Alaskans who buy health insurance on the Affordable Care Act marketplace will see a significant rate hike for next year. The state Division of Insurance says consumers can expect to pay an increase of more than 30 percent on average for coverage.
Two insurers offer individual plans on the marketplace – Premera Alaska and Moda. Premera’s plans will increase the most – an average of 37 percent. Premera spokesperson Eric Earling says even that increase is not enough to pay for customers’ claims.
“We do have a pretty clear influx of folks with some very significant medical costs that in the past was spread across the insured market, including employers,” Earling said.
Earling says the way the individual market is structured under the Affordable Care Act is not sustainable in a small population state like Alaska.
“Before the ACA took effect in January, people could access coverage through a state high risk pool or through a state high risk pool,” Earling said. “Many of those folks are now purchasing coverage on the individual market and we believe Premera probably picked up a disproportionate share of those folks with really significant medical needs.”
Premera is working with the state on a solution that would spread the risk of those high cost customers across the insurance market. The state is analyzing the plan and hasn’t yet taken a position on it.
Premera serves 7,000 customers in the state who bought marketplace plans. Earling says the company expects to lose four million dollars insuring those customers this year. He says a small number of enrollees account for a huge amount of claims.
“We’ve seen since January first through June 30th, seven million dollars in medical claims from only 33 members out of those 7,000,” Earling said. “So that’s about 1/3 of all of our medical claims costs for those 7,000 members are coming from 33 individuals.”
Earling says Premera would have to increase rates by more that 70% next year to break even. That’s the rate increase the company first proposed when it approached the state Division of Insurance, according to director Lori Wing-Heier. After looking at the company’s data, she agreed with their financial assessment. But Wing-Heier says through discussions they were able to compromise on a lower rate increase:
“And we felt that they could sustain another year of significant loss,” Wing-Heier said. “They’re indicating they’ll lose 5 million dollars in 2015 in addition to what they lost in 2014. But they are financially strong and they’re willing to take that loss to see what the data looks like when we go through rate filling next year.”
Moda, the other company offering individual plans on the marketplace, will increase rates by an average of 27 percent. Rates increase for both companies will vary depending on age and geographic region. Wing-Heier says state statute prohibits her from releasing the specific rates until they go into effect on January 1st. She says she hopes in a year or two, the rates will stabilize.
“We are being asked through a federal program to price a product that some people cannot afford,” Wing-Heier said. “And we’re doing the best we can to keep the cost of that product down.”
The federal government points out that many Alaskans will be able to use subsidies, and that will help lessen the impact of the rate increases. In Alaska, almost 90 percent of consumers who bought plans on healthcare.gov in 2014 qualified for financial help to purchase the plans.