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States look to Alaska as Senate attempts to shore up individual health insurance markets

  • Author: Erica Martinson
  • Updated: December 2, 2017
  • Published September 6, 2017

WASHINGTON — Alaska's head of insurance urged U.S. senators to consider several strategies to offer stability to the state's fledgling individual insurance market Wednesday, at the first bipartisan hearing since Congress failed to overturn "Obamacare" in July.

Talk of more certainty in federal funding, expanding a state waiver program and potentially allowing buy-ins for a federal marketplace comes as other states struggle to replicate Alaska's successful "reinsurance" program. While 2018 rates are expected to rise across the nation, authorities expect individual insurance rates to drop 20 percent to 25 percent in Alaska.

Though Wednesday's hearing before the Senate Committee on Health, Education, Labor and Pensions (HELP) was only the first, lawmakers said they are planning to move in a quick and targeted manner.

Alaska Sen. Lisa Murkowski, who sits on the committee, said she thinks that the Senate can act before the end of the month by focusing on a few discrete issues.

"I think we can get those specifics worked out within the next week and a half here," she said. The goal is first to shore up struggling individual markets, she said. Subsequent steps will focus on reducing the overall cost of health care.

Committee Chairman Lamar Alexander, R-Tenn., said at the start of the hearing that he had hopes of moving the process quickly, coming up with a plan to vote on this month, based on the hearings taking place this week and next.

Democrats will have to bend and agree to give states more flexibility, and Republicans will have to bend and agree to more funding, Alexander said.

The committee's top Democrat, Sen. Patty Murray of Washington, urged a multiyear solution, lest the panel end up right back where it started a few months from now.

Alaska's director of the Division of Insurance, Lori Wing-Heier, was a star witness at the hearing, describing how the state had managed a feat — premiums that are going down, rather than up — that other states want to replicate.

All is not rosy in Alaska's individual market. While the number of people covered has grown, costs have risen dramatically because of the requirements of the Affordable Care Act — both for coverage and requiring companies to offer plans to people with expensive pre-existing conditions. In 2013, individual premiums cost $344 a month, Wing-Heier testified. In 2017, they averaged $1,041 a month.

Wing-Heier joined insurance chiefs from Tennessee, Washington, Pennsylvania and Oklahoma.

Wing-Heier didn't just speak to the HELP Committee members Wednesday. Earlier, the committee invited those testifying to a morning coffee with whichever senators wanted to come. Thirty-one of them showed up.

"It was very good. It was informal," Wing-Heier said. "There were a lot of questions for all five of us about what we needed to see in market stability from reinsurance to the cost sharing, health care, pharmaceuticals, much like you heard today but in a less formal setting."

A top issue that the committee members hope to resolve this month is how to manage cost-sharing reduction (CSR) payments — the federal funding to insurance companies that's designed to keep premium costs down.

Across the board, commissioners told the senators that they want to see certainty in CSR payments. President Donald Trump has repeatedly threatened to cut those payments, and has so far allowed them to move forward on a month-to-month basis.

The idea of funding longer-term CSR payments has more bipartisan support than most options, so it's a likely candidate for any targeted legislation in the near-term. How long Democrats and Republicans might agree on establishing payments, however, remains unclear.

In Washington, the CSRs mean the difference between a $1,200 deductible and a $14,000 deductible for plans on the individual market, said the state's insurance commissioner, Mike Kreidler. He urged the committee to "take bold action now to shore up these markets," as "millions of hard-working families and individuals are counting on it."

Wing-Heier told the panel that the CSRs need to be authorized for at least two years to get a solid commitment out of insurers. She also said that she expects to see another insurer enter Alaska's market if there is long-term funding for the CSRs.

Murkowski was confident about prospects for a bipartisan consensus on CSRs.

"I think the issue will be how long that is, whether it is one year, two years or perhaps longer-term," she said after the hearing.

Throughout the hearing, Wing-Heier and Alaska were front and center, given the state's early success with using Section 1332 of the Affordable Care Act. The provision allowed Alaska to adjust how federal funding flows to the state's insurance market, and will lower premiums by as much as a quarter in 2018.

Wing-Heier explained how it works to the committee members Wednesday: The state put out a call for data from its only remaining individual market insurer — Premera — and determined which conditions were skewing the treatment costs and bringing up costs for everyone in the pool. With fewer than 20,000 people in the market, a few ill members can make the market unprofitable for everyone else.

Wing-Heier and her cohorts in the Walker administration convinced the state Legislature to let them shift insurance tax revenues from the general fund to a program that would cover those conditions. In 2017, with $55 million in state funding, premiums went down 7 percent.

The sweetener for the state Legislature: a then-little-known part of the Affordable Care Act known as the "1332 waiver." It allowed states to shift federal funding to any innovative program that brought down premium prices.

When Alaska's Legislature approved the program, the state was facing some fairly dire circumstances. Moda had just left the individual market, and many wondered if Premera would be next. State "legislators got a lot of phone calls," said Commerce Commissioner Chris Hladick.

It took Alaska months to work through the application with the help of the Obama administration, and it was six more months by statute — and then a change in administration — before the Trump administration approved it.

Alaska's Legislature and the Walker administration were far ahead of the Lower 48, however.

More than 20 states have begun the process to apply for 1332 waivers now. Only Alaska and Hawaii have received them.

Other states are going to have a "tough hurdle," Wing-Heier said, particularly getting approval from state legislatures to apply for a waiver.

"We've talked to probably 40 states, and all would like to be able to do something like Alaska. But they all face obstacles — from legislatures that meet every other year to legislatures that don't want to put up the funding," Wing-Heier said.

Senators asked a lot of questions about reinsurance at the hearing — and broadly heard from the state commissioners that they need authority to apply for it without legislative approval. Wing-Heier also suggested speeding up the approval process. Others asked for funding to cover the application process and the ability to combine waivers for the individual market and Medicaid programs.

Not everyone is sure that waivers are the right choice. Oklahoma's insurance commissioner, John Doak, said he isn't convinced — though the state has applied for a waiver.

"We should have the opportunity to do something different," he said. "I do not think the government will ever fix health care. The markets will."

Lawmakers also seemed primed to consider allowing alternate types of individual plans.

Upon questioning from Maine Republican Sen. Susan Collins, Wing-Heier said Alaska is very interested in being able to allow healthy young people to buy "catastrophic" insurance plans, particularly combined with health savings accounts.

Murkowski — who, along with ultimately voting against "Obamacare" repeal, has been a strong proponent of having bipartisan hearings — questioned whether there is a long-term workable plan, given such a small individual market in Alaska. Instead, why not allow people to buy into an existing plan, she wondered during the hearing and after.

"When you have markets that are under-served … is it possible to have an option or an opportunity to buy into another system?" Murkowski asked in an interview after the hearing. A group of governors, including Alaska Gov. Bill Walker, recently sent a letter to Congress that suggested allowing a buy-in to the federal employee plan — an idea that Murkowski raised as well.

During the hearing, Murkowski and Wing-Heier both spoke about the oft-mentioned prospect of buying insurance across state lines, which they agreed is an unlikely option for Alaska. Because of the state's high costs, "we're not attractive to anybody," Murkowski said. State officials have looked into prospects in the past, and are not opposed, Wing-Heier said. But so far, "no one's wanted us. … We would be bringing the rest of the market down."

Wing-Heier also told the panel that Congress should do something to shore up "navigator" funding that the Trump administration said it would cut by 40 percent. Rural areas of Alaska don't have insurance agents on every corner who are able to help sign people up for the individual market, Wing-Heier said.