After years of hikes, Premera files rates for 2018 down 21.6%
Premera Blue Cross Blue Shield of Alaska filed insurance rates for 2018 with a 21.6 percent decrease for customers on individual Affordable Care Act compliant plans.
As predicted by the Centers for Medicare and Medicaid services when Alaska received a Section 1332 “innovation waiver” on July 11, Alaskans on the individual market exchange would see a 20 percent to 22 percent decrease in 2018.
The waiver will provide for $48.9 million in federal funds to the Alaska Reinsurance Program, or ARP, which when combined with $11 million in state funds allowed Premera to lower its rates next year.
The five-year waiver will send about $332 million to the ARP. The ARP was created by the Legislature in 2016 and with $55 million in funds collected from every insurance policy sold in the state, Premera was able to reduce the 2017 rate increase from 42 percent to 7 percent.
Premera raised rates by nearly 40 percent in the previous two years. The company lost $7 million from 2014-16 in the first three years of the ACA. Premera is also the lone company offering individual insurance plans on the federal exchange after three companies exited in 2016.
With lower rates, the 1332 waiver uses the savings from smaller premium subsidies paid by the federal government to cover the costs of 33 expensive medical conditions.
However, even with the lower rate increase in 2017, Alaska still has the highest premiums in the country at $947 per month for the second-lowest cost “silver” plan on the insurance exchanges.
To illustrate the cost savings, the monthly premium for a 40 year-old non-smoker in Anchorage on the least expensive “bronze” plan in 2017 pays an annual deductible of $5,250 with a monthly premium of $703 per month. In 2018, that person’s monthly premium will be $561 per month, said Premera senior spokeswoman Melanie Coon.
In addition to the waiver, Premera said the rate decrease is also attributed to a significant reduction in the use of medical services by customers.
“While the rate decrease is an encouraging sign that the Alaska market is becoming more stable, we caution against drawing conclusions based on one or even two years of results,” Coon said in an email. “The Alaska market, due to its small size, remains volatile where the medical claims of a relatively small number of customers have the potential of greatly influencing financial results.”
Coon noted the rates Premera filed assume “we would not be getting the Cost Sharing Reduction (CSR) reimbursement from the federal government.”
That’s just as well. Currently, payment of the CSR is still entangled in a two-year-old legal battle in the case of U.S. House of Representatives v. Burwell, a case challenging CSR payments to health insurers under the ACA.
Judge Rosemary Collyer of the U.S. District Court for Washington, D.C., determined the House had standing to sue the executive branch under President Barack Obama and then ruled in May 2016 that the Obama administration’s CSR payments to insurers were illegal without an appropriation from Congress.
Collyer held off on ordering an end to the payments pending the appeal to the D.C. Appeals Court, which allowed the Obama administration to keep making the payments.
If the Trump administration drops the appeal, Collyer’s ruling stands. It cuts off CSR payments to health insurance issuers unless Congress appropriates the funds, according to the Crowell and Moring Health Law’s website, which analyzes the latest developments on health care law and policy.
Trump has been approving CSR payments on a month-to-month basis since he took office and has held off the appeal hoping for congressional action, but he warned in a tweet July 31 that if the ACA isn’t repealed and replaced, CSR payments or “BAILOUTS for Insurance Companies… will end very soon.”
But Alaska, one of only two states in the nation to receive the innovation waiver — which amounts to $332 million over five years — there remains the question of whether Alaska should expect the CSR payment.
Other states are dependent on the CSR as one of the only ways to help insurance exchange companies cope with the risks of uncertain coverage for the most expensive to insure.
Sen. Joe Connelly, R-Ind., made an appeal to the Centers for Medicare and Medicaid Services Administrator, Seema Verma, on July 31. He expressed hope the CSR payments would continue. Two insurance companies left the Indiana exchange market, citing a lack of certainty after the Trump administration’s refusal to commit to making CSR payments. Indiana, like Alaska, has pockets of small insurance pools.
Premera’s Coon explains there’s a big difference between CSR payments and the 1332 waiver funds. CSR helps lower out-of-pocket expenses, lowers the deductible you pay and payment for visits at the time of service. For example, with CSR, a person’s $30 visit would be matched so that the patient pays $20.
A $5,000 deductible is lowered to $3,500. It kicks in at the 250 percent of poverty level for those eligible on the Premera Silver Plan. Bronze Plan holders — like the example of the 40-year-old non-smoker above — do not receive CSR subsidies.
The waiver, on the other hand, helps the pool of insured. It came out of the state’s reinsurance program that committed state insurance tax dollars ahead of time to prevent costs from increasing for Premera customers.
“For Alaska’s 20,000 people — that’s not a big pool,” Coon said. “There were not enough healthy people, and by that, I mean people who are healthy and pay insurance but don’t use it to offset the high medical costs of those who were sick.”
The funds aren’t “new money” but rather the amount that would have been paid anyway through individual subsidies that 90 percent of Alaskans on the exchange receive.
Premera doesn’t have dollar amounts on the CSR payments for Alaskans, but is working on separating out those, Coon said.
The Division of Insurance has required Premera to do a second calculation for what the rates would be if CSR payments are continued.
“They are working on that now,” Coon said. “It can only get better. I can’t estimate how much yet.”
Naomi Klouda can be reached at email@example.com