With $55M in state aid, Premera files for 9.8% rate hike

Premera Blue Cross Blue Shield of Alaska filed its request for 2017 individual insurance rates on July 18, ending a two-year run of exorbitant increases but still costing the beleaguered state checkbook $55 million.

Premera, the state’s sole remaining individual insurance provider, filed for an average rate increase of 9.8 percent on 6,800 individual metallic plans across the state. Statewide, Premera has 140,000 customers with the vast majority in group plans.

The rate is a break from two straight years of leaping increases. Premera’s rates rose approximately 37 percent and 39 percent in 2015 and 2016, responding to a high-risk patient pool that lost the company $13 million since 2014.

The comparatively palatable rate increase for 2017 comes from a bill passed by the Legislature in June and signed by Gov. Bill Walker on July 18. The bill established a reinsurance program, which subsidizes plans by spreading the cost around to other users.

In this case the reinsurance plan, which will cost $55 million, draws proceeds from a statewide insurance premium tax. This tax of 2.7 percent per plan typically draws between $50 million and $60 million per year according to Lori Wing-Heier, director of the Division of Insurance.

Premera praised the Legislature’s actions as having staved off a third year of rate increases and potentially the worst year yet.

“Had the legislature not passed the reinsurance legislation to provide some relief to Alaskans, Premera’s 2017 rate increase request would have been more than 40 percent, based on medical claims data from 2015,” according to a Premera press release.

The Legislature feared dedicating too much state revenue to a shifting situation, and installed a two-year sunset for the reinsurance program. The Legislature also used the opportunity to establish a working group dedicated to studying Alaska high medical costs.

“The reinsurance program will sunset after two years, but we remain committed to working with legislators, the Division of Insurance and other stakeholders to find a longer term solution,” stated Premera.

The state’s dwindling insurance provider ranks and spiking rates trace their roots to federal healthcare policy. Other states with Alaska’s geography and rural demographics have had similar outcomes.

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

In two years, Alaska’s individual insurance market provider pool shrank from five providers to one. On May 1, Moda Health announced that it is leaving the Alaska individual market in 2017. Aetna, State Farm, and Assurant Health left Alaska’s individual insurance market in June 2015. Moda officials said the company could no longer operate in Alaska without a substantial increase in insurance premiums, which had already increased by 29 and 37 percent in 2015 and 2016, respectively.

Rates have cooled for now, but it remains to be seen whether or not the reinsurance program will lure Alaska’s former providers back into the market. The two-year sunset doesn’t promise that subsidies will last long enough for the state to substantially lower healthcare costs for the high-risk users driving insurance prices.

 

Updated: 
07/20/2016 - 1:01pm

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