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Alaska Creates Fix For Rising Obamacare Premiums

Alaska has found a way to fix Obamacare and stop the 42 percent rise in premiums for individual health insurance plans its marketplace was facing.

At one point, officials thought the state was headed for a "death spiral," wherein only the sickest people would buy health coverage, causing rates to skyrocket year after year, according to Vox.

Alaska managed to stop that from happening through a new approach.

Lori Wing-Heier, Alaska's insurance commissioner, created a program that had the state pay back insurers for certain high medical claims submitted to Obamacare, also known as the Affordable Care Act, plans. By doing so, premiums were lowered for all residents. Instead of a 42 percent increase from its one remaining Obamacare insurer, Premera Blue Cross, premiums only increased by 7 percent.

"We knew we were facing a death spiral," Wing-Heier said. "We knew even though it was a federal law, we had to do something."

Alaska used $55 million of tax revenue collected from health, life and property insurance, which usually goes into a general Alaska budget fund, for the reinsurance program. That money could then be used by Premera or any future Obamacare insurers to cover large medical claims, preventing them from suffering losses because of very sick patients.

It is because of the reinsurance program that Premera only raised rates 7 percent in 2017, making Alaska a state to have one of the lowest rate increases in the nation, instead of one of the highest.

The move also saved the federal government money because it didn't have to spend as much on subsidies for premiums. Eighty-six percent of Alaska's Obamacare enrollees receive subsidies, and with the reinsurance program, its cost fell by $56 million.

Now, Wing-Heier is working with the Trump administration to have the federal government, not Alaska, cover the claims costs.

"Why shouldn't the money come back to us to fund the reinsurance program?" she thought. "It was that simple."

In December 2016, Alaska applied for a waiver that asks the federal government to refund its spending. Former Health and Human Services Secretary Sylvia Mathews Burwell granted conditional approval in mid-January. Tom Price, the current secretary, has spoken favorably in regards to Alaska's approach, calling it one other states should follow.

"[It's an] opportunity for states to lower premiums for consumers, improve market stability, and increase consumer choice," he said in a letter to governors in March.

Wing-Heier is confident the Trump administration will approve the waiver. If that happens, then Alaska predicts Obamacare premiums will decrease in 2018, and that an additional 1,650 people will join the marketplace because of the lower premiums.

"Do I think it's a perfect solution? No, but it works for us," Wing-Heier said. "It's working in the right direction. It did what it was intended. It brought stability to our market, and the waiver is going to bring funding to us."

Minnesota has already followed Alaska's example and established a fund to reimburse health insurers for high costs associated with very sick policyholders, The Huffington Post reports. The state plans to apply for the same waiver as Alaska to receive federal reimbursement.

Sources: Vox, The Huffington Post / Photo credit: Ryan Schreiber/Flickr

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