Repeal or replace fails, but state to see premiums fall in ‘18
Alaska has the highest insurance premiums in the individual market in the country with an average monthly cost of $927 that’s nearly equal to the average rent of $1,100.
Premiums in the individual insurance market are now projected to decrease by as much as 20 percent to 22 percent in 2018 after the state received a Section 1332 “innovation waiver” under the current Affordable Care Act.
Consumers won’t be the only one to see a savings.
The state budget will see savings of $44 million as the nearly $49 million in federal savings from reduced Advanced Premium Tax Credit, or APTC, payments are passed through to the Alaska Reinsurance Program.
Federal savings available to be passed through to the state program are projected to grow to $92 million by 2026.
The total amount of federal funding for the reinsurance program under the waiver is $332 million over five years, but it is not “new” money. Instead it is money that otherwise would have gone toward federal premium subsidies.
Under the waiver, the state contribution will be $11 million for 2018 instead of the $55 million in 2017.
According to Centers for Medicare and Medicaid Services, the waiver program allow states to “implement innovative ways to provide access to quality health care that is at least as comprehensive and affordable as would be provided absent the waiver, provides coverage to a comparable number of residents of the state as would be provided coverage absent a waiver, and does not increase the federal deficit.”
With “repeal and replace” or even just “repeal” now dead in the U.S. Senate, leaving the ACA in place for the foreseeable future, the State of Alaska was one of the few states to gain good news on the health insurance front.
Murkowski said July 18 she will not vote for a simple repeal; fellow Alaska Sen. Dan Sullivan said he would vote for a straight repeal with the goal to work for a replacement system.
Down to only a single insurance provider, Premera Blue Cross Blue Shield, in 2016, the Legislature approved the Alaska Reinsurance Program, or ARP, last year using $55 million from existing fees charged to each insurance policy sold in the state.
That funding, which essentially insured Premera’s expenses from 33 high cost conditions, held the 2017 rate increase down to 7 percent compared to a projected 42 percent before the ARP was approved.
Premera has said it lost about $7 million over the first three years under the ACA from 2014-16 prior to the ARP adoption.
Because about 90 percent of Premera’s individual market customers qualify for at least some income-based subsidy from the federal government, lower premiums reduce the size of those individual subsidies through the APTC.
Premera’s adjusted rates for 2018 were filed with the state by the deadline on July 17 in light of receiving the 1332 waiver, spokeswoman Melanie Coon said. The state will analyze the proposal prior to approval.
“We will release our rates after the state has reviewed and approved them. With less than 20,000 people in Alaska’s individual market, claims experience can be very volatile,” Coon wrote in an email. “Because of that, Premera and the DOI (Division of Insurance) have agreed to update the rate filing in mid-August with more recent experience, which will result in rates that more closely reflect the latest cost trend.
“We will continue to renew customers on grandfathered individual plans (purchased before 2010) and transitional relief individual plans (purchased between 2010 and 2014). Those plans have separate filings and start dates.”
The Center for Medicare and Medicaid Services held up Alaska’s approach as a creative solution other states could pursue in a national news conference July 11 announcing a long-awaited decision after the state applied for it in December.
“Today’s approval will temporarily stabilize Alaska’s individual insurance market, which only has one carrier and has experienced a 203 percent increase in insurance premiums since the Affordable Care Act began,” said CMS Administrator Seema Verma during the announcement.
In its waiver application, the state projected the reinsurance program would save the federal government more than $48 million in 2018 and asked for those savings to be passed to the ARP to replace state money.
The state also estimated that 1,460 households that currently don’t have health insurance will buy policies if they are more affordable. The growth is expected to come from households that do not qualify for the income-based subsidies, which is more than 400 percent of the federal poverty line.
“Based on these projections, CMS and the U.S. Department of the Treasury are approving the request,” CMS said in its announcement July 11.
The waiver was conditional on the state reauthorizing the ARP and appropriating the necessary matching funds.
Senate Finance Co-Chair Sen. Anna MacKinnon, R-Eagle River, said the logical place to add in the new provisions became the fiscal year 2018 operating budget, which had already passed prior to the July 11 announcement by CMS.
The 2018 budget also appropriates $55 million from the insurance fund, but this time it is spread over the next five fiscal years instead of covering just one.
“(The budget) provides the necessary federal receipt authority for FY18 so there is no need for anything in the capital budget,” said Alaska Office of Management and Budget Director Pat Pitney. “It is possible that future year federal receipt authority may be required and that would show up in FY19’s budget.”
The money to continue the ARP was included in Gov. Bill Walker’s original proposed budget and the language was amended later to receive federal funds to the program for five years as the state sought in its waiver application.
“We were planning on it,” Pitney said. “We were hoping for the strategy to work. Federal money will be coming in for the program January 2018 and there will be revisions once we know the actual dollar amount in real numbers for each year.”
Premera had 16,732 customers as of May 31. The numbers have varied as customers join or leave the exchange. Another approximately 2,900 customers have individual coverage that they purchased before ACA plans were available, Coon said.
“They are on different plans but we consider them part of our entire individual customer group. If you add those to our individual metallic (ACA) plan customers, it brings our current individual enrollment up to roughly 19,600 customers.”
Although CMS officials said Alaska is the first state in the union to receive the 1332 waiver, according to its website Hawaii received a partial 1332 waiver this past December under the previous administration.
After the efforts failed to replace, and simply repeal, the ACA, Sen. Lisa Murkowski said the goals should be “to stabilize the individual markets and engage in a bipartisan process to address the failures of the ACA.”
In Alaska, the waiver achieves the first goal for at least the next five years.