Alaska's extreme health care costs destroy economic opportunity and warp lives

The outrageous cost of health care in Alaska is crippling small businesses, stifling innovators, and pushing ordinary people to make bizarre life decisions.

I've been writing about Alaska's extraordinary transfer of wealth to the medical industry in an occasional series of columns. For a healthy Alaska family trying to comply with the law, the cost of health care can easily exceed the cost of housing. That's unsustainable.

In 1991, Julie Drake started Title Wave Books with her husband, Steve, who was born in Alaska. A couple years ago, they had to drop their group insurance through the business and go to the Affordable Care Act online marketplace for individual coverage. But those premiums also rose until, planning retirement in their 50s, they realized they couldn't afford to stay in Alaska.

Drake said the couple's premium on Alaska's marketplace website was $2,300 a month. They moved into a new home in coastal Washington a week ago. Now they will pay $800 a month for health insurance.

"Either you have to earn so little money that you get some kind of subsidy, or you have to be married to somebody who has insurance. It's not a sob story. It's just the fact," Drake said. "It's turning into a system where you'd better be married to somebody with insurance or you can't be an entrepreneur."

Tim Paszalek, owner of a two-person marketing agency called Axe & Antlers, faced this problem when his wife, Amy, wanted to leave her job with the Anchorage School District to become a nanny, where she would make similar money but without insurance. They decided to take the plunge, buying a policy on the individual marketplace.

But affordable marketplace policies come with huge deductibles and out-of-pocket expenses. Paszalek hurt his back in January. Even with insurance, his surgery and recovery cost the family $12,000 on top of health premiums of $450 a month.

Paszalek experienced the Alice-in-Wonderland part of medical billing when providers offered him enormous discounts for paying cash rather than using his insurance — but he had to turn them down in hopes of filling his deductible. A physical therapist offered to charge $85 per visit in cash or to bill insurance $250.

[A doctor's quest to remain human inside an insane medical system]

His business is thriving, so Paszalek is close to paying off the bills.

"That's been the hobby of the summer, paying off medical bills," he said.

Shopping around outside Alaska helps some families. State Senate candidate Forrest McDonald gets his coverage through the Veterans Administration, but his wife, Jini, whom he met while serving in the Army in Korea, does not. When she got pregnant, they realized she could have the baby there for about $900 out of pocket or pay $15,000 for the same services in Anchorage.

Now she's away while he campaigns. The dental work she needed would cost $5,000 here. In Korea, she can get the same work, plus pay for flights for herself and the two children, and an extended visit, for less total cost.

When they're home, the children get coverage through Denali Kid Care, funded by the state and federal government.

"This is why it really kills me, because I want to pay for everything, but the costs are so extreme, it's not possible mathematically," said McDonald, who has made health care a major part of his campaign. "I can pay for everything else in my life, but I can't pay for this."

I've spoken to many people who went outside Alaska for treatment. A self-employed engineer in his 50s said he ran the numbers and realized he could drop his individual policy, pay the tax penalty, and do all his medical work out of pocket, including taking trips Outside for vision appointments, and still save a lot of money. If he gets seriously ill, he can always buy a policy.

A doctor told me of a young patient in need of an operation who bought a policy for the months necessary to get treatment, then dropped it.

Small businesses are dropping medical policies, too. In 2016, the penalty for a business with more than 50 full-time-equivalent employees that does not provide health insurance is around $3,000 per worker, far less than the cost of coverage in Alaska. Jeff Ranf, vice president of USI Northwest, who consults with businesses on health insurance, said he has seen policies approaching $50,000 a year for a family.

Ranf said three-quarters of his business clients who still offer health care do so with self-insurance, paying employee health care costs directly while carrying a stop-loss policy to cover unaffordable claims. If they monitor health care spending carefully and invest in employee wellness measures, the option can save money.

Many small businesses have no choice about offering insurance. Katherine Jernstrom said health care is the largest cost other than payroll for her husband's five-employee engineering firm, Jernstrom Engineering, but most engineers won't take a job without insurance.

Ranf agreed with her that high health care costs make Alaska companies less competitive than those Outside and disadvantage Alaska-owned firms compared to large businesses. With so much spent on a basic benefit, Alaska businesses have less money for salaries, bonuses and perks that talented young professionals can choose among when seeking work.

We also pay for these costs in higher Alaska prices.

"They're passing the cost of health care on to their customers," Ranf said. "They have to."

[How health care costs are bleeding Alaska dry]

And who knows what else we're losing, as we crush daring young people who want to start new businesses and create new opportunities?

Jernstrom owns The Boardroom, a shared work space for entrepreneurs and freelancers. She said many of the people who work there have spouses with insurance from government or large organizations. For those without that advantage, she often hears health care mentioned as a factor in giving up and finding a job.

We're not just impoverishing ourselves by paying so much for health care. We're throwing away our future.

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