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Here’s how some Alaska workers save money running their own health plans

  • Author: Charles Wohlforth
    | Opinion
  • Updated: November 6, 2017
  • Published November 6, 2017

One group of Alaskans is relatively happy with their health coverage: union employees who manage their own. But those plans could go away if the state creates a Health Care Authority.

I talked to leaders of these health trusts to find out why they seem to be working. What I learned is that in this one corner of Alaska's broken health care market, interests are aligned. Customers have a voice in their health care purchases.

Alaska's health care system is the most expensive in the world, squeezing government budgets, impairing business competitiveness and crushing family finances. The political system has taken no effective action to address health costs.

Ways to reduce health care costs that are commonplace elsewhere in the U.S. aren't used in Alaska. We outlaw some and others haven't taken hold in our small, fractured market.

Union health trusts are an exception. They have worked here.

The concept grew in Alaska in the 1990s with government and school employee groups. Instead of an employer buying a health policy, it pays a negotiated fee to a trust managed by employees themselves.

The employees elect co-workers as a trustee board over the funds. The board decides what health benefits to offer and hires managers and claims administrators to work with providers. Workers pay premiums into the fund to cover costs above what the employer pays.

The system aligns incentives to hold down costs in administrator salaries, provider payments and employee use of care.

The Public Education Health Trust, which covers 17,000 Alaska teachers and other school professionals, has only three employees. It contracts with a small company in Billings, Montana, to handle claims. The plan's total overhead is about 3 percent — 97 cents of every dollar go to care.

Rhonda Kitter, who has managed the trust for two decades, said a survey showed members were extremely happy. I myself was covered by the plan for years and always found the service speedy and humane and the benefits excellent.

Kitter said the trust works because the teachers are in charge. She is passionate about supporting them, watching administrative costs, offering cost-saving choices, and bargaining for lower doctor fees.

She has negotiating leverage. Her group is large in Alaska's tiny market, so she can move a lot of business, but no bureaucracy keeps her from making rapid decisions.

When Anchorage's monopolistic orthopedic practice wouldn't play ball, she talked publicly about paying six times more for a knee replacement here than in Seattle. In July, she made a contract with the group for a significant discount.

In addition, as a self-paid group, the teachers' trust is not affected by the 80th percentile rule, a state regulation that that forces payment of a monopoly's inflated bills at 80 percent to protect patients from large balances. The exemption allows the trust to control its expenses and drive a better bargain.

State workers' ASEA-AFSCME local 52 Health Trust costs 5 to 7 percent less than the state spends on its own plans, said Michael Williams, who chairs the trust and himself works for the Department of Revenue.

"When you're talking hundreds of millions of dollars of spend in any given year, you're talking a pretty significant amount of money. Millions of dollars," he said.

Williams said the trust saves money on administration and grabs opportunities by avoiding the bureaucracy of state procurement. The plan also receives discounts through a buying club for 30 similar groups called the Health Care Cost Management Corporation of Alaska.

"The opportunities are already there, the state just isn't taking advantage of them," he said.

But state consultant Mark Foster warns against comparing health plan costs, because the needs of members are different. Younger workers are less expensive to cover. Foster doubts the union plans are saving much.

A state official said its administrative costs are only 4 percent.

Foster worked on the state's Health Care Authority report. That idea would gather up state and local governments and school districts into one huge group to force providers to reduce costs.

But if the unions are right, they're already saving more than the projections in the authority report. For bigger savings the authority would have to be aggressive, perhaps hiring its own providers or cutting reimbursements unilaterally and daring providers to hit patients with big balances.

I doubt state leaders have the guts for that.

The authority concept also faces a gauntlet between reluctant unions and wealthy doctor groups. Jim Duncan said it has little chance in the Legislature, where he served 24 years.

A former Commissioner of Administration, Duncan now is executive director of ASEA-AFSCME local 52.  He suspects the state has designs on its health trust financial reserves, but said union would defend the trust in court.

Other trusts associated with national unions could be even more difficult to take over.

Duncan suggested the trusts take the state's health plans rather than the other way around.

Meanwhile, Alaska hasn't done easier things to address the health care cost problem.

The 80th percentile rule is still in place. And we still have a state law that makes it impossible to run a managed care group in Alaska, a model that has worked for decades nationally.

Elsewhere in the U.S., some government and private plans have moved away from fee-for-service payments that reward doctors for doing more work regardless of need. But the alternative of value-based payment has barely started to be discussed in Alaska.

Before the early 1990s, Alaska health care costs tracked national averages. In that decade, the industry changed nationally with HMOs expanding and other controversial measures that at least partly controlled cost. Many of those changes didn't happen in Alaska.

That was when our costs split from the rest of the country, rising to today's unsustainable high.

The two trends may or may not be related. No sustained study of Alaska's health care market exists to tell us.

But today's situation points to opportunities. While waiting for a big idea like the Health Care Authority to transform our system, let's learn from our union neighbors and from other states to save money right now.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at) Send submissions shorter than 200 words to or click here to submit via any web browser.

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