On Thursday, the Alaska Division of Insurance announced hefty insurance rate increases in 2015 for Alaskans who purchased individual plans under the Affordable Care Act. As politicians spoke out to blame the increase on one another depending on their stance on the national health care law, Alaskans face more immediate questions about how and why they may be affected.
Who is affected?
Roughly 16,000 Alaskans who signed up for individual insurance plans under the Affordable Care Act will be affected by these rate increases, to varying degrees. These are Alaskans who signed up for individual health insurance after Jan. 1, 2014. Nearly all of these plans are through Premera Blue Cross or Moda Health.
Most of these Alaskans -- nearly 13,000 people -- signed up through healthcare.gov, the federal insurance marketplace. Of these, 88 percent qualified for federal subsidies that pay a portion of the premium costs. The remaining 3,000 Alaskans signed up outside of the marketplace and were not eligible for federal subsidies.
The more federal subsidies one receives, the less impact the increases will have. Division of Insurance Director Lori Wing-Heier said those receiving subsidies are "not going to see very much in change."
The state says that 6,000 Alaskans who do not receive any sort of federal assistance will be hardest hit by the increases. Premera Blue Cross communications director Eric Earling said those receiving minimal subsidies will also be affected.
Among the 6,000 Alaskans who did not receive subsidies, the state has included 1,100 Alaskans who signed up outside the marketplace through insurers other than Premera or Moda Health. Rate increases for those plans have not been tabulated yet, but the state expects similar increases, Wing-Heier said.
The rate increases go into effect Jan. 1, 2015.
What are the increases?
In 2015, Premera Blue Cross insurance rates will increase between 35 and 40 percent, Wing-Heier said. Those plans cover roughly 7,000 Alaskans. Alaskans who chose a silver plan (the most popular) through Premera will see an increase of 37 percent.
Moda Health plans will increase between 22 and 28.8 percent, according to Wing-Heier. These plans cover roughly 8,000 Alaskans, Moda regional operations director Jason Gootee said.
Rates for other insurers have not been finalized yet, Wing-Heier said.
What are the reasons cited for the increases?
Rates have been on the rise in Alaska for years. Over the past five years, individual health care plans have increased an average of 12.3 percent annually, Wing-Heier said.
Wing-Heier said 2015's greater increase is due to the small number of Alaskans on the individual market: "For insurance to work the way it's intended ... you pool your risk and spread it across the pool."
Insurers were facing "some very horrific claims" with "just not enough people" to balance it out, she said.
"It's bothersome to all of us here," Wing-Heier said, but "in order to stabilize the market ... we have to watch what we're doing today."
Premera Blue Cross outlined its reasons for the increases in a detailed press release Friday.
"There are not enough healthy members in Alaska's individual market to offset the cost of members with very high medical costs," the release states.
In the first six months of 2014, Premera received more than $7 million in claims from only 33 Alaska members on the individual plans, according to the release. That was roughly a third of all medical costs for all 7,000 members on the plan. Premera expects to lose $3.7 million in 2014 on these plans, the company writes.
"We need a 71.5 percent average rate increase to break even in 2015," the release states. In 2015, Premera is forecasting losses of $5 million, even with the rate increase.
Premera has asked the state to implement a reinsurance program, in which the state would reimburse insurance companies for losses. Those costs would be spread across the entire insured market, including large and small employers, in what Wing-Heier said would be "rearranging the chairs" but not solving the problem.
The state is reviewing the request, Wing-Heier said.
How does the state approve rates?
The state reviews insurance rates annually. "Rate filings are hundreds of pages," Wing-Heier said. "You go through this data, cost of claims, cost of expected claims ... basically look to price the product so it's not excessive but it's not inadequate."
The division approves rates based on historic results of the plan, according to Thursday's press release. Since these plans were all new in 2014, not much data yet exists. Historical data is "very, very limited," Wing-Heier said.
"We understand the data is not very credible, but it's all we have to use at this point," Wing-Heier said. "Right now we don't know if this is a trend or an anomaly."
The state can disapprove insurance rate plans, and until rates are approved, they are "quasi-disapproved," Wing-Heier said. She declined to say whether insurance companies had asked for higher rate increases, citing state statutes regarding confidentiality.
The division was also unable to provide additional reports or reviews of the rate filings, citing state statutes. No public hearings were held on the insurance rate increases, Wing-Heier said.
Why didn't the state apply for a grant to strengthen its review process?
Under the Affordable Care Act, the Division of Insurance was able to apply for grants through the Centers for Medicare and Medicaid Services to enhance its rate review process. Alaska was one of a handful of states that chose not to do so.
Wing-Heier said the department was already adequately equipped to review rates, and the grant program allotted a specific amount that Wing-Heier said would be too much.
"We didn't know what we would do with a million dollars because we already had the resources within the department," Wing-Heier said. "To simply take taxpayer money ... we couldn't do it."
This decision has been met with criticism by some, including the federal Department of Health and Human Services.
"Before the Affordable Care Act, Alaskans regularly faced double-digit rate increases on the individual market," HHS spokesperson Tasha Bradley wrote. "The state remains the primary insurance regulator and rate reviewer, and with a more robust rate review program, the state could offer Alaskans more affordable options to shop from on the market."
The NAACP also voiced disapproval.
"The Division of Insurance should use every tool in the toolbox to stop exorbitant insurance rate hikes," said Kevin McGee, vice president of the NAACP Anchorage, in a press release sent out in late July.
Reactions to the release
Susan Johnson, Alaska's regional director for the U.S. Department of Health and Human Services, said the announcement raises questions for consumers.
"What we're lacking is transparency about this," Johnson said. "Is this really justified? Is there another way to do it? What else is the office of insurance going to do to protect Alaskan consumers?"
In a Friday release by the NAACP, McGee blamed the increase on the governor.
"Sean Parnell rejected Medicaid, failed to police the health insurance companies, and now the chickens are coming home to roost as he signs off on health insurance rate hikes," McGee wrote.
Similar sentiments were echoed by Alaska U.S. Sen. Mark Begich, a Democrat who supported the national health care legislation.
"After leaving millions of dollars of federal funding on the table and refusing to accept the Medicaid expansion to cover tens of thousands of Alaskans, it is frustrating to now see the State and Governor Parnell try and pass the buck on to consumers," Begich said in a press release.
Rep. Don Young issued a press release preempting criticism that the state's announcement was unnecessarily politicized. Parnell and Young have both been openly critical of the Affordable Care Act.
"Some will dismiss these alarming numbers as a partisan attack on the president's health care law, but I assure you, for the 16,000 Alaskans paying higher rates in 2015 for the same or worse care, it's not political, it's painful," Young said in the release.
An earlier version of this story incorrectly reported the title of Lori Wing-Heier with the state Division of Insurance. She is the director not commissioner.
Alaska Dispatch Publishing