By Tim Bradner
Alaska Journal of Commerce

About 20 percent of Alaskans are not covered with health insurance, and the cost of extending care to the uninsured imposes serious burdens on health care providers and Alaskans through higher costs of health insurance policies they carry, said state Sen. Hollis French, D-Anchorage.

French cites data from Families USA, a national nonprofit that tracks health cost trends, that in 2005 the cost of care for the uninsured resulted in $124.7 million in costs being absorbed, which added 14 percent to the cost of health insurance premiums.

The Families USA data showed costs in caring for uninsured Alaskans added $565 a year to private employer premiums for individuals and $1,466 annually to premiums for families.

The solution, French says, is Senate Bill 160, a bill sponsored by French and two fellow Anchorage Democrats, Sens. Johnny Ellis and Bill Wielechowski, that would require all Alaskans have health insurance coverage.

If it passes, the legislation would not only get coverage for uninsured Alaskans, but it would spread the costs of coverage more fairly by tapping those healthy twenty-somethings who skip coverage out of the belief they will be healthy forever.

In reality, young people impose costs on the system when they get hurt and leave unpaid bills. Under French's plan, they will have to buy insurance, if they can afford it, and contribute to the system.

There are also Alaskans of all ages uninsured because they work for small-businesses that can't afford to offer coverage. For lower-income Alaskans in this category, French's bill would offer subsidized coverage.

French said the bill isn't a panacea for all the problems facing health care in Alaska. But it would help by getting more Alaskans under coverage, which would create larger and more diversified pools of insured people. And that will spread risks for insurers and help restrain the skyrocketing costs of premiums.

It will improve public health too, because by having insurance, people will more likely seek medical help earlier and not wait until conditions worsen to the point where a costly hospital emergency room visit is necessary.

SB-160 creates a health care board with three core responsibilities: Overseeing a health care fund to pay for subsidized coverage for low-income Alaskans, define “essential services” that will be required, and certify that insurance plans private insurers offer will meet the requirements of the law.

Competition in the health insurance market would be maintained because firms would compete for customers just as now.

French acknowledged that small business groups are concerned about SB-160 because the bill imposes a fee on employers, other than very small ones, who do not offer some coverage.

But there are also small businesses supporting the legislation, he said, because they see that it will help them offer coverage.

“Many small employers can and want to make some contribution toward employees' health coverage and many told us they can afford something like $100 to $300 per month, but they can't pay the whole cost of coverage,” French said.

Employers failing to offer any coverage would pay a fee that helps support the subsidies. Very small businesses with up to 10 employees would pay no fee. Those with 10 to 20 employees would pay an annual fee of 1 percent of their gross payroll. If an employer has more than 20 employees, the fee is 2 percent of gross payroll.

“There are a number of ways the fee can be avoided,” French said. “One is to pay 33 percent or more of the premium costs for the coverage. Another is to enroll 25 percent of the employees in a health benefits plan.”

There's little doubt that health costs in Alaska are rising at least as fast as elsewhere in the nation. French cited studies by the University of Alaska Institute of Social and Economic Research that showed a 176 percent increase in Alaska health care spending, from $2,884 per person in 1991 to $7,970 per person in 2005. Medical costs are higher in Alaska than the rest of the nation, too, French said.

Alaska costs are much higher than in the Lower 48. Alaska health providers have told the Division of Insurance that their costs are typically 30 percent above those in Seattle, Linda Hall, director of the division, told the Senate Labor and Commerce Committee in a Feb. 26 hearing.

The bill is winding its way through committees in the state Senate. SB 160 is in the Senate Labor and Commerce Committee, which Ellis chairs. It cleared the Health, Education and Social Services Committee on Feb. 19. Ellis said he would bring the bill up for action in his committee March 11. There is no House version of the legislation yet.

Basically the bill would create an Alaska version of a mandatory health insurance program now being implemented in Massachusetts. California, Pennsylvania and several other states, along with the two Alaska legislators, are watching the Massachusetts experiment in mandatory coverage with an eye toward developing variations.

The Massachusetts program was developed by former Gov. Mitt Romney, a conservative Republican, and a Legislature controlled by Democrats.

French said the experience so far in Massachusetts is positive in that health coverage of the uninsured is rising, which is the goal, but he admits that costs are also higher than expected.

An Alaska version of the Massachusetts plan would have a price, too. The state Department of Health and Social Services has done an initial estimate that the program could cost the state general fund about $300 million a year. French said the estimate is high, however, because the department assumed that the state would subsidize a robust health plan similar to that offered to state employees.

In actuality, insurance companies would work out what would actually be offered as long as they contain certain essential services that would be spelled out in the legislation. French envisions a menu of possible plans insurers could offer tailored to consumers' desires - young, healthy people might want something different than middle-aged people with families - but the required coverage is intended for essential services spelled out in the legislation.

Just what the minimums are will be a matter of intense debate as the bill winds its way through the Legislature, French admits. As currently written, for example, SB-160 requires coverage for mental health treatment services as an “essential,” as do many health insurance policies today.

French told the Labor and Commerce Committee that the subsidy for coverage kicks in if family or individual incomes are three times the federal poverty limit for Alaska. In 2008 the federal poverty limit for individuals was $13,000, and for families it was $26,500.

An individual earning three times the federal limit would earn $39,000 per year. A family at three times the limit would earn $79,500.

At those levels of income or above, there would be no subsidy for coverage but insurance would still be required, French told the committee.

Below the threshold level, a subsidy would kick in on a sliding scale that would increase to 100 percent, or free, for individuals or families at the poverty limit.

However, at that point people are eligible for Medicaid, the state-federal program for the poor, so very few totally subsidized policies would be issued, French said.

The bulk of the subsidized coverage would be for individuals earning between $13,000 and $39,000 per year or families with incomes between $26,500 and $79,500 yearly, he said.

French said the legislation also shifts the responsibility to the individual to secure coverage, and it doesn't remake the insurance market by instituting some kind of single-payer, government system.

Tim Bradner can be reached at

tim.bradner@alaskajournal.com.