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Premera expects big cut in health insurance premiums on Alaska’s individual market

WASHINGTON — Premera, the sole insurer in Alaska's individual insurance market, announced Tuesday that it expects rates to drop more than 20 percent in 2018, a major turnaround for the beleaguered market.

Premera attributes the requested rate decrease of 21.6 percent — yet to be approved by the Alaska Division of Insurance — largely to the state's reinsurance program, which shifts claims from some of the highest-cost customers to a separate federal funding program.

"This rate decrease can be attributed to a number of factors, including the payment of high cost claims through the state's reinsurance program and a significant reduction in the use of medical services by our customers," Premera spokeswoman Melanie Coon said in an email.

But she cautioned that the rates — effective Jan. 1, 2018 — were a good sign but not a final one.

"While the rate decrease is an encouraging sign that the Alaska market is becoming more stable, we caution against drawing conclusions based on one or even two years of results. The Alaska market, due to its small size, remains volatile where the medical claims of a relatively small number of customers have the potential of greatly influencing financial results," Coon said.

Premera submitted the rate request on July 18, and the Centers for Medicare and Medicaid Services (CMS) posted it on its website Tuesday. The CMS website posts an even deeper cut in rates — 22.23 percent — than that provided to Alaska Dispatch News by Premera. That's because CMS calculated an average by equally weighing plan rates across the total population. Premera calculated the average by taking into account the actual number of people on the various available plans, Coon said.

The rate decrease assumes that Premera does not receive subsidies from the federal government known as cost share reductions (CSRs), Coon said.

That makes the proposed rate cut all the more remarkable at a time when many markets are on shaky ground. If the state does receive the CSRs, the rate cut could grow even larger.

President Donald Trump has repeatedly raised the possibility that he will order the federal government to stop making the subsidy payments after the Senate's failed attempts to pass health care legislation.

The federal government spends about $7 billion a year on subsidies to insurance companies to reduce deductibles and copayments for people of modest income. The Trump administration has the power to end those payments, and has been approving them on a month-to-month basis since the president took office.

On Tuesday, Sen. Lamar Alexander, R-Tenn., who chairs the Senate Health, Education, Labor and Pensions Committee, announced that the committee plans to begin holding health care hearings the week of Sept. 4. The focus will be on "actions Congress should take to stabilize and strengthen the individual health insurance market so that Americans will be able to buy insurance at affordable prices in the year 2018," Alexander said.

Insurance companies that operate on the federal exchange must sign contracts with the federal government by Sept. 27, Alexander said.

"There are a number of issues with the American health care system, but if your house is on fire, you want to put out the fire," he said. "And the fire in this case is the individual health insurance market. Both Republicans and Democrats agree on this."

Alaska Sen. Lisa Murkowski, who is a member of the HELP committee, said she was happy to hear that there would not only be hearings, but also a process to draw input from senators who are not members of the committee.

"And I hate to keep hounding about process, but this is what people want to see," Murkowski said, noting that she heard from Alaskans over the weekend who wanted to watch the debate over health insurance play out in public.

Alexander said he expects that the Senate will be able to take bipartisan action on the limited role of federal subsidies in the individual insurance markets by the end of September.

Until then, he said, he has asked the president "to temporarily continue the cost sharing reduction payments through September, so that Congress can work on a short-term solution for stabilizing the individual market through 2018."

In exchanges outside Alaska, estimates have shown that premiums could go up 20 percent without the subsidy payments.

Premera calculated its rate decrease assuming that no CSR payments would be made in 2018. But with the results of the reinsurance program and the federal "1332 waiver," premium prices still saw a stark drop.

The waiver program will send $300 million in federal funds to Alaska over the next five years for a program designed to drive down premiums. The program covers claims in the individual market for people with one of 33 high-cost conditions, so that costs can remain stable for others in the program. Alaska's relatively small individual health insurance market has struggled with the costs imposed by a small number of people with extremely high-cost health care needs.

The Alaska Division of Insurance has asked Premera to revise its filing to include an assumption that the state would also receive subsidy payments.

"That work is underway and would likely cause the decrease to change," Coon said.

Asked about the Senate's trajectory for health care legislation Tuesday, Alaska Sen. Dan Sullivan said that he's going to continue working on proposals and legislation to "help the people who are hurting." He said he expects anything that would come out of the committee to "be more piecemeal."

"I think the next question of what has to happen is the payment right now," he said. Sullivan said he doesn't "want people to get hurt. So I would be supportive of making those payments."

Murkowski also said she'd like to see the subsidies remain in place in the "short-term for market stabilization."

"So I know, certainly nobody wants to be in a spot where you're saying, 'oh, bailing out the insurance companies.' But if you recognize that what this does is to stabilize the market so that the insurance companies don't send the premiums through the roof, then I think that they see the benefits to the individual families," she said. "So we'll see what he does," she said, speaking of Trump.

Speaking before Premera released the numbers, Sullivan said he had been given advance information from the insurance company but he was hesitant to share the details while the numbers were still under revision.

Nationally, things are looking worse, he said.

But, given the 1332 waiver, Sullivan said that the company was signaling that "we'll see for the first time a reverse in the spike in premiums that you know Alaska has been subject to more than any other state in the country."

"They had not shared with us the number," but Premera had said that several factors, including the 1332 waiver funding, would bring premium prices down in 2018, Murkowski said Tuesday evening when informed of Premera's expected cuts.

Another temporary issue, related to Moda's exit from the market last year, played into the dramatic reduction in rates, Murkowski said.

"I do think, though, as we're talking about things that we can do to make a difference, you have a real live example now in Alaska of how this reinsurance can actually work and why it makes sense to make sure that the 1332 waiver is a process that is relatively efficient," Murkowski said.

The considered but now-abandoned Senate GOP health care legislation included provisions to "streamline" the waiver process, Murkowski said, noting that she'd like to see that considered as a way to stabilize the market going forward.

"I think Alaska is probably going to be in a better place when they're looking at the rates than a lot of these other states are now. But again, what we need to remind them is that the state of Alaska had to put $55 million up in order to get to that place. So it's not as if it did not come without skin in the game for Alaska too," Murkowski said.

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