Alaska individual health insurance rates to drop by 26.5 percent

Here’s a little badly-needed good news on health insurance.

Premera Blue Cross Blue Shield of Alaska, one of the state’s largest medical insurers, said it will reduce its rates for individual health insurance policies in 2018 by 26.5 percent.

The rates, filed Sept. 19 with the state Division of Insurance, apply to individual and family policies sold in the federal Affordable Care Act exchange for Alaska.

Average monthly premiums will drop from $1,000 to $770 under the new rate, Premera said in a press release. The figures are before any subsidy allowed for lower-income Alaskans in the insurance exchange.

Premera had filed a preliminary 2018 rate with a 21.6 percent decrease earlier this summer but increased it to a 26.5 percent decline after a final analysis of recent claims data, said company spokeswoman Melanie Coon.

The individual health insurance market is relatively small in Alaska, with about 16,700 individuals and families covered – the bulk of Premera’s customers are in group policies with employers – but the individual market has been extremely volatile due to unusual circumstances, including some related to the federal Affordabe Care Act.

The company’s employer health insurance groups, even its small group for employers with up to 49 workers, have been relatively stable. Coon said the small employer group will see a modest 4 percent premium increase this year.

Policy holders in the individual market include self-employed professionals and their families as well as people no longer in employer group plans,

Premera gave credit to a state “reinsurance” program initiated in 2015 for helping stabilize rates for individual policies in 2017 and for the lower rates filed for 2018. A significant reduction in the overall use of medical services in 2016 was also a contributing factor, the company said in its press release.

In an interview, Coon said the decreased utilization appears to be mainly a result of Premera’s taking over customers that were previously covered by Moda Health before that company pulled out of the Alaska market.

The result of that was to substantially increase the number of people insured, although it was still small. However, the larger pool changed the demographics to include younger people who tend to use fewer medical services than the group covered previously in Premera’s individual insurance group, Coon said. Overall, the use of medical services appears to be stable.

A deciding factor, however, was the stability brought in the small market with the state reinsurance program, which is now being taken over by the federal government under a plan worked out by state officials earlier this year.

The challenge that had been faced with the individual market was caused by its very small size and an indirect effect of the federal ACA.

Overall costs of the pool were being driven up sharply by a relatively small group of policy-holders with serious medical problems who came into the individual insurance exchange after dropping out of a state high-risk pool, the Alaska Comprehensive Health Insurance Association, or ACHIA.

ACHIA was formed by the state several years ago to make health coverage available for Alaskans with serious health problems who had been denied by insurers because of pre-existing conditions. ACHIA’s coverage was subsidized by fees assessed on insurance companies selling policies in the state, and the insured also paid premiums. Those were high, but at least the coverage was available.

When Congress enacted the ACA, insurance companies could no longer deny coverage based on pre-existing conditions, and most Alaskans in the ACHIA plan abandoned it to enroll in the new ACA exchange and get the benefit of federal subsidies.

Since the size of the individual Alaska exchange was small, however, the effect of even a small number of people joining who had costly medical issues drove up with overall cost, to the point that Premera lost $25 million in both 2014 and 2015.

To reduce losses the company proposed a 42 percent rate increase, but a “reinsurance” subsidy plan put together by state insurance officials and legislators for the high-risk individuals, and paid for from state insurances taxes, allowed Premera to lower its cost increase to 7.3 percent for 2017. Now, for 2018, rates are being decreased 26.5 percent.

Premera officials warned against drawing long-term conclusions from the new filing, however.

“It is far too early to assume these lower rates are the beginning of a trend based on the unique circumstances of 2017,” saidJim Grazko, Premera’s president for Alaska.

“However, we believe the state’s reinsurance program without question has contributed to a more stable and affordable individual health insurance market for Alaskans,” he said.

In a statement, Gov. Bill Walker credited the work by the state insurance division and state lawmakers in devising the reinsurance program. “It shows that our out-of-the-box thinking paid off,” the governor said.

Alaska’s reinsurance model has also attracted national attention as an innovative way to stabilize small insurance pools, and it helped Alaska get approval for the federal government to take over the reinsurance.