Other states look to Alaska as model for insurance relief

Donald Trump’s election as president is expected to lead to major changes in the individual health insurance market. While states don’t know what those changes will be, some policy experts suggested before the election that other states follow Alaska’s lead in addressing rising prices.

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With the highest in individual insurance prices in the country, Alaska is facing problems that other states may face soon. Alaska enacted state-level reforms in response to premiums that nearly doubled in just two years.

Now policymakers in some states, such as Minnesota, are trying to craft plans to address their own skyrocketing prices for health plans. Some are turning to Alaska as a model.

A federal financial safety net program for health insurers is ending, and that’s playing a major role in rising prices. The federal reinsurance program will no longer protect carriers hit with unexpectedly high costs for medical care. Many insurers have been surprised by high costs and big financial losses. So now they’re raising premiums to cover worst-case scenarios.

Washington and Lee University health law Professor Timothy Jost wrote a blog post for the influential journal Health Affairs suggesting Alaska as a model.

“I think that what we need is a reinsurance program at the federal level,” Jost said. “But if that is not forthcoming, then states that are seeing particular problems with the insurers in their market should be looking at whether there’s something they can do.”

Alaska lawmakers enacted a state reinsurance program for next year when faced with a potential disaster. Moda, one of the state’s two insurers, chose to leave the market. The remaining carrier, Premera, was planning to raise the highest rates in the nation by another 42 percent. Premera scaled that back to 7 percent after the reinsurance legislation passed.

Lori Wing-Heier, head of Alaska’s Division of Insurance, said it’s relatively rare that Alaska becomes a national model for policy reforms.

“I think that for those that were insured with Premera, that the reinsurance bill has been a welcome relief,” Wing-Heier said.

The plan called for devoting $55 million in taxpayer dollars to reinsurance. But lawmakers didn’t embrace the idea entirely.

Republicans who control Alaska’s legislature raised concerns that the state was being stuck with costs caused by the Affordable Care Act. State Sen. Peter Micciche said he’s concerned the federal government is taking advantage of the state.

“It’s really fun to play poker with someone else’s money,” Micciche said during a hearing on the reinsurance bill in the spring. “So when the feds are creating expectations and requirements under ACA and we volunteer to pick up the difference, we’re really not ever pushing back on the feds to cover their unfunded mandate.”

The administration of independent Gov. Bill Walker argued that if the Legislature didn’t pass the bill, the result could be far worse.

Alaska Deputy Commissioner Fred Parady made the case this way:

“Our market is in crisis and the consequence if Premera were to withdraw … 23,000 Alaskans who are currently paying for insurance and receiving coverage, would not have any access to insurance at all,” Parady said.

Parady argued the state would have to shell out hundreds of millions of dollars to establish a new insurance company if Premera left.

The legislature ultimately agreed to the reinsurance program, but only for two years. What happens next is anyone’s guess. But the state’s reinsurance program is hardly a magic bullet.

The program has headed off massive price hikes, but premiums here are already punishing for many and aren’t going down.

Moda customers being forced to switch to Premera have to pay 30 percent more for coverage next year if they don’t qualify for federal subsidies.

But Alaska’s innovation is making health insurance more affordable for at least one party–the federal government. Alaska officials estimate the reinsurance program will save the feds $20 million a year.