Alaska Senate HSS hears from Division of Insurance on market stability

Lori Wing-Heier, Director of the Alaska Division of Insurance, earlier this week presented the Senate Health & Social Services Committee with an overview of the health insurance market.

The Senate asked the Division of Insurance to deliver the overview in order to determine the need for legislative action and we have summarized the hearing for you here.

Between 2014 and 2015 the individual and group markets grew by 5,867 and 2,972 individuals respectively, according to Wing-Heier. However, the number of insurers has dropped. In the small group market, Aetna and Assurant left ahead of plan year 2016. In the individual market, Alaska is down to Premera and Moda (on exchange and off). The small group market still has Premera, Moda, United, Aetna and a few others.

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Wing-Heier reported that when open enrollment closed on Jan 31st of this year, the Division of Insurance assessed enrollment numbers for the 2016 individual market at 23,029. That is below the number of individuals enrolled in 2014.

Small markets were left out of the presentation on stability for their relatively healthy performance.

“For reasons we don’t understand, the small market is performing much better than the individual,” commented Wing-Heier.

Rising premiums

In the individual market both written premiums and claims are rising, according to the agency. Premera’s written premiums rose from $40 million in 2013 to 70 million in 2014. In the same time period, overall claims increased 46 million. Wing Heier reported that for every dollar Premera collected in premiums, they paid out $1.05 in claims.

Moda also saw a rise to $30 million in written premiums, and $32 million in claims. For every dollar Moda collected in premiums, they paid out $1.04 in claims.

For Premera there was a 37.2 percent rate increase in 2015 and a 38.7 percent increase in 2016. For Moda, the increase in 2015 was 27.3  percent and 39.6 percent in 2016..

Premera:

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Moda:

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‘Three Rs’

Wing-Heier also discussed the ‘Three Rs’. Below are her comments in brief.

  1. With respect to Risk Adjustment, she noted this is almost having the opposite of the intended effect.
  2. Reinsurance sunsets in 2016 and insurers will be forced to assume this cost themselves.
  3. The Risk Corridor has not been successful, and it sunsets in 2016. Overall the program did not work as intended and the federal government chose not to “fund it to the gap” For 2014, they will only be funding 12.6 percent. The Division is unsure of funding for 2015 and 2016.

Why are costs so high?

The Health Care Commission conducted a study to provide the Division with more data to understand why premiums were so high. Their work determined that cost is based partly on the actual cost of health care, and partly due to the way Alaskans utilize health care.

Overall, health care costs in Alaska are some of the highest in the country. Wing-Heier highlighted several points from the data:

  • Commercial health care premiums in Alaska are approximately 130 percent of the average in Idaho, North Dakota, Oregon, Washington and Wyoming
  • Average hospital costs are approximately 138 percent in the comparison states
  • Physician reimbursement in Alaska is approximately 160 percent of the average in the comparison states

Rates filings for 2017 have not yet been submitted. But Wing-Heier says rates will depend on a number of factors including any changes to essential health benefits, continued migration of grandfathered plans entering individual market, insurers entering and exiting market and mergers, and actuarial cost calculator on the cost sharing structure.

Solutions?

In closing, Wing-Heier presented solutions to stabilizing the market, but all are just discussions at this point. Possible solutions included:

  • 1332 Innovation Waiver- Hawaii, Minnesota, Colorado are exploring this but no state will be allowed to do this until 2017.
  • Premera and Moda –possible reinsurance program to be administered by ACHIA
  • Regional exchanges –partnering with other western states?
  • Combining the individual and small group markets to spread the risk amongst more enrollees?

Access the complete presentation slide deck and video of the hearing.