Alaska's only insurer on the individual insurance market will raise its rates nearly 10 percent in 2017, a significantly smaller increase than those seen in the past two years, thanks to a $55 million cash injection from the state.
On Monday, Premera Blue Cross announced an average rate increase request of 9.8 percent come January. That's far less than in either 2014 or 2015, when policy rates jumped nearly 40 percent.
The rate increase applies to about 7,000 current Premera plans. Alaskans who are now covered by Moda Health, which is exiting the market next year, will see a somewhat higher average increase, said Division of Insurance director Lori Wing-Heier, although she did not know by how much. About 75 percent of Alaskans on the market receive subsidies from the Federal government for their plans.
With a relatively small individual market like Alaska's, there's no way to spread those costs without taking a huge loss, Premera has argued.
"We believe this solution will build a more stable and sustainable market, without significant swings in premiums," spokeswoman Melanie Coon wrote in a press release. "It could also make the market more competitive by ideally attracting more health plans and increase consumer choice."
The reinsurance program will be funded by the state's insurance premium tax, a roughly 2.7 percent tax levied on every insurance policy in the state, including renters, life, automotive and health insurance, Wing-Heier said. House Bill 374 passed the Legislature on June 4 and Gov. Bill Walker signed the bill Monday afternoon, according to Wing-Heier.
"(The costs are) going to be spread out basically to everybody in the state," she said.
Last year, $65 million was collected from the premium tax. That money had been going into the state's general fund. For the next two years, $55 million will be dedicated to paying high-cost claims, Wing-Heier said, and she expects all of that money to be used for the program.
The program will work by taking Alaskans with the highest-cost conditions — such as hemophilia or muscular dystrophy — off the individual market and into the Alaska Comprehensive Health Insurance Association program, which already has the staff to take on those claims, Wing-Heier said.
"We were between somewhat of a rock and a hard place," Wing-Heier said. Two insurers left the individual market last year. Then, Moda Health announced in May that it would leave the market, with only Premera remaining. After Moda's exit, Wing-Heier warned legislators that the system might go into a "death spiral" should no action be taken.
"If we lost Premera we would have been down to no one in the individual market, so in looking at that, I think that desperate times call for desperate measures," Wing-Heier said Monday.
The program has a sunset clause of two years.
"The Legislature gave us a very strong message that they're supportive of the concept … but they're not supportive of funding it from the general fund forever," Wing-Heier said.
The state will look at other ways to reduce health care costs, she said.
The bill also authorizes the state to begin an "Innovation Waiver" process that would exempt Alaska from key Affordable Care Act requirements should Alaska be able to provide the similar benefits and consumer protections. A few other states are also pursuing the waiver.
About 23,000 Alaskans get their health insurance through the individual market, a component of the Affordable Care Act that went into effect in 2014.