invested $152 million in Moda earlier in 2019, obtaining a 49.5 percent stake in the company. While Alaska’s regulators had concerns about Moda’s financial health in 2016 and 2017, they have noted that those concerns are no longer an issue after the infusion of capital in the agreement with Delta Dental of California.
Enrollment in Alaska’s exchange
As has been the case in the majority of the states that use HealthCare.gov, enrollment in Alaska’s health insurance exchange peaked in 2016. That year, 23,029 people enrolled in private plans (QHPs) through the Alaska exchange.
Each year since then, enrollment has declined:
- 19,145 people enrolled for 2017. That was 17 percent lower than enrollment had been in 2016. 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 was one of the biggest in the country. But despite smaller-than-average percentage rate increase for 2017, Alaska still had by far the most expensive health insurance in the country in 2017, 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.
- 18,313 people enrolled for 2018
- 17,805 people enrolled for 2019
From 2014 through 2016, enrollment in Alaska’s exchange had increased each year, as was true in most states. Only 12,890 people enrolled for 2014, the first year that the exchanges were operational. The next year, for 2015 coverage, 20,897 signed up for plans in Alaska’s exchange. Enrollment peaked in 2016, at more than 23,000, but has since declined to under 18,000 people.
No longer the highest premiums in the country
Although Alaska had the highest health insurance premiums in the country in the first few years of ACA implementation (and that continued to be the case through 2017), 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 covers 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.
By 2018, with decreasing rates in Alaska and steadily increasing rates in most of the rest of the country, Iowa, Tennessee, West Virginia, and Wyoming all had average premiums that were significantly higher than Alaska’s. In 2019, Delaware, Iowa, Nebraska, West Virginia, and Wyoming all have higher average premiums than Alaska.
For 2020, Premera has proposed a slight average rate decrease, although final rates, including Moda’s, aren’t yet available. Nationwide, insurers have proposed average rates for 2020 that are very similar to the rates that apply in 2019, with an average proposed rate increase of less than half a percent.
Rates decreased again in 2019; Premera began offering all new plans for 2019
In Alaska, plans in the exchange (with or without premium subsidies) can be purchased via HealthCare.gov. Plans outside the exchange (without premium subsidies) can be purchased directly from Premera.
Premiums for 2019 had to be filed in Alaska by July 13, 2018. Individual market insurers that offer on-exchange coverage (only Premera) were instructed to file two sets of rates for 2019: One that added the cost of cost-sharing reductions (CSR) to on-exchange silver plans, and one that didn’t (the filing directions were clear in noting that in the rate filing with the cost of CSR added to silver plans, any silver plans that are sold only off-exchange would not have the cost of CSR added to their premiums).
Presumably, the duplicate filing approach was just so that the Alaska Division of Insurance could 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. Ultimately, the rate filings that appeared on ratereview.healthcare.gov noted that the cost of CSR would be added to silver plan rates for 2019.
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.
In August 2018, Premera and Governor Walker’s office announced that Premera had filed for an average rate decrease of 3.9 percent. That was on top of the 22.4 percent average decrease in premiums for 2018. So before any subsidies were applied, average premiums dropped from $1,043/month in 2017 to $770/month in 2019. Premium subsidies have kept coverage affordable ever since 2014, but for people who aren’t eligible for subsidies, coverage was particularly unaffordable in Alaska before the reinsurance program was implemented. While rates continued to climb sharply in most states in 2018, they declined in Alaska. And that trend continued for 2019 (at ACA Signups, Charles Gaba estimates that rates would have dropped even more in Alaska in 2019 — by nearly 10 percent — if the individual mandate penalty hadn’t been eliminated and if short-term and association health plans hadn’t been expanded).
Premera discontinued all of their ACA-compliant individual market plans as of December 31, 2018 and replaced them with new plans that took effect January 1, 2019 (Premera did not discontinue or make significant changes to grandmothered and grandfathered plans). Consumers had an option to pick their own new plan during open enrollment. Those who didn’t pick their own plan were mapped to the most similar plan available for 2019, with seamless coverage (ie, the old plan ended December 31 and the new plan took effect January 1).
The new Premera plans are all PPOs, but coverage is provided at the out-of-network level for providers outside of Alaska and Washington, even if the member uses a BlueCard medical provider. Premera also added adult preventive dental benefits to some plans, which could change the prices that some enrollees pay. Dental benefits cannot be covered by premium subsidies, so even if a person has a $0 premium plan (after subsidies are applied, because the subsidy exceeds the cost of the plan), he or she will have to pay a premium for the dental benefits if they’re included in the plan.
For perspective, here’s a look at how premiums have changed in Alaska’s exchange since plans first became available in 2014:
- For 2015, Alaska insurance officials announced significant premium increases: 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 in 2015, at 31 percent. But Insurance Commissioner Lori Wing-Heier confirmed that 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.
- For 2016, average rate increases of nearly 40 percent were approved for Moda (39.6 percent average increase) and Premera (38.7 percent average increase). Alaska’s average premiums were already the highest in the country in 2015, and they became dramatically higher than the rest of the country as of 2016.
- On July 18, 2016—the same day Governor Walker signed H.B.374 (a bill to create a reinsurance program) into law—Premera announced that they had filed rates with an average increase of 9.8 percent for 2017. The rate increase was 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 took effect in January 2017. Average rate increases for 2017 were higher for people who had Moda plans in 2016, as Moda’s rates were lower than Premera rates in 2016, and enrollees had not choice but to switch to Premera—with rates an average of 7.3 percent higher than Premera’s 2016 rates—for 2017.For perspective, for a 40-year-old in Anchorage, the lowest-priced plan from Moda in 2016 was $579 per month, while the lowest-priced plan from Premera was about 12 percent higher, at $649 per month. Members who had Moda plans saw overall rate increases that amounted to an average of 7.3 percent higher than the 2016 Premera rates. But as is always the case, premium subsidies absorbed some or all of the rate increases for people who were subsidy-eligible.
- For 2018, Premera initially filed an average rate decrease of 22 percent, which included the assumption that cost-sharing reduction (CSR) funding would be eliminated by the federal government in 2018. Then Premera announced in mid-September 2017 that their revised rate proposal called for a 26.5 percent average decrease. Despite the more significant decrease, the new filing included an assuption that CSR funding would continue. The overall rate decrease was attributed to the new reinsurance program.However, the smaller premium decrease (which was 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 were about 5 or 6 percent higher than they would have been if CSR funding had continued. There was still an overall decrease in premiums, as the reinsurance program was a much more significant factor than the CSR funding cut.But the fact that silver plan premiums were lower in 2018 than they were in 2017 means that premium subsidies were smaller in Alaska in 2018, because they didn’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 had 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; federal funding was higher than expected in 2018
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 after the end of 2016, 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 pass-through 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 (this is why it’s called “pass-through” funding). 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 projected that the reinsurance program would 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 expected to pay $11 million in 2018, and expected the federal government to 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 noted 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. And in early 2018, the state found out that the federal government would actually pay $58.5 million in 2018 instead of $48 million, leaving the state to cover just $1.5 million, instead of the $11 million the state had expected to fund.
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 was necessary in Alaska in order to bring premiums down to the same level as the rest of the country, but it’s noteworthy that in 2018, the average subsidy amount in Alaska was much lower, at $718/month, while the national average premium subsidy had grown to $520/month).
But although Alaska led the way with reinsurance and several other states have subsequently followed suit, 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.
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 the 80th percentile rule was still referenced in the filing instructions for 2019 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’s position on exchange, Medicaid expansion
After the ACA was enacted, 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 paid 100 percent of the cost through 2016, and has committed to always paying at least 90 percent).
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.
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 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. 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, and Medicaid expansion has remained in effect in Alaska.
Alaska health insurance exchange links