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After subsidizing health care marketplace, Alaska hopes feds will cover some of the cost

  • Author: Laurel Andrews
  • Updated: November 30, 2016
  • Published November 30, 2016

In July, the Legislature approved spending tens of millions of dollars to keep Alaska's individual health insurance market stable. Now, the state says the program is saving the federal government money, and it's asking for those savings to be passed back to Alaska.

In an application posted Wednesday, the Division of Insurance says it is seeking federal funding to subsidize its reinsurance program.

Under that reinsurance program, the state is spending $55 million in both 2016 and 2017 to pay for medical care for Alaskans with the highest-cost conditions, who have been getting insurance on the individual market.

With the highest-cost claims off the small individual market, Premera Blue Cross Blue Shield of Alaska, the state's only insurer on the individual market, raised premiums by 7 percent instead of the nearly 40 percent increases it had seen in the two years prior.

And with those Alaskans off the individual market, the federal government is saving money, too, the state says.

The federal government pays tax credits for Alaskans getting their insurance on the individual market who fall within a certain percentage of the federal poverty level.

Ninety percent of people on the federal marketplace received subsidies in 2016, an independent actuarial report says. The federal government has spent $135 million in tax credits this year, according to the report.

Because of the state's reinsurance program, in 2018, the federal government will save $51.6 million in tax credit costs, according to the actuarial report. The Insurance Division hopes those savings will return to the state.

"It's not quite 1-to-1, but it's a good start," said Lori Wing-Heier, division director.

Should the application be approved, federal funding would begin in January 2018, and continue for five years. The state will not know if its request is accepted for at least six months, according to Wing-Heier.

In May, Wing-Heier warned Alaska legislators the market may "go into a death spiral" without intervention. In July, the Legislature approved using $55 million for each of the next two years to prop up the market.

"Alaska has an extremely fragile health care market … without a permanently funded (reinsurance program), rates in the individual health care market are expected to rise at an unsustainable rate," the application says.

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.