The individual market for health insurance in Alaska is in critical condition. It may not survive without immediate state intervention.
Family tragedies of all kinds across the state have brought us to this point. More than 1,300 Alaskans fighting for their health have bought insurance while dealing with sickle cell anemia, quadriplegic cerebral palsy, hemophilia, kidney failure, amputation, multiple sclerosis, brain cancer, paralysis, AIDS, lung cancer, leukemia, cystic fibrosis and other serious conditions.
They paid $8 million in premiums over a 21-month period while accumulating $80 million in medical bills.
In the past, these Alaskans would have been in a high-risk insurance pool, if they had the money. Or they would have been uninsured and speeding toward financial ruin, sinking lower with each unpaid bill. Some, after losing almost everything in the struggle, would succeed in becoming poor enough for Medicaid or old enough for Medicare.
Under the Affordable Care Act, commonly called "Obamacare," they cannot be denied coverage for preexisting conditions. This has allowed sick people to stave off bankruptcy, but the system in Alaska has proven too fragile to survive without more money.
Extreme medical bills from about 4 percent of the customers in the individual market and tens of millions in losses by the insurance companies have led to a crisis. The illnesses in question are almost all of the sort that change lives forever, and not in a good way.
(Here is a list of the most expensive claim categories submitted from 2014 until late 2015.)
The most expensive claim category was due to "mucopolysaccharidosis," a rare condition caused by an inability to produce enzymes. Drugs for enzyme replacement therapy are among the most expensive in the world, with some costing $380,000 a year.
Private insurance only works when there are enough healthy people paying premiums to more than make up for the claims submitted by those who are sick. And we don't have enough healthy people buying individual insurance to spread the costs, as many Alaskans have group coverage of some kind or government-paid care.
The small number of paying customers and the high cost of health care — with some ailing Alaskans running up tens of thousands or hundreds of thousands in claims — have proven to be a deadly combination for the market.
On Monday, one of the two remaining companies offering individual policies surrendered. Moda said it would need another enormous premium increase to keep offering policies to its nearly 14,000 customers in 2017. The annual increases have been in the 40 percent range for the past two years and all signs point to a three-peat.
Moda said it will stop offering coverage for individuals as of Dec. 31, but it will continue to provide group medical and dental policies and individual dental policies, categories not facing the same financial breakdown.
"At some point you can't keep passing these significant costs on to consumers," the Alaska director for Moda said in a press release about the individual medical market.
That will leave Premera as the only company offering individual medical coverage. It has about 9,000 customers and could pick up about 14,000 from Moda, depending upon how many people can afford insurance after the next round of rate hikes. A larger customer base could allow the costs of caring for sick people to be spread over more policies, but both companies have been running big losses.
Premera said it is taking in about $713 in premiums per policy holder per month and paying out about $919 a month because of the high claims in individual coverage.
The healthy people who make up the majority of the customer base have seen enormous rate hikes and are more likely to see injustice in this system than seriously ill customers who are far more worried about when or if they will ever be healthy again. While many customers qualify for federal subsidies, those who have decent jobs are paying amounts that rival home mortgages.
Another big increase is expected for 2017 from Premera, with the numbers on losses to be reviewed by the state Division of Insurance. Something has to give.
While the members of our congressional delegation continue to chant, "repeal and replace 'Obamacare,'" with emphasis on repeal and no detail on replace, it's more productive to look at specific fixes that Alaska can enact on the state level.
To that end, Rep. Kurt Olson, R-Kenai, has come up with what looks like a sensible plan. House Bill 374 would set up a system where the existing 2.7 percent tax paid on almost all insurance premiums in the state, that now goes into the state general fund, would help cover the medical claims of the sickest Alaskans who buy individual insurance. The House Labor & Commerce Committee gave unanimous support to the proposal.
Olson's plan, which modified a bill from Gov. Bill Walker, would not eliminate increases in individual health policies, but it could substantially reduce the rate of increase and make the system sustainable. Allocating the premium tax, about $55 million a year, would not be a miracle cure or erase all losses, but it would help the market survive.
The bill is in the House Rules Committee, awaiting action by the full House and Senate.
There is one more thing. On Wednesday, House Speaker Mike Chenault, R-Nikiski, ruled an amendment to provide health insurance coverage to the surviving dependents of police officers who die in the line of duty could not be placed in the crime bill. The amendment was not about crime, but about insurance, he said. I've come around to see the logic of his decision.
The amendment about law enforcement dependents, which has broad support among legislators, could be placed in House Bill 374, however, as that is an insurance bill.
Dermot Cole is a Fairbanks-based columnist for the Alaska Dispatch News. The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.