Moda back in the individual market
Moda Health Plan Inc. has had a tumultuous couple weeks. But for the time being, they are now back in the individual market in Oregon and Alaska, renewing coverage and selling new plans. Here’s what’s gone on so far:
On January 28, 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 are 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, including 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 allows the carrier to resume selling and renewing coverage in the individual markets in both states. Part of the agreement is a commitment from Moda to continue to service individual market policy-holders until at least the end of 2016. So assuming Moda is able to uphold their end of the agreement, individual plans from Moda are safe for at least the remainder of this year.
In short, consumers who have Moda coverage in the individual market do not have to make any changes at this point. And people who are shopping for coverage during a special enrollment period this year will continue to have access to new coverage from Moda.
In October, Moda exited the market in Washington and California, in order to focus on Oregon and Alaska. The agreement between Moda and regulators in Alaska and Oregon allows the carrier to continue to do so for at least the immediate future.
By the 23rd of January, with one week left in open enrollment, 21,853 people had enrolled in private plans through the Alaska exchange for 2016. That’s an increase of only 171 people since December 26, but that’s because Healthcare.gov is reporting net enrollments this time around, subtracting in real-time the enrollments that are either cancelled or never effectuated with an initial premium payment.
For perspective, enrollments totalled 20,897 at the end of open enrollment last year, but that didn’t account for people who never paid their initial premiums. By the end of March 2015, effectuated enrollment stood at 18,320. This year, the drop-off after the end of open enrollment shouldn’t be as sharp, since the initial rounds of unpaid and cancelled enrollments have already been deleted.
Open enrollment continues through January 31. Plan selections made between January 16 and January 31 will have coverage effective March 1. If your plan was auto-renewed, you can still return to the exchange and select a different plan, with a March effective date. If you’re enrolled in a plan from Moda and would prefer to switch now rather than wait, you can return to the exchange to pick a plan from Premera instead (a special enrollment period will also apply later, if and when existing plans terminate).
The penalty for being uninsured will be significantly higher in 2016 than it was in 2014 and 2015. Given the sharp increase in the penalty, many people – particularly those who qualify for premium subsidies – will find that for the cost of the penalty, they could instead fund several months worth of health insurance premiums. 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 ends 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 will be limited to people who have a qualifying event that triggers a special enrollment period (including anyone who loses coverage under a Moda plan, if the plans terminate at some point in 2016).
With Moda’s exit from the individual market in Alaska, Premera is the lone carrier available in the state for people who buy their own insurance – on or off-exchange.
But until late January 2016, Moda and Premera both offered plans in the Alaska exchange, 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.
Kaiser Family Foundation analyzed benchmark plan (second-lowest-cost Silver plan) premiums in major metropolitan areas across the country, to see how they compared with the 2015 rates. Keep in mind that the benchmark plan in one year may not be offered by the same carrier that offered the benchmark plan the year before, since price changes vary from one carrier to another. For a 40 year-old non-smoker in Anchorage who earns $30,000/year, the benchmark plan was $547/month in 2015, and has risen to $719/month in 2016 (for perspective, in the majority of the areas in the KFF study, the benchmark premium is less than $350/month).
Anchorage is one of only seven metropolitan areas across 49 states where the benchmark premium increase (for the study’s hypothetical enrollee) is at least 30 percent higher in 2015.
Statewide, the average benchmark premium in Alaska is 31.5 percent more expensive in 2016 than it was in 2015.
The steep rate hikes for 2016 came on the heels of an average rate increase of 31 percent for 2015; Alaska’s average benchmark plan was already the highest in the country in 2015, and it’s dramatically higher than the rest of the country for 2016.
Potential legislation to stabilize rates
Even with the high premiums in the individual market in Alaska, insurers continue 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.
In an effort to address the problem caused by the very small individual market in Alaska, Premera and Moda – with some help from the state Division of Insurance – have been working on draft legislation that would call for a tax on all health plans in the state (not just the individual market) and fund a supplemental reinsurance program for Alaska that would help to cover the individual market’s largest claims. The proposed risk adjustment would use Alaska’s existing high risk pool (ACHIA) as the reinsurance entity, but people would still purchase their coverage through the existing private carriers (pre-2014, ACHIA was the insurer of last resort, and provided coverage – albeit with very high premiums – for people who were declined by private insurers because of medial history).
Alaska’s entire population is less than three quarters of a million people – only Wyoming, Vermont, and DC have fewer residents. But a reinsurance risk pool funded by all the health plans in the state could go a long way towards stabilizing premiums for the individual market in Alaska – which had fewer than 24,000 people in 2014.
A recent Alaska Dispatch editorial expresses frustration with the soaring cost of health insurance and healthcare in Alaska, and it was written when there were still two carriers available in the individual market.
Several pieces of legislation have been introduced in the 2016 session relating to health insurance, but as of late January, a bill to create a state-based reinsurance program had not been introduced. However, lawmakers have introduced a bill calling for increased public transparency in terms of health insurance rates and Division of Insurance actions against health insurance carriers.
Legislation has also been introduced (by Republican Representative Paul Seaton) to reform Medicaid, with the bill text stating that “the current Medicaid program is not sustainable.” Federally-funded Medicaid expansion under the ACA took effect in Alaska in September 2015.
The importance of Obamacare subsidies
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 will ensure that the cost of the benchmark plan remains at a level deemed affordable under the ACA. In mid-2015, almost 89 percent of Alaska exchange enrollees were receiving premium subsidies.
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. The KFF study found that after-subsidy premiums for a 40-year-old nonsmoker earning $30,000/year in Anchorage are actually expected to decline by a dollar (from $164/month to $163/month) in 2016. When you consider the fact that pre-subsidy premiums for that same enrollee would be $719/month, it’s easy to see the importance of the subsidies.
Luckily for Alaska, the Supreme Court ruled in June 2015 that subsidies are legal in every state, regardless of whether the exchange is run by the state or federal government. Alaska is one of a handful of states where premiums would have increased by more than 500 percent for people losing access to subsidies; the Kaiser Family Foundation estimated that premiums for people losing subsidies would have gone up by 520 percent, pushing the health insurance market into a “death spiral.” Fortunately for the residents, insurers, and medical providers in Alaska, that didn’t come to pass.
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
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 will be ramped up to its full amount in 2016 (it will increase in future years, but only in line with inflation).
If you remain uninsured in 2016 and don’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 2015, the national average cost of a bronze plan is $2,484 for a single person, and $12,420 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.
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.
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 are raising 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.
A study by the U.S. Department of Health and Human Services showed Alaskans who received subsidies in 2014 qualified on average for an 81 percent reduction in their premiums, resulting in an average monthly premium, after tax credits, of $94 in 2014. Forty-two percent of Alaska enrollees who received subsidies paid $50 or less per month in 2014.
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. Forty-two 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 will 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
On July 16, 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 on September 1 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 are moving forward with a lawsuit to block Medicaid expansion, but it could take two years to move through the court system – during that time, thousands of Alaska residents will gain coverage under the new eligibility requirements.
About half of the Alaska residents who are newly eligible for Medicaid are expected to enroll in the first year (roughly 21,000 people), and 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