Premera contributes $25 million to Alaska reinsurance
Premera Blue Cross Blue Shield of Alaska will make a one-time only $25 million reimbursement to fund high-cost health insurance claims through the Alaska Reinsurance Program as part of a memorandum of understanding agreed to with the Alaska Division of Insurance, Premera announced today.
The agreement stipulates the state’s division of insurance direct the Alaska Comprehensive Health Insurance Association, which operates the reinsurance program, to use these funds “solely for health insurance claims in the individual market.”
Premera offered to make the reimbursement, after finding that health insurance claims filed by Alaska customers in 2017 were trending at a 10 year low. The Alaska Reinsurance Program is a state-operated program that covers claims in the individual market for people with one or more of 33 identified high-cost conditions in order to help stabilize premiums for all customers.
The increased stability of the state’s individual insurance market provided by the reinsurance program as well as a significant reduction in the use of medical services by the health plan’s customers resulted in the state earlier this year approving an unprecedented average rate decrease of 22.4 percent on Premera’s 2018 individual metallic plans. With nearly three months remaining in the year, Premera expects the individual market to be profitable for the second year in a row, a sign the market in Alaska is continuing to stabilize.
“We believe offering to make a one-time reimbursement to the Alaska Reinsurance Program was the right thing to do, given that our claims this year were much lower than we or the state anticipated,” said Jim Grazko, President and General Manager of Premera’s Alaska office. “This reimbursement underscores our continued commitment to Alaska’s individual insurance market, especially to those individuals who are most in need of care, and reinforces our efforts to work with the state to provide all Alaskans with access to high-quality care at an affordable price.”
Predicting the use of medical services is especially difficult for insurance companies in small individual markets like Alaska with fewer than 20,000 customers where just a handful of customers can cause dramatic swings in the amounts paid out in claims and where approximately 30 percent of customers enter or leave the market each year. Setting rates presented unique challenges for 2017 as Premera became the sole insurer in Alaska’s individual market, thrusting the company into the difficult position of setting rates based on claims made by thousands of new customers.
Premera Blue Cross Blue Shield of Alaska, which has operated in Alaska since 1952, is a not-for-profit, independent licensee of the Blue Cross Blue Shield Association. Premera and its family of companies provide comprehensive health benefits and tailored services to approximately 2 million people, from individuals to Fortune 100 companies. The company offers innovative health and wellness solutions focused on quality outcomes for patients and controlling costs.