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Obamacare is coming -- and some Alaskans may face higher costs

Pat Forgey

A legislative committee Tuesday heard concerns from two top insurance officials and a doctor about the implementation of Obamacare in Alaska, the federal health care reform that Alaska has resisted. A state insurance regulator warned that it would likely raise individual insurance rates after it takes effect Jan. 1, and a top insurance official agreed.

Alaska has some of the nation's highest health care costs, but few Alaskans buy their insurance as individual policies. Most are covered under group plans provided by employers or the government. A mandate that everyone have health coverage is part of the federal Patient Protection and Affordable Care Act (ACA), commonly known as Obamacare – perhaps its most controversial aspect. The measure, upheld by the U.S. Supreme Court, was supposed to drive down costs by bringing greater transparency to hospital billing and competition to the market through online exchanges. Perhaps most controversially, Obamacare requires every American purchase and maintain health coverage or pay a fine.

Brett Kolb, director of the state's Division of Insurance, warned that the Affordable Care Act may eventually result in higher individual insurance rates for some people.

"The research seems to be indicating that the cost of individual insurance is going to go up," Kolb told the Alaska Legislature's Administrative Regulation Review Committee, meeting in Anchorage.

A goal of Obamacare was to lower overall health care costs by ensuring most everyone has insurance. That should mean fewer uninsured patients who can’t pay their bills showing up in hospitals, costs now passed on to paying customers.

Kolb said people facing steep health insurance costs today or who cannot buy insurance -- such as those with pre-existing conditions -- may see their bills go down. But rates for healthy young males, who typically cost less to care for, will likely rise. Many of them currently go without insurance, he said.

Despite the mandate, some people will go without insurance because the tax penalties won't be steep enough to compel those people to buy in, the committee was told.

Others may practice what's known now as "jumping and dumping," said Jeff Davis, president of Premera Blue Cross/Blue Shield of Alaska.

That's what insurance company actuaries call it when someone waits until they have a medical need for insurance to actually purchase insurance. After they get their operation, he said, they dump their coverage.

He provided an example of a woman who enrolled in the Alaska Comprehensive Health Insurance Association, a state insurance pool for high-risk customers who cannot otherwise obtain coverage. She enrolled when she needed a knee replacement costing $250,000 and canceled her coverage after the operation -- having paid only $3,000 in premiums.

Davis said he didn't blame the woman for using the system that way. And an identical surgery can cost far less out of state, something that hasprompted a number of Alaskan to schedule medical procedures in the Lower 48 – and sometimes overseas

"She was responding to the economic incentives that were in front of her," he said.

Davis said Obamacare's enrollment requirements, which don't include waiting periods or pre-existing condition limitations, may drive up costs for insurers. If that happens, many expect those costs to be passed on to consumers.

“That's like pulling your car into your driveway, discovering your house is on fire, and then calling Allstate to get a homeowner's insurance policy," he said.

"There's some problems with that as an economic model," he said, allowing that future regulations could change it.

The implementation of Obamacare's individual mandate is rapidly approaching, with enrollment scheduled to begin October 1, and coverage taking effect January 1.

Because so little is known about how Obamacare will be implemented, Director Kolb said its impact on Alaskans is unclear. "A lot of the basic questions haven't been answered," he said.

The division will review policies offered under Obamacare and won't "allow premiums to run rampant," he said.

Alaska was one of the states that unsuccessfully challenged the constitutionality of Obamacare's individual mandates, and it has resisted other aspects as well.

The Supreme Court ruled that states could not be compelled to expand their Medicaid programs for low-income residents, and Gov. Sean Parnell has tentatively decided to not go forward with the expansion, despite federal incentives to do so.

According to the Daily Briefing and American Health Line, here’s how the states stood on June 14 regarding the Medicaid expansion:  26 participating, 1 leaning toward participating, 13 not participating, 6 leaning towards not participating and 4 pursuing an alternative model.

Parnell has also chosen not to create Alaska’s own health insurance exchange, the online portal through which residents would be able to buy the new policies. "The decision has already been made that it was in the best interest of the state to go with a federally facilitated exchange, or as they're now being termed, 'marketplace,'" Kolb said.

Obamacare contains subsidies for low-income insurance buyers that will bring down some costs, as well as new requirements aimed at limiting waste and fraud.

Davis said that given the size of the national health care industry, there is plenty of waste.

But Dr. Ilona Farr of the Alaska Family Medical Center said that the act's additional paperwork and audits would take time away from patients.


                    Right for Alaska: Obamacare already has cost many residents

Alaska has the highest health care costs in America, largely because of our unique geography, sparse population and associated transportation issues that drive up the cost of our medical care. ACA addresses Alaskans’ health cost issues in multiple ways. First, it significantly increases funding for local community health centers, many of which serve communities which are too small for a full size hospital. Secondly, ACA permanently authorized the Indian Health Care Improvement Act. Thirdly, ACA has important Medicare improvements..

According to the Kaiser Foundation, 69,301 Alaskans rely on Medicare. In the past, Medicare participants have paid high prices for prescription drugs through Medicare Part D. By “closing the doughnut hole,” the ACA has reduced prescription drug costs by 50 percent and will continue to reduce those costs. In addition, the ACA guarantees free preventive care for Medicare participants, which saves money for everyone by fixing medical issues before they become bigger and more expensive. Having increased access to preventive screening ensures that Alaskans don’t have to go without lifesaving tests such as colonoscopies, mammogram and other cancer screening tests because the cost of copay is too prohibitive. This early catching of disease also reduces the cost of treatment and potentially increases the lifespan of the Medicare program. 

Gov. Parnell’s Alaska Health Care Commission stated that “Alaska fares poorly when it comes to the cost of health care for our citizens.” The commission also noted that Alaskans’ per capita spending on health care is the second highest in the country. The biggest improvement for the Alaska health care system could be right around the corner, but Gov. Parnell refuses to accept the federal Medicaid funding provided under ACA and extend health coverage to 41,500 additional Alaskans. According to the Alaska Native Tribal Health Consortium, Medicaid expansion would have a 28-to-1 return on investment for Alaska taxpayers. It is shameful for Parnell to block access to affordable health care to score partisan points, and it’s just as shameful for outside interest groups to think they know what’s best for Alaskans. 

Alaska can’t afford increased prescription drug costs for seniors. We can’t afford to lose Indian Health Service programs that have extended health care to 29,000 additional Alaska Natives and American Indians. Insurance companies should not be allowed to cancel coverage when we get sick or refuse to provide it at all, as was the case before passage of ACA. The ACA is well-tailored for Alaska: It improves care in rural areas, permanently authorizes the Indian Health Care Improvement Act, and strengthens Medicare for Alaska’s seniors. 

Mike Wenstrup, of Fairbanks, is chairman of the Alaska Democratic Party. He received a bachelor’s degree and then a law degree from the University of Notre Dame. He is a member of the Fairbanks Kiwanis club and the Fairbanks Elks club. He enjoys hiking, fishing and camping with his wife Annie and their dogs. 

Alaska Health Care Programs

Individual Health Insurance in Alaska (including Self-Employed)

  • Providers are allowed to turn down coverage based on health.
  • There are no limitations on the price of individual policies.
  • Pre-existing conditions can be excluded from coverage.
  • Individual insurance cannot be cancelled due to sickness.

Self-Employed Health Insurance in Alaska

  • Self-employed individuals cannot buy group health insurance.
  • Check with the Alaska Division of Insurance for rules governing those joining associations offering group health coverage.

Group Health Insurance in Alaska (including Small Business)

  • Eligible applicants can not be denied group health insurance or charged more due to a health problem.
  • Prior coverage can be credited toward the exclusion period for a pre-existing condition, if the break between coverages was brief.
  • There is a time limit on exclusion periods for pre-existing conditions.
  • Insurance cannot be cancelled due to illness.

Small Business Health Insurance in Alaska

  • A small business applying for group insurance cannot be denied due to the health of an employee.
  • Larger businesses may be denied coverage by group health insurance.
  • Small businesses may have limited rate hikes, based on the health of employees.
  • There is no limitation for rate increases on a large group policy.
CONTACT
Alaska Division of Insurance
3601 C Street, Suite 1324
Anchorage, AK 99503
(907) 269-7900
www.dced.state.ak.us/insurance


Location Exchange Decision Federal Approval Status Structure of Exchange Type of Exchange
Alaska Default to Federal Exchange NA NA NA

Data are as of May 10, 2013.

Coverage through the exchanges will begin in every state on January 1, 2014, with enrollment beginning October 1, 2013. States can elect to build a fully state-based exchange, enter into a state-federal partnership exchange, or default into a federally-facilitated exchange. The Affordable Care Act (ACA) directs the Secretary of Health and Human Services (HHS) to establish and operate a federally-facilitated exchange in any state that is not able or willing to establish a state-based exchange. In a federally-facilitated exchange, HHS will perform all exchange functions. States entering into a state-federal partnership exchange may administer plan management functions, in-person consumer assistance functions, or both, and HHS will perform the remaining exchange functions.