OPINION: Alaska should drop 80th percentile rule, offer public option for health care

The 80th percentile health insurance regulation is once again being reviewed by the Alaska Division of Insurance, and I recommend the department finally repeal this destructive regulation. Recent federal legislation restricting surprise medical billing has made the insurance commission’s justification for the 80th percentile regulation obsolete, unnecessary, and the regulation is now doing a lot more harm than good.

Alaska’s health care providers and the care that they provide are as good as anywhere in our country, but our health care payment structure (which they did not create) has been an economic disaster for both the Alaska state budget and private enterprise. Alaska has, quite literally, the highest health care prices in the world. How did we get here? The 80th percentile regulation sure helped. Providers in Alaska didn’t design our insurance payment system and shouldn’t be faulted for it, and indeed many have done very well economically (including myself) merely for being busy and good physicians. That’s capitalism and that’s good, but the pricing economics have been too far out of balance, without real market competition, for too long — and our health care payment structure has to change if Alaska is to get well.

Those opposed to repeal are trying to convince you, the Legislature and the Division of Insurance that the sky will fall here in Alaska if this regulation is repealed. It won’t. In fact, in so many ways, the sky has already fallen. Outmigration and jobs are clearly Alaska’s biggest issues. We’ve been hearing so much about Alaska’s decade-long decline in so many metrics that nearly all of us agree that something major has to change to reverse this process. People won’t even come here to look, no matter how many degrees our university offers or how high our BSA is if there isn’t a job. Job creation requires an economic environment that is favorable or at least competitive with other markets, and Alaska is not even close, in large part because of health care prices.

Advocating for repeal of the 80th percentile regulation was the very first issue that I became publicly outspoken about back when it was last reviewed in 2017, because as a physician, and understanding our state’s economy, I and many others have seen just how much damage this regulation has done to our state.

The 80th percentile rule has been, by far, the single biggest reason as to how health care prices got disproportionately high in Alaska. Enacted in 2004 with the intent to protect consumers from surprise bills, the 80th percentile regulation has forced insurance companies to keep raising the “usual and customary” payment bar higher and higher at the whim of non-participating providers (which, in 2004, included virtually every provider in the state). Now the majority of urban providers have become “preferred providers” of most Alaska health insurance companies, meaning they have accepted negotiated payment agreements. But those negotiated numbers are based upon the super-inflated numbers which the 80th percentile rule enabled in the first place. And there are a number of outlying nonparticipating providers who still qualify for this regulation and continue to raise prices. Repeal of the 80th percentile rule would be the first and easiest step toward stopping the upward trend of health care prices. But for prices to come down significantly, we need true market competition, and I believe that should include a public option, administered by the state (or less likely, the federal government).

An Alaska-run public option would cost participants a great deal less than private plans, create competition in the marketplace, and loosen the death grip holding back our businesses and overwhelming our state budget. Allow Alaskans to buy in, at cost. Skip the middleman. That’s not socialism. Our state government is supposed to help provide an environment that is friendly for private enterprise to flourish. And our governor has the authority to create such a public plan. A public option would be a monumental positive change for Alaska, and it could be done without compromising access, care or cost to the state. It could be done in parallel with private plans.

You may have noted that our state Senate’s newly proposed defined-benefit retirement plan, which we need so very badly to help with recruitment and retention of employees, is missing one key component for success: health care. Why? It costs too much.

Al Gross is an orthopedic surgeon and has a master’s degree in public health. He is a lifelong Alaskan and lives in Anchorage.

The views expressed here are the writer’s and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser. Read our full guidelines for letters and commentaries here.