Feds agree to shore up Alaska’s insurance market

Alaska’s U.S. senators with Seema Verma, head of the Centers for Medicare and Medicaid Services, center, in the office of Sen. Dan Sullivan. (Photo by Liz Ruskin)

The U.S. Health & Human Services Department has given the green light to the State of Alaska’s reinsurance program, which lowers costs for people who buy their own health insurance.

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The head of the Centers for Medicare & Medicaid Services, Seema Verma, who administers the Obama-era health care law for the Trump administration, said the approval means federal money will flow to the state over five years to stabilize Alaska’s individual health insurance market. The amount will vary, but it comes to about $48 million for next year.

“Our analysis shows that premiums should go down 20 percent,” Verma said. “So that’s going to be helpful for the people that are getting subsidies, but also for the people that don’t get subsidies.”

The state’s proposal, crafted by Alaska Insurance Director Lori Wing-Heier, has been called a model to avoid market “death spirals.”

Alaska is the first to get what’s known as a State Innovation Waiver, under section 1332 of the Affordable Care Act. Although the federal government will now fund most of Alaska’s reinsurance program, the state designed it to avoid adding to the federal deficit. It’s essentially a “pay it forward” approach.

The Legislature kicked off the program last year by appropriating $55 million for reinsurance. That helped cover some of the most expensive Alaskans in the risk pool, people with advanced cancer, end-stage renal failure and other conditions. That backstop prevented another steep premium hike and, the state said, saved the federal government about $50 million that it did not have to pay in premium subsidies under the Affordable Care Act. The government has essentially agreed to send that “savings” to Alaska to bring down premiums and entice more uninsured Alaskans to buy coverage.

Sen. Lisa Murkowski said a more stable market could attract another insurer to provide competition.

“The hope is that you don’t need to have this backstop going well out into the future,” Murkowski said.

The approval was granted as Senate Republicans are trying to fashion a replacement bill for the Affordable Care Act. Sen. Dan Sullivan said the bill draft he’s seen would allow the innovation funds to continue and expands on the concept with similar programs that give the states more flexibility.

Like Murkowski, Sullivan said the news of the government’s waiver doesn’t make it more likely he’ll vote for or against the health care bill.

“You know, I wouldn’t connect them directly, in terms of ‘oh, just because this happened that makes it more likely,” Sullivan said.

Aviva Aron-Dine is a fan of the Alaska innovation waiver, too. She’s a fellow at the Center on Budget Policies and Priorities, a left-of-center think tank.

“This is a model of the road not taken so far in Washington, which is actually focusing on specific, identifiable challenges and trying to craft specific solutions that make things work better,” Aron-Dine said, “instead of  trying to tear down the entire structure, which so far is what Congress has been focused on.”

The innovation waiver is set to last five years, for a total of about $330 million.