OPINION: It’s time for Alaska to repeal the 80th percentile regulation

Normally, being No. 1 is a badge people wear proudly. We all want a first-place ribbon and the accolades that follow.

This is not one of those situations.

Alaska has the highest health care costs in the country. According to a 2018 University of Alaska Anchorage report, the average annual increase in health care spending in Alaska between 2005 and 2014 was $376 million. Being first place in health care costs is not something any of us want to be.

However, we have a once-in-a-lifetime moment to make a change.

The Alaska Division of Insurance (DOI) is holding hearings to consider abolishing Alaska’s 80th percentile regulation. This regulation was enacted in 2004 to protect patients from surprise billing, which occurs when medical providers bill a patient for the difference between the amount they charge and the amount that the patient’s insurance pays.

However, it allows doctors and hospitals to increase charges over time, with little incentive to keep costs low or to join insurance networks. Instead of simply protecting patients from unexpected costs, it has contributed to Alaska’s soaring health care expenses.

With the passage of the Federal No Surprises Act in 2022, which protects consumers from surprise billing, the 80th percentile regulation is no longer needed. We urge the DOI to abolish the 80th percentile regulation. This will make health care more affordable for Alaskans.

A report states the 80th percentile regulation accounts for “between 8.61% and 24.65% of the increases in expenditures the state has experienced over the last decade. These results are statistically significant and robust.” This increase is typically borne by employers and consumers directly.

The Congressional Budget Office estimates that the federal law will reduce commercial insurance premiums by up to 1%. This would save taxpayers $17 billion over 10 years and save consumers about $34 billion in reduced premiums and cost-sharing. Add this savings to the reduction of health care costs if the 80th percentile regulation is repealed, and Alaska employers and residents will have more money for their bottom line and pocketbooks. This means more money can be invested in building the workforce, supporting local businesses, and strengthening other economic development.

The other unintended consequence is that the 80th percentile has provided health care providers with an open door to keep increasing rates. As an example, Alaska has a small number of providers in certain areas and it is easy to drive the cost of care up by 20-30%, forcing the 80th percentile to float up with it.

It is also important to note that no other state in the United States has anything like the 80th percentile

The state regulation discourages providers from being in-network with health plans because they know they can demand a higher reimbursement rate thanks to the 80th percentile regulation. This drives up costs for Alaska employers and patients.

With the Federal No Surprises Act in place, now is the time to repeal the 80th percentile regulation. It is the right thing for Alaska -- we simply can’t afford to be first place in rising health care costs. Join us in asking the DOI to repeal this regulation. Go online to learn more about how to make your voice heard.

Jim Grazko is the President of Premera Blue Cross Blue Shield of Alaska, a leading health plan based in Anchorage. The company and its predecessors have operated in Alaska since 1952.

Katherine Gardner is the Human Resources Director of the Matanuska-Susitna Borough School District, which is the second largest school district in Alaska. It serves about 40 schools across the Mat-Su Borough.

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