UPDATE: 2017 Rate Request Early Look: Alaska
(Originally Posted 6/09/16)
Every year, Republicans insist that the ACA is guaranteed to cause a rate hike "death spiral" as increasing premiums cause healthier people to drop out of the individual exchange market, causing higher medical expenses, causing even higher premiums, causing more healthy people to drop out and so forth...and every year, for three years in a row so far, this has failed to be the case nationally. While premiums have obviously continued to increase for many people, the individual insurance market has grown each year, from around 11 million in 2013 to 15.6 million in 2014, around 17 million last year and up to 19-20 million or so today.
However, there's one state in particular where the "death spiral" does appear to developing, in large part due to their unique demographic (and geographic?) situation: Alaska. And today, the Alaska state legislature is doing something about it:
‘Reluctant’ Legislature passes bill to salvage insurance market
The Legislature forwarded a bill to Gov. Bill Walker that will stave off steep insurance premium increases in the individual market — at a $55 million cost to the state — at least for two years.
Reinsurance is a form of subsidy for insurance providers. It will subsidize existing individual plans to slow rate increases, which spiked in Alaska by nearly 40 percent this year and a similar hike was likely coming in 2017.
The Affordable Care Act, or ACA, drew high-risk patients away from the Alaska Comprehensive Health Insurance Association with its lower-cost, federally-subsidized plans. When federal reimbursements for insurer losses came up short, insurance companies hemorrhaged money and have been forced to raise insurance rates to recoup losses or leave the state altogether.
Insurers will submit claims to the Alaska Division of Insurance, then receive a direct payment from the state to dampen the costs.
The bill, drafted by Gov. Bill Walker’s administration and sponsored by Sen. Mia Costello, R-Anchorage, will draw proceeds from a statewide insurance premium tax to pay the reinsurance. This tax of 2.7 percent per plan typically draws between $50 million and $60 million per year according to Lori Wing-Heier, director of the Division of Insurance.
When passed, the law will only be a temporary (2 year) measure, but that seems reasonable to me--two years from now, the healthcare situation in both Alaska and nationally will llkely look very different, whether in a positive or negative way; presumably they can either extend or sunset the reinsurance bill at that point.
In any event, here's how this impacts my 2017 Requested Rate Hike project (remember, with Moda Health dropping out recently, there's only a single carrier, Premera BCBS, offering individual policies in the state):
Premera will file its new rates with the Centers for Medicare and Medicaid Services on July 15.
Premera spokeswoman Melanie Coons said the company was discussing a rate increase of up to 42 percent prior to the bill’s passage. She said Premera expects the rate increase to be less now; previous estimates said the bill would produce an increase of 15 percent to 18 percent.
Premera received an extension to incorporate Moda Health’s rate information for its 14,000 Alaska customers last month. On May 1, Moda Health announced that it is leaving the Alaska individual market in 2017.
Moda officials said the company could no longer operate in Alaska without a substantial increase in insurance premiums, which had already increased by 29 and 37 percent in 2015 and 2016, respectively.
As for what's been causing Alaska's massive rate hikes:
Even with the rate increases, insurers have been losing money. Premera’s rates rose approximately 37 percent and 39 percent in 2015 and 2016, but Premera still lost roughly $13 million since 2014 because of Alaska’s small customer base of individual policyholders cannot offset the number with high medical costs.
in any event, I'm not sure how to enter Alaska on the state-by-state spreadsheet. Remember, at the moment I'm entering the requested rate hikes for each state, not the approved increases. Since the bill hasn't technically been signed into law yet (although it appears certain to do so within days), at the moment Premera is techically looking at a 42% average hike...but once it is signed, it looks like they'll be seeking 15-18% instead.
It's important to remember that I have no idea what sort of political maneuverings, policy changes and so forth have been happening behind the scenes in any of the other states which I've entered requests for; the only difference here is that it's happening right now, and will have a more dramatic impact in Alaska than most other states. Therefore, I'm gonna go with the 15-18% range, subject to change if the bill fails to be signed at the last minute after all.
Officially, that apparently won't happen until July 15, so I suppose I should wait until then before plugging them in, but I really would like to complete this project before the approved rates start being released, which will likely start happening right around mid-July as well (a few states do so earlier than the rest).
Therefore, I'll go ahead and enter Alaska at 16.5% for the moment...but with a major disclaimer.
UPDATE 7/23/16: Thanks to commenter FarmbellPSU for the heads' up; the new legislation has been implemented, and as a result, Premera's actual requested rate hikes are actually lower than they were projecting a couple of months ago:
JUNEAU, ALASKA: A major health insurer is seeking an average rate increase of about 10 percent on individual health insurance policies in Alaska, far less than what it received the last two years. This follows recent steps by the state to shore up Alaska's insurance marketplace.
Premera Blue Cross Blue Shield is expected to be the only company offering individual health policies in Alaska in 2017, with Moda Health planning to leave that market. Premera received average rate increases of nearly 40 percent for 2015 and 2016.
Premera credited the lower request for 2017 to state legislation passed in June aimed at stabilizing the market.
Under the bill, claims for high-cost conditions would be ceded to a high-risk pool funded by a premium tax paid to the state by insurance companies. The bill anticipates $55 million being available.