Alaska’s relatively thin population makes it difficult to sustain a viable individual health insurance market. Too few “belly buttons” as plan members are termed within the industry doesn’t allow for adequate spread of risk so that premiums paid by members who use relatively little medical services offset those who use more. That also makes the state less attractive to health plan issuers since they could potentially suffer adverse selection.
The Patient Protection and Affordable Care Act’s individual market reforms included reinsurance to reduce that risk by compensating health plan issuers once medical utilization costs for a given member exceed a certain dollar amount over a plan year. That premium stabilization component that applies to plans sold in state health benefit exchanges goes away for plans effective in 2017.
Consequently, Alaska lawmakers approved legislation backed by Gov. Bill Walker to create its own reinsurance program for the individual market. HB 374 would also authorize the state to seek a state innovation waiver from the federal government under Section 1332 of the Affordable Care Act to establish its own state plan governing the individual market.
The legislation comes with a high level of urgency. State Insurance Division director Lori Wing-Haier told lawmakers that Alaska’s individual insurance market could collapse if it’s not enacted, according to this report. That’s not an overstatement given only one health plan issuer, Premera Alaska, remains in the individual market.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email