Alaska draws major federal funding to shore up individual health insurance market

WASHINGTON — Alaska will receive more than $300 million in new federal funding over the next five years to shore up the state's individual health insurance market, federal officials announced Tuesday.

The Centers for Medicare and Medicaid Services approved a "1332 waiver" request from the state Legislature, part of a "reinsurance" plan to infuse money into the state's costly individual market.

The waiver program draws its name from Section 1332 of the Affordable Care Act, which allows states to apply for an "innovation waiver" when they try new strategies aimed at offering high-quality and affordable health insurance. The waivers became available to states on Jan. 1 and cannot increase the federal deficit, according to the law.

Alaska is the first state to receive a 1332 waiver. Minnesota has applied for one as well.

With the federal government's $48 million input in 2018, the state will pay $11 million from its own coffers, according to Randy Pate, deputy administrator at CMS. The federal input will increase annually through 2022, when the federal government is expected to send Alaska nearly $76 million to offset high-cost care.

"We're still concerned for Alaska, though," CMS Administrator Seema Verma said in an interview Tuesday. "I think having just one insurer, that means that there's not choices for people in Alaska. We think that this is an important step forward to at least stabilizing the marketplace."

Alaska's individual health insurance market has been plagued by extremely high costs, mostly managed so far through federal tax subsidies that make the plans more affordable for some. But with the requirements imposed on insurance plans through the Affordable Care Act — like maternity services, eliminating payment caps, required preventive care — have come higher costs.

[Here's how Alaskans get their health insurance]

Prices for individual plans in Alaska increased 203 percent from 2013 to 2017, according to the CMS. That has put plans out of reach for many Alaskans who earn too much to qualify for the lower-cost subsidized plans.

The federal money cuts an expected price jump for 2017 to 7 percent from the previously expected 42 percent.

Alaska Sen. Dan Sullivan, who, along with Sen. Lisa Murkowski, has worked with the Trump administration to get the waiver approved, praised the state and federal "collaboration" employed to move the funding forward.

Murkowski also pointed to the state Legislature as deserving credit for the program.

"Trying to gain consensus to find $55 million to put forward two years ago, they really needed to believe that this could be an approach that would allow for a level of stabilization, and they took a risk there," she said.

Now, the federal government will act as a "backstop … so they don't have to come up with another $55 million at a time when our state really doesn't really have it," Murkowski said.

The waiver "will temporarily stabilize Alaska's individual insurance market," Verma said in a statement.

It's "not a long-term solution but it does temporarily stabilize Alaska's individual insurance market," she added in a call with reporters.

Verma called Alaska a "trailblazer" and said the effort would pave the way for other states that are interested in similar federal funding mechanisms.

But the plan has its limits. The "innovation" of Alaska's reinsurance plan is to infuse the market with federal funding to pay for the most expensive treatments as a way of keeping premiums from skyrocketing. Nothing about the plan actually lowers costs, however.

Murkowski said the question of the program's sustainability was "a fair one."

The waiver is not "designed to be a funding source in perpetuity," she said.

Instead, it's meant to stop the bleeding while policymakers figure out a way forward.

"The hope is that you don't need to have this backstop going well out into the future, that as a state, as we work to reduce our health care costs," eventually, "we won't be in the same really dire situation that we are right now, where our costs are off of everybody's charts, our insurance is down to one," Murkowski said. "My hope would be that we wouldn't need that in the long, long term. But for the short term, we absolutely do."

Verma said the waiver would keep costs down as the state implements the reinsurance plan between 2018 and 2022.

The reinsurance plan works this way: The state collected $64 million in 2015 from a 2.7 percent tax on health insurance premiums. That money went into a fund to shore up the individual market.

The program covers claims in the individual market for people with one of 33 high-cost conditions, so that costs can remain stable for others in the program. Alaska's relatively small individual health insurance market has struggled with the costs imposed by a small number of individuals with extremely high-cost health care needs.

The state projected that the reinsurance plan would cut premiums by 20 percent next year, by extension making coverage available for more people.

Since the start of the Trump administration this year, it had been widely expected that the waiver would be granted — a plan telegraphed to the public by Health and Human Services Secretary Tom Price.

But before that, some questioned whether Alaska's waiver would be approved, given the high cost to the federal government for such a small number of beneficiaries — roughly 1,485 people. For a roughly $50 million program, that's a high per-capita cost.