The open enrollment period for signing up for health care coverage under the Affordable Care Act begins November 15th. Customers in Alaska who don’t receive subsidies will have to pay dramatically higher rates for next year’s coverage. And one insurer on the exchange, Premera Alaska, says the state needs to implement a new program to ensure future rate increases aren’t as steep.
Premera Alaska is raising rates an average of 37 percent. Moda Health, the other insurer on healthcare.gov in Alaska is increasing rates an average of 27 percent. Larry Levitt, a senior vice president with the Kaiser Family Foundation, has been tracking rate increases across the country and says the Alaska rates stand out:
“I don’t think there are any areas where the major insurers are all increasing rates this substantially.”
The vast majority of Alaskans who buy individual plans on healthcare.gov receive subsidies, and that will cushion the impact of the new rates. But thousands of residents pay full price.
Levitt says in the rest of the country, rates are going up an average of eight to 10 percent. So what happened in Alaska?
The law ensures people with pre-existing conditions can buy health insurance. The idea is that enough healthy people will also sign up for coverage to balance out the sick. But Levitt says smaller population states, like Alaska, could have more trouble finding that balance:
“Smaller states will definitely be subject to more volatility. In a small state, even just a couple of very sick people could skew costs a lot, which wouldn’t be true in a bigger state like New York or California.”
According to Premera Alaska, that’s what happened with its members. The company says in the first half of this year, 33 members in Affordable Care Act plans racked up more than $7 million dollars in medical claims. The company has about 7000 people enrolled in ACA plans in Alaska. Premera spokesperson Eric Earling says that math is not sustainable:
“The individual market in Alaska as a whole just isn’t big enough to spread the cost. And what we’re looking at is not a temporary issue. What we’re looking at is long term structural instability for the market for individuals purchasing health care coverage and we think that needs to change.”
That stability in the market used to come from ACHIA- the Alaska Comprehensive Health Insurance Association.
The program allowed Alaskans with pre-existing conditions to buy coverage before the Affordable Care Act. A fee assessed on every health insurance plan in the state helped subsidize the high cost of coverage.
Now, many Alaskans who had insurance through ACHIA are buying plans on healthcare.gov instead, where they can get a better deal. Earling thinks Alaska’s health insurance exchange needs its own version of ACHIA:
“Simply a program that helps spread the cost of individuals with very high medical needs across the entire insured marketplace.”
The federal government has its own version of the idea, called reinsurance, but it runs out after three years. Premera says Alaska needs a long term program, where fees from insurance plans across the market, from individual policies to large group employers, would fund medical care for the most expensive enrollees.
The state of Alaska is considering the idea. The division of insurance has contracted with an outside company to figure out how the program would work and what it would cost. Lori Wing- Heier directs the division:
“I don’t think it’s the hidden savior to this program, to the cost of health care in Alaska.”
Wing-Heier points out that at its peak, ACHIA had about 500 members. Alaska’s health insurance exchange includes 16,000 people. And she worries that means the fees assessed on insurance plans would be much larger than they have been for ACHIA:
“One of our concerns was that the assessment would be so great that those that would be assessed would be upset. I mean if they all of the sudden had an increase of 20 percent of their cost, just to pay the assessment, I would expect I would have people calling me on that.”
Wing-Heier says she should have a better idea whether the plan could work when the analysis is complete by the end of the year. She says the legislature would have to approve the plan. The earliest it could be implemented is 2016.
Larry Levitt with the Kaiser Family Foundation thinks the program could work, but he also says Premera may be too quick to declare the system broken. Experts anticipated more sick people would sign up in the early years of healthcare.gov and the hope is that larger numbers of healthy people will follow. Levitt says Premera is forecasting the future based on less than a year of data:
“If after a couple years there’s not a balanced risk pool, then I think everyone will be looking for some solutions to bring down premiums.”
But Eric Earling from Premera says Alaska can’t afford to take a wait and see approach. He says Premera would need a 71 percent rate increase to break even in 2015. And he worries the individual market in Alaska can’t sustain the type of rate increases that will be necessary in the years ahead if the state doesn’t implement a program to stabilize rates.
This story is part of a reporting partnership between APRN, NPR and Kaiser Health News.