Uncertainty remains as launch date nears for Obamacare
It will be a new world soon for health care coverage in Alaska and the rest of the nation. A new federally-managed health insurance exchange for Alaska is to go active Oct. 1, although there will likely be some startup bumps.
Meanwhile, the new requirement for all Americans to have health coverage or pay fines kicks in March 31, 2014.
There will be two insurance companies selling health care coverage in the new federally-managed health care exchange for Alaska individuals set to be activated Oct. 1. Premera Blue Cross Blue Shield of Alaska will be one and the other will be Moda Health.
Two of three companies who are licensed to sell health coverage in Alaska is enough to ensure some competition, said Jeff Davis, president of Premera’s Alaska division.
“One would have been problematic,” he said. “Two out of three is not bad.”
Companies including Premera will also be selling health insurance Outside as well as in the new exchanges but federal subsidies available to low-income Alaskans under the federal Affordable Care Act can only be done with policies sold through the exchange.
The competition within Alaska’s exchange will be similar to that in many other U.S. Northwest states where two to three insurance companies will compete.
Davis said there is good incentive for people to sign up after Oct. 1 because an estimated 72 percent of the individual Alaskans now without health insurance coverage are in income groups that would qualify them for subsidies in the exchange.
There will also be a small group or small business health insurance exchanges in Alaska, but most small businesses in the state will not qualify for federal tax credits to be offered as subsidies, mainly because the wages paid in Alaska are too high, Davis said.
“We’re not finding anyone (among customers) who would qualify for the tax credits, so there’s no benefit in signing up,” Davis said.
Eric Earling, a spokesman for Premera, said the definitions of small business eligibility for federal tax credits are so tight as to make them impractical in Alaska. The eligibility for the tax credits is a firm with less than 10 employees and wages of $25,000 per year, on average, he said. Few Alaska firms fit those criteria.
Davis said Premera is also supporting an expansion of Medicaid coverage in Alaska to cover low-income uninsured or underinsured Alaskans who presently earn too much to qualify for Medicaid.
This is allowed under the Affordable Care Act, with the federal government paying the full cost of the expansion for the first three years and 90 percent thereafter. However, state governors can decide whether to allow the expansion and Alaska Gov. Sean Parnell has yet to make the decision.
Families with dependents who are at 85 percent of the federally-defined “poverty level” in Alaska ($24,410 per year for a family of three for 2013) are now eligible for Medicaid, but not individuals without dependents. If Medicaid is expanded, families with incomes up to 138 percent of the federal poverty level will be covered, and individuals will also be covered.
Davis said Premera supports Medicaid expansion even though, in theory, it could mean fewer low-income people buying insurance in the new exchange, and possibly fewer customers for Premera.
An expansion of Medicaid would be better overall, Davis said, because the increased federal payments will strengthen the state’s health care industry, particularly the tribal nonprofit health providers working in rural areas who are now short-funded by the Indian Health Service through federal budget cuts.
“This is definitely a concern for us. We’re interested in sustaining the health care industry in Alaska, and particularly services provided to lower-income Alaskans,” Davis said.
If Parnell decides against the Medicaid expansion, the lower-income individuals and families who lack coverage will still be eligible for health insurance subsidies in the exchanges, however. The health coverage may not be as complete as it would under Medicaid, however.
Davis also said he’s heard the reports that some small business operators, particularly those in the lower-wage industries, plan to drop their employee health coverage and instead encourage employees to sign up in the health insurance exchanges to receive subsidies.
However, he’s not sure whether many Alaska small business owners will actually do this.
“We’ve heard the discussion, that some employers will just put the money they would have spent on benefits in their employees’ paychecks. But now people have had time to reflect on this and we’re hearing discussion on the other side of it,” Davis said. “There may have been an initial response just to drop coverage but when people think this through they realize that there are reasons why they may want to offer employer coverage.
“For one thing, business owners want healthy employees, with health coverage. There’s the possibility that just putting money to buy insurance into an employee’s paycheck may not result in insurance actually being purchased, particularly since the penalty for going without coverage is so low.”
Davis continued, “Also, offering a benefits package helps an employer compete for skilled labor. Anchorage has a low unemployment rate, so it’s a pretty competitive environment for labor. Meanwhile, the cost effects of the new federal requirements, for policies sold in Alaska either inside the exchanges or outside, are still unknown. There will be winners and losers,” with some people paying more and some less.
About half of Premera’s existing individual and small group insurance customers are “grandfathered” with existing policies that were signed before the cutoff date for new federal requirements that will add costs, such as no denials because of pre-existing conditions.
The requirements under the ACA do not apply to existing policies until they are renewed, so the cost under those policies won’t change. However, for the approximately half of Premera’s individual and small group customers who have policies signed more recently, and to which the new requirements will apply, there may be higher costs.
Of the policies that could be affected, those with high-deductible plans could be significant impacts, while those with low-deductable plans could see benefits under the changes.
Premera Blue Cross customers who currently have high deductible plans are more likely to see price increases because the federal law requires the purchase of more comprehensive benefits.
“Customers who already purchase comprehensive benefits will likely see less of an increase, and some may actually see a rate decrease,” Earling said.
Overall, there are a lot of unknowns.
“We’re on the brink of unprecedented changes that will be unleashed in the market. We’re working to make the experience (of transition) as easy as possible for our customers, both our existing customers and our new ones,” Davis said.
Davis touched on other topics. Medical cost inflation is continuing but has moderated in recent years for reasons that are still unknown. The average increase across several states in which Premera sells is about 3 percent per year, although it is a little higher in Alaska, he said. The level varies from year to year.
Interestingly, one reason why Alaska’s increases tend to be higher is because they are partly driven by acquisition of new medical technology.
Alaska is actually a little behind most other states in the level of medical technology available, mainly in small communities. There’s an effort to catch up, however, and the acquisition of an expensive piece of equipment in a small town hospital or clinic can have a disproportionate effect on costs.
One is the cost of the equipment itself in a small health care market. Second, however, is that the availability of new equipment can also drive up utilization, Davis said.
Tim Bradner can be reached at email@example.com.