Alaska News

Budget politics threaten Alaska’s federally funded health insurance relief program

The Alaska House of Representatives reversed course June 28 to make sure the whole state government won’t shut down July 1, but politics will still leave many longstanding and broadly popular programs unfunded for the foreseeable future, including one that has been successful in reducing private health insurance premiums.

Legislators on the budget conference committee attempted to pressure their colleagues to vote for Permanent Fund dividends of about $1,100 per person by tying the larger amount to funding the Power Cost Equalization subsidy for rural residents, the state’s school bond debt payments to local governments and $114 million in oil and gas tax credits; paying the oil and gas tax credits has been supported by many of the Republican advocates for larger PFDs.

Much of the funding for the PFD and the other impacted programs in the fiscal year 2022 budget was made contingent upon a favorable vote for the now-annual draw from the state’s dwindling savings account, the Constitutional Budget Reserve, which requires a three-quarters vote in both the House and Senate to access its funds. An affirmative CBR vote also authorizes a technical action, known as the “reverse sweep,” that restores program funds at the start of each fiscal year due to a constitutional requirement.

However, the CBR vote failed in both the House and the Senate, resulting in a slew of un-or underfunded programs and capital projects, and PFDs of approximately $525 per Alaskan, at least until the Legislature convenes again.

[Dunleavy signs state budget but delays veto announcement]

Among the unfunded programs is one that only required lawmakers to approve the acceptance and transfer of federal funds to help offset the unusually high cost of individual market health insurance plans in Alaska.

The state’s first-of-its-kind reinsurance program, approved by lawmakers in 2017, lowers the cost of health insurance premiums for individual market enrollees by directing the premiums of high care utilization or catastrophic health cases to the Alaska Comprehensive Insurance Association, a nonprofit.

The insurance group then goes to the broader individual market to spread out the costs for those individuals, lessening the cost to individual insurance providers. After rising to the highest in the nation, Insurance premiums for individual plan holders have mostly decreased each year since the program took effect.

Alaska was eligible to receive approximately $78.5 million from the U.S. Department of Health and Human Services to support the reinsurance program through a 1332 innovation waiver, according to a March statement from the state Division of Insurance, but budget language tying the reinsurance program to the reverse sweep means the program is currently unfunded for the 2022 and 2023 fiscal years, according to some House Democrats.

Department of Commerce, Community and Economic Development spokeswoman Glenn Hoskinson wrote via email that the funding level for the reinsurance program the next two years is unknown, but noted that it is funded on a calendar year basis. The average premium for a consumer on a Bronze marketplace plan was $435 per month in 2020, which was down about $100 per month versus 2018 rates, according to the Kaiser Family Foundation.

The House adjourned sine die nearly immediately after approving an effective date for the existing budget to avoid a government shutdown but did not address the CBR vote, all but assuring the host of impacted programs will start the fiscal year without the necessary funding.

Senate President Peter Micciche, R-Soldotna, said in a statement provided by a Senate Majority spokeswoman that the caucus will have internal meetings and discuss with other legislators the prospect of addressing the CBR and potentially other items before the next special session called by Gov. Mike Dunleavy — the third this year — begins in early August.

“There’s still more work to be done: the three-quarter vote, reverse sweep, etcetera. If there’s a way of coming to an agreement for short-term sessions prior to the special session, I believe we would have the opportunity to be a lot more productive,” Micciche said.

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