Alaska Healthcare Reform on the Hot Seat

Alaska healthcare reform is in jeopardy, with more than 51% of Alaska voters who voted for President Donald Trump opposing Medicaid expansion enacted by the ACA in 2015.

The majority of Alaska’s 738,000 residents have health insurance through their employers or government programs. Approximately 30,000 people obtained insurance through the ACA’s Medicaid expansion in 2015.

Even fewer people buy insurance through the ACA’s marketplace. Rates have risen in that small private insurance pool because health insurers in the vast but sparsely populated state couldn’t sign up enough healthy people to offset costs for high-risk patients with expensive conditions like end-stage renal disease and cancer.

Premera reported that it paid approximately $67 million in claims for individual members on the Alaska exchange last year, with nearly a quarter — more than $16 million — coming from just 20 patients.

“Alaska has been quite a story over the last few years,” said Premera spokeswoman Melanie Coon. “It’s not like the rest of the states.”

With the market on the verge of collapse, Alaska lawmakers took a novel approach to the problem last year, according to Eric Earling, senior vice president of State of Reform, a nonpartisan health policy communication group with a Western focus.

When Andy Hawk needed hernia surgery last year, his main concern wasn’t the cost of the procedure, but whether he’d be able to lead a spring bear-hunting expedition on Kodiak Island. For the first time, the self-employed gunsmith in the state with the highest medical costs in the country – and the most volatile insurance market – had some protection. He was insured for all but $10,000 of the $45,000 bill.

“Before that, I was just damn lucky,” said Hawk, 52, who joined the Affordable Care Act marketplace in 2013.

However, neither Hawk nor his girlfriend, Jennifer Jolliffe, 55, a self-employed acupuncturist who is also covered by the ACA, are at ease.

Last month, Republican congressional leaders quickly withdrew the American Health Care Act, a GOP bill described by Sen. Lisa Murkowski (R-Alaska) as a “flawed replacement” for Obamacare, the common name for the ACA.

The failure of the bill left Obamacare in place while Republicans rethink how to address rising insurance costs and other flaws in health-care delivery. The problems are especially acute in Alaska, the fourth most expensive state in the country, where a standard knee replacement may cost five times as much as it does in Seattle and expensive air ambulance rides are common in emergencies.

Individual health insurance premiums increased by nearly 40% per year after the ACA went into effect, and high health-care costs drove all but one provider out of the market in 2017.

Hawk and Jolliffe are now keeping a close eye on state leaders as they struggle to keep Alaska’s online marketplace from collapsing. Officials are asking the federal government for a $51.6 million waiver to help stabilize the individual insurance market.

“I just want everyone to have health insurance,” said Jolliffe, who suffered a life-threatening bacterial infection in 2009 that for her underscored the need for coverage.

State officials voted to levy a 2.7 percent tax on all insurers in order to create a $55 million reinsurance fund to cover high-cost patients’ bills, thereby stabilizing the individual market for the rest of the customers.

“The reinsurance program could be a model for others across the U.S.,” he said.

It worked in the short run. Instead of the expected premium increase of more than 40% for 2017, Premera’s rates increased by only 7.3 percent, according to Coon.

The insurer reported on March 29 that it made $20 million in the Alaska individual market in 2016. According to Jim Grazko, president of Premera’s Alaska operations, this figure included $4 million in direct profits, $8 million in adjusted income carried over from 2015, and $8 million in federal risk adjustment funds, which help compensate insurers for enrolling high-risk patients. According to the new report, Premera’s losses in the state’s individual market through the ACA are reduced from more than $25 million to around $7 million over three years.

Premiums remained the highest in the country, at $904 per month for a 40-year-old nonsmoker in Anchorage on Premera’s second-lowest silver plan, which sets the standard for subsidy levels. According to the Centers for Medicare & Medicaid Services, enrollment in the Alaska individual exchange fell from about 23,000 people in 2016 to about 19,145 this year.

“I think we lost about 3,800,” said Lori Wing-Heier, director of the state Division of Insurance. “Some of them could simply not afford it.”

The reinsurance fund was a one-year deal approved by a Republican-dominated Legislature and signed by an independent governor to keep the state’s insurance market from collapsing.

For a longer-term solution, state officials submitted a Section 1332 waiver proposal to federal health officials in December, which allows states to seek “innovative strategies” for providing insurance. Alaska is requesting that the federal government redirect $51.6 million in premium subsidies that would have been paid in 2018 to the reinsurance program. It would be valid for five years, with the option to renew.

Such waivers are encouraged by new HHS Secretary Tom Price, and Wing-Heier expects it to be approved “quite quickly” after state legislators tweak the final language.

“It is a way of stabilizing the ACA in Alaska,” said Wing-Heier, who emphasizes that cutting health care costs is also crucial.

Alaska’s all-Republican congressional delegation, which includes Murkowski, Sen. Dan Sullivan, and Rep. Don Young, has consistently opposed Obamacare but has not supported the Republican House bill.

“Healthcare is broken as it is today,” Young said in a March 21 press release that detailed his reservations. “We’ve seen the numbers — skyrocketing premiums, soaring deductibles and the loss of all but one insurer. Ultimately, I support efforts to repeal and replace the Affordable Care Act, but I also recognize that it’s very difficult to put the toothpaste back in the tube.”

Murkowski called the AHCA push “a reckless repeal process,” and she said she would not support plans to cap federal Medicaid funds, which could jeopardize newly insured people.

“I don’t support pulling the rug out from people who have received coverage,” she said in a Facebook Live town hall on March 23. Murkowski has also spoken out against efforts to cut federal funding for Planned Parenthood.

People like Cindy Stark, 61, who runs a small sewing and embroidery business outside of Anchorage and obtained health insurance through the state’s Medicaid expansion, were relieved. She had been seriously injured in horseback riding accidents in 2003 and 2008, and she had previously struggled to pay a $950 monthly premium and $5,000 deductible with private insurance. She hopes that recent efforts to limit Medicaid funding, potentially reducing enrollment, have failed.

“I have asthma and the chronic pain,” said Stark, who voted for Hillary Clinton in the 2016 presidential election. “My medicine now keeps me on track.”

However, constituents such as Sam Trotzke, 48, a partner in an accounting firm in North Pole, Alaska, chastised Murkowski, whom he described as a “Democrat in Republican clothes,” for failing to work harder to repeal Obamacare.

Trotzke declined his company’s insurance in favor of Medi-Share, a Christian health care sharing ministry. It’s one of several growing programs in the United States in which faith-based followers pay for medical care through monthly payments called “shares.”

Wing-Heier estimates that such programs have grown in popularity among Alaskans who are on the wrong side of the ACA’s “subsidy cliff,” which refers to the 400 percent poverty line for federal premium subsidies.

Trotzke said he pays $634 per month in health insurance premiums for himself, his wife, Shauna, 44, and their daughters, Tessa, 12, and Anna, 8. Preventive care, dental visits, and eye exams are all paid for out of pocket.

“It’s the way health insurance should be. They’re paying the big costs. I’m paying the doctors’ visits. Health insurance shouldn’t be covering every little thing,” said Trotzke, who voted for Trump.

Trotzke says the cost-sharing plan gives him more control over his health-care spending. He wants the Affordable Care Act repealed and replaced with a plan with fewer regulations.

“It’s our overlords in Washington, D.C., dictating to us how we have to run our business,” he said. “That just rubs me the wrong way.”

Hawk has a different perspective back at the Anchorage gunsmith shop, where custom rifles and rebuilt shotguns line the walls beneath moose antlers and a wolverine pelt.

The ACA isn’t perfect, he admits, but it allows him and Jolliffe to live active Alaskan lives — hunting, fishing, skiing — without worrying about the costs of a medical disaster.

Hawk, a Clinton supporter, is concerned about Trump’s pledge to “let Obamacare explode,” and believes the administration will go out of its way to undermine the health-care law even if there is no full repeal.

“We don’t smoke, don’t drink, we’re doing our part,” said Hawk, who added: “I don’t understand why they couldn’t just fix it.”

Kaiser Health News (KHN) is a national news service covering health policy. It is a program of the Henry J. Kaiser Family Foundation that is editorially independent.

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