Monthly bills for Alaskans using the federal health insurance marketplace are set to rise some 16% in 2024 — coming on top of an 18% increase in the previous year that, in total, will bump up costs by more than one-third in a two-year span.
Higher overall health care costs and a post-pandemic spike in the amount of health care sought by Alaskans are driving the jump in monthly premiums, according to interviews with a top state regulator, an insurance executive and Alaska’s chief medical officer.
Insurance company profits, they added, are not the cause. Premera Blue Cross Blue Shield, whose 20,000 members make up some 80% of the 24,000-person individual market in Alaska, recorded $26.5 million in operating losses providing that coverage last year, it said in a filing with the federal government.
“Nobody in this administration is happy about these rate increases,” said Lori Wing-Heier, Alaska’s insurance director, whose office regulates the individual market and is legally required to reject “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 justified, based on how they closed out the year-end in 2022,” she said. “No matter how much it hurts, you’ve got to deal with reality.”
The year-to-year increase in Alaska’s individual market is among the highest in the nation, in a state that already has some of the nation’s steepest health care costs. The enrollment period for 2024 coverage began Nov. 1, and continues through Jan. 15.
For a 40-year-old Anchorage customer, monthly premiums for one of Premera’s mid-level “silver” plans are set to jump to $1,106 next year, up from $961 this year, according to a state analysis shared by Wing-Heier. Rates depend on location and age, and monthly premiums for other, less-comprehensive plans cost as little as $306.
Many Alaskans also will not pay the full cost of their plans.
Last year’s Inflation Reduction Act extended, through 2025, substantial federal tax credits for premiums. Depending on a customer’s income level, the credits can cover the entire monthly cost, up-front. (The federal insurance marketplace website, healthcare.gov, walks consumers through the process.)
Even for those earning four times the federal poverty level or more, the credits can still limit premiums to 8.5% of a person’s household income. And Native people can also qualify for premium assistance through the Alaska Native Tribal Health Consortium.
“You might be surprised that you qualify for subsidies,” said Dr. Anne Zink, Alaska’s chief medical officer. “I think there’s a lot of people that don’t even check.”
Most Alaskans get their health insurance not in the individual market but through employer-sponsored group coverage, or the government-sponsored Medicaid and Medicare programs. Small group premiums are still rising but more slowly — some 6% on average in 2024, following a 6% increase between 2022 and 2023, according to state data.
But Zink said that more residents may be seeking out individual coverage after the recent expiration of a pandemic-related ban on states disenrolling people from Medicaid.
The past two years of steep increases in the individual market came, experts said, as Alaskans sought medical care they may have postponed during the pandemic — a trend that’s played out across the country.
“Let’s say 5% of the population needed to have a knee replacement and they don’t get it in 2020. In 2021, 2022, they’re still a little reluctant,” Wing-Heier said. “In 2023, we all think, ‘COVID’s over, and I’m getting it done now.’”
Higher demand for health care directly translates into higher monthly premiums, since 90% of premiums go toward covering the cost of care, said Jim Grazko, Premera’s president for Alaska.
“People are using more services,” Grazko said. “And the services they’re using are costing more, per service.”
Group premiums in Alaska have remained more stable, Grazko added, in part because that market is spread across a larger pool of members who are, generally speaking, less likely to need care: Individual customers are more likely to buy insurance only when they’re sick, while businesses or government agencies will enroll employees even if they’re 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’re outside the insurer’s network, Grazko said. In Washington, Premera offers a plan with no out-of-network benefits that’s 15% cheaper than an alternative plan with some out-of-network coverage.
“That might be another way for consumers to be able to have a choice of a lower-cost options, premium-wise, in exchange for maybe a narrower network or a little bit less choice on the provider side,” he said.
Grazko and Wing-Heier both said the rate increases in 2024 are smaller than they would have been without a major policy step by Alaska GOP Gov. Mike Dunleavy’s administration: repealing what’s known as the “80th percentile rule.”
The rule, originally intended as a consumer protection, requires private insurers to pay for out-of-network service at rates that meet the 80th percentile of all bills for that service in the geographic area. Its repeal takes effect Jan. 1.
Some providers opposed the move, saying it would effectively force them to join insurers’ networks, accept unsustainably low payments for their work and even force them out of the state.
But critics, including Premera, said the rule was driving up the cost of health care by allowing providers to remain outside insurers’ networks while still charging and receiving steadily increasing fees. One economic study found that the rule was responsible for between 8% and 25% of Alaska’s growth in health care spending between 2005 and 2014.
Grazko said Premera’s 16.7% average rate increase in 2024 would have been some 18.5% without the rule’s repeal.
With the repeal set to take effect, Wing-Heier said her parent agency, the Department of Commerce, is now soliciting broader input on health care costs and payment systems in Alaska.
The department issued a “request for written input” earlier this month on subjects like payment calculations, new payment models worth considering and “ways to pay for value-based care.” It invited “all stakeholders and consumers” to participate before a March 1 deadline.
“It’s us asking what you would do, or what you’d love to see,” Wing-Heier said. When it comes to rising costs, she added, “we know that doing anything about it is not a simple fix. You’ve got the providers and you’ve got the consumers and somehow, working with all of these parties, we’ve got to address this in Alaska.”