Alaska Receiving $322.7M to Reduce Health Insurance Premiums(1)

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Sara Hansard

Alaska will receive about $322.7 million from 2018 through 2022 to cover people with high medical claims.

Alaska’s application for a waiver of some Affordable Care Act requirements in order to implement a reinsurance program was approved in a July 7 letter from the Department of Health and Human Services to Alaska Gov. Bill Walker (I). The waiver, which Alaska applied for during the Obama administration, was granted under Section 1332 of the ACA, which allows for states to innovate if they meet certain requirements, such as not increasing the federal deficit. The approval was announced July 11.

Alaska’s reinsurance plan has been hailed by proponents of the Affordable Care Act as a way for states to reduce spiraling Affordable Care Act premiums as insurers have struggled to cover a sicker-than-expected exchange population.

The plan may also enjoy bipartisan support, as both the House-passed American Health Care Act and the Senate’s draft Better Care Reconciliation Act include funds for states to set up reinsurance programs or high-risk pools to cover people with high medical claims.

Reductions in Premium Increases

Alaska was facing large premium increases due to many high-cost enrollees in its ACA exchange, and the program will result in large savings for exchange enrollees. Reductions in the premium tax credits that the federal government would have had to pay for the higher premiums are being passed back to the state under the waiver.

Alaska is the first state to receive federal approval for a reinsurance program, and Minnesota has also completed an application, Justin Giovannelli, associate research professor at the Center on Health Reforms at Georgetown University, told Bloomberg BNA July 11. Alaska enacted its own reinsurance program with its own state funding in 2016 in order to stave off big premium increases, and the Obama administration had viewed the program favorably, Giovannelli said.

“It’s certainly a positive step for consumers in Alaska,” Giovannelli said. Other states also have the option under the ACA’s Section 1332 state innovation provision to craft a waiver application along the lines of Alaska’s program, he said.

States, Federal Government Should Participate

“We have called both for states to look at these, and for the federal government to give reinsurance funding as well,” Katie Allen, executive director of the Council for Affordable Health Coverage, told Bloomberg BNA July 11. “Not every state will be ready to go next year.”

“Today’s approval will temporarily stabilize Alaska’s individual insurance market, which only has one carrier [Premera Blue Cross] and has experienced a 203 percent increase in insurance premiums since the Affordable Care Act began,” CMS Administrator Seema Verma said in a release about the approval of Alaska’s reinsurance program.

Premium are poised to increase sharply in the ACA exchanges in 2018 following increases averaging about 25 percent for the most popular plans in 2017. Many insurers, such as Aetna Inc., Humana Inc. and Anthem Inc., have pulled back from the exchanges and the individual health insurance markets due to large losses from covering a heavy load of high medical claims, and some parts of the country may have no coverage in the exchanges in 2018.

One hundred forty-one individual market qualified health plans submitted initial applications as of June 21 to offer coverage on the ACA exchange operated by the federal government in 2018, the Centers for Medicare & Medicaid Services announced July 10. At the initial filing deadline in 2016, 227 issuers submitted applications, a 38 percent drop in filings, the CMS said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Health Care on Bloomberg Law