The first disbursement from the federal government to help cover Alaska's high-cost individual insurance market pool was announced Feb. 9 at $58.5 million for 2018, an amount higher than projected.
The funds come after the state was approved for what's known as an "innovation waiver" under Section 1332 of the Affordable Care Act that will allow it to continue the Alaska Reinsurance Program, or ARP, created by the Alaska Legislature in 2016.
Lori Wing-Heier, the director of the Alaska Division of Insurance, said the Centers for Medicare and Medicaid Services calculation of $58.5 million means Alaska's portion will be smaller than expected at $1.5 million.
After consecutive years of nearly 40 percent premium increases and down to just one company offering insurance in the individual market, the Legislature established the program to reinsure claims for Alaskans with high-cost medical conditions and isolate the higher costs from the majority of people in the insurance pool.
The creation of the ARP led to a smaller premium hike in 2017 and a decrease in premiums of more than 20 percent in 2018 for about 18,000 Alaskans in the individual market.
The Division of Insurance filed for the 1332 waiver in December 2016 to use the federal savings from reduced Affordable Care Act premium tax credits to help offset the price of the reinsurance program. The savings in premium subsidies are key as the waiver must be budget neutral.
The Legislature used $55 million from existing insurance policy taxes to cover the cost of the program in 2017.
Under the waiver, the ARP will receive $332 million in federal appropriations over five years, the Centers for Medicare and Medicaid Services and the U.S. Treasury Department announced in July 2017. At the time, it was estimated that the CMS would kick in about $48 million to match with the state's $11 million portion in 2018.
"The CMS award was more than we were expecting, reducing the amount that the state will need to contribute for CY2018," Wing-Heier wrote in an email.
The money will be disbursed over a calendar year, rather than an Alaska fiscal year, which begins July 1. The federal fiscal year runs from Oct. 1 to Sept. 30.
"The ARP is set at $60 million (maximum) for the individual market and the award was $58.5,"she wrote.
But Wing-Heier cautions that this is the estimated amount and subject to a true-up at the end of the calendar year.
"But we are not expecting any significant deviation from the award when the true-up occurs," she wrote.
In the meantime, since applying for the waiver and receiving it, Alaska's insurance pool enrolled on the individual market has settled at about 17,357 people, said Steve Kipp, vice president of corporate communications with Premera Blue Cross Blue Shield. Premera is Alaska's lone remaining insurance company serving the individual market.
That number includes those who enrolled during the open enrollment period from Nov. 1-Dec. 15, Kipps said.
Premera, in announcing its 2018 rates last August, filed insurance rates that were 21.6 percent less than the previous year's insurance plans. Then in September, the rates were lowered more, an overall 26.5 percent, after Premera found a significant reduction in the use of medical services and due to lowered costs in the reinsurance program. The reduced services also allowed Premera to refund $25 million back to the state.
Gov. Bill Walker announced the CMS award Feb. 9, lauding the reinsurance program, a unique program built by the Alaska Division of Insurance, the Alaska Legislature and the federal government.
"We have created an innovative solution to stabilize the market, which other states are now attempting to replicate," Walker said. "We are committed to developing smarter solutions like the Alaska Reinsurance Program so that all Alaskans have access to affordable health insurance."
Alaska's small population — and therefore small individual insurance market pool — creates challenges, Wing-Heier acknowledged. The smaller the pool, the fewer people there are to absorb the costs.
"But while premiums in the individual market are rising sharply in most states, because of the reinsurance program Alaskans saw only a modest rate increase in 2017 and a 22 percent decrease in the average individual market plan in 2018," Wing-Heier said.
It was the first time the average rate had decreased under the current federal health care law in Alaska, where high health care and premium costs have been an ongoing concern as some of the highest in the nation. Rate increases were nearly 40 percent in 2015 and 2016, but stabilized in 2017 with a 7 percent increase after the ARP was created.
The president of Premera's Alaska office said at the time it was too soon to assume the lower rates are the start of a trend.
"However, we believe the state's reinsurance program without question has contributed to a more stable and affordable individual health insurance market," Jim Grazko said in a statement.