Monthly bills for Alaskans using the federal health insurance marketplace are set to rise some 16% in 2024, on top of an 18% increase the previous year, which, in total, will increase costs by more than one-third over the two-year span .
Higher overall health care costs and an increase in the amount of health care Alaskans are seeking after the pandemic are causing monthly premiums to jump, according to interviews with the state’s top regulator, insurance executive and Alaska’s chief medical officer.
The profit of the insurance company, they add, is not the cause. Survey Blue Cross Blue Shield, whose 20,000 members make up about 80% of Alaska’s 24,000-strong individual market, posted $26.5 million in operating losses providing that coverage last year, according to a filing with the federal government.
No one in this administration is happy about these rate hikes, said Lori Wing-Heier, Alaska’s director of insurance, whose office regulates the individual market and is required by law to deny excessive insurance premiums. But, she added: We have to be realistic about it.
“We can’t say you can’t have a rate increase when we know it’s warranted, based on how they concluded at the end of 2022,” she said. No matter how much it hurts, you have to face reality.
Alaska’s year-over-year increase in the individual market is among the highest in the state, in a state that already has some of the highest health care costs in the country. The enrollment period for 2024 coverage began on November 1 and runs through January 15.
For a 40-year-old Anchorage customer, monthly premiums for one of Premeras’ mid-tier silver plans are set to jump to $1,106 next year, from $961 this year, according to a state analysis shared by Wing-Heier. Prices vary by location and age, with monthly premiums for other, less comprehensive plans costing as little as $306.
Many Alaskans also won’t pay the full cost of their plans.
Last year’s Inflation Reduction Act extended, through 2025, significant federal tax credits for premiums. Depending on the client’s income level, loans can cover the entire monthly expenses in advance. (The federal insurance marketplace website, healthcare.gov, guides consumers through the process.)
Even for those earning four times the federal poverty level or higher, the loans can still cap premiums at 8.5% of household income. And Natives can also qualify for premium assistance through the Alaska Native Health Consortium.
You may be surprised that you qualify for subsidies, said Dr. Ann Zink, Alaska’s chief medical officer. I think there are a lot of people who don’t even check.
Most Alaskans get their health insurance not through the individual market, but through employer-sponsored group coverage, or through the government-sponsored Medicaid and Medicare programs. Small group premiums are still rising, but at a slower rate of about 6% on average in 2024, after a 6% increase between 2022 and 2023, according to state data.
But Zink said more residents may seek individual coverage after the recent expiration of a pandemic-related ban on states barring people from Medicaid.
Experts said it followed the last two years of steep growth in the individual market, as Alaskans sought medical care they may have delayed during the pandemic, a trend that has played out across the country.
Let’s say 5% of the population was supposed to have a knee replacement, and they’re not going to get it in 2020. In 2021, 2022, they’re still a little reluctant, Wing-Heier said. In 2023, we all think, Covids is over, and I’m doing it now.
Higher demand for health care translates directly into higher monthly premiums, as 90% of premiums go to cover the cost of care, said Jim Grazko, Premeras Alaska president.
People use more services, Grazko said. And the services they use cost more, per service.
Group premiums in Alaska have remained more stable, Grazko added, in part because that market is spread among more members who, generally speaking, are less likely to need care: individual clients are more likely to buy insurance only when they are sick, while companies or government agencies will enroll employees even if they are healthy.
One change that would help limit future spikes in the individual market is if the state could give insurers more flexibility in their plan design, Grazko said.
Currently, Alaska requires insurers to provide at least some coverage for services from providers even if they are outside the insurer’s network, Grazko said. In Washington, Premera offers a plan with no out-of-network benefits that is 15% cheaper than an alternative plan with some out-of-network coverage.
It could be another way for consumers to have a choice between cheaper options, premium, in exchange for perhaps a narrower network or a little less choice on the provider side, he said.
Grazko and Wing-Hyer said the rate increases in 2024 are smaller than they would have been without a major policy move by the Alaska GOP administration of Mike Dunleavys: eliminating what is known as the 80th percentile rule.
The rule, originally intended to protect consumers, requires private insurers to pay for out-of-network services at rates that meet the 80th percentile of all bills for that service in a geographic area. Its cancellation takes effect on January 1.
Some providers opposed the move, saying it would effectively force them to join insurer networks, accept unsustainably low fees for their work and even force them to leave the state.
But critics, including Premera, said the rule raises health care costs by allowing providers to remain outside insurer networks while still charging and receiving ever-rising fees. One economic study found that the rule was responsible for between 8% and 25% of the growth in health care spending in Alaska between 2005 and 2014.
Grazko said that the average increase in the Premeras rate of 16.7 percent in 2024 would be about 18.5 percent without repealing the rule.
As the repeal is set to take effect, Wing-Heyer said her parent agency, the Department of Commerce, is now seeking broader input on health care costs and payment systems in Alaska.
The department issued a request for written input earlier this month on topics such as payment calculations, new payment models worth considering and ways to pay for value-based care. He invited all stakeholders and consumers to participate before the March 1 deadline.
We ask you what you would do or what you would like to see, Wing-Heier said. When it comes to rising costs, she added, we know that anything about it is not a simple solution. You have suppliers and you have consumers and somehow, working with all these parties, we have to solve this in Alaska.
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