Quick Summary of the Alaska Reinsurance Plan
Yesterday, Health and Human Services (HHS) Secretary Tom Price issued a letter to governors encouraging them to take advantage of Sec. 1332 State Innovation Waivers under the Affordable Care Act (ACA) and cited Alaska ‘s 1332 waiver request to HHS as an example. Alaska’s waiver seeks federal funds to support a reinsurance plan to stabilize its individual insurance market. The proposal has been deemed complete by HHS and is under review but has not yet been approved. What exactly is Alaska proposing to do and how?
Insufficient funding of the federal ACA reinsurance program (which ended for claims incurred after calendar year 2016), and the underfunding of the federal ACA risk adjustment program, were factors in extraordinary premium increases in the individual markets in the states. In Alaska, state action was provoked when the one insurer operating in the individual market proposed rate increases more than 40 percent higher than 2016.
In the fall of 2016, Alaska’s legislature created the Alaska Comprehensive Health Insurance Fund (ACHI), that sunsets in June 2018, and authorized the Division of Insurance to apply for a 1332 waiver. The ACHI is designed to reinsure the one remaining insurer for costs to treat people with life-threatening, chronic conditions; the specific conditions are defined in regulation rather than the authorizing statute. As a result, the health insurer scaled back 2017 premium increases to seven percent. Alaska funded the program by using $55 million of the $64 million generated in 2015 from a 2.7 percent tax on health insurance premiums. The new law expanded the premium tax base to all insurance premiums – not just health insurance.
The state’s Division of Insurance tracked how the investment in reinsurance lowered premiums and thereby lowered the cost to the federal government for advanced premium tax credits (APTC); as premiums went down, fewer federal dollars were needed to make premiums affordable through APTCs.
With assistance from Oliver Wyman actuaries, Alaska projected what the costs for APTCs would have been by year, absent the reinvestment fund, and documented projected savings to the federal government. As the charts demonstrate, Alaska has sought a 1332 waiver to secure from the federal government the funds that would have been spent on APTCs to reinvest in the reinsurance plan to maintain premium stability and reduce the state’s liability for those costs. Alaska notes that the reinsurance plan alone is inadequate and other actions are under consideration to increase the affordability of coverage, although the reinsurance plan has stabilized the individual market.
All eyes are on Alaska to see if their 1332 request is approved and how the reinsurance plan and other strategies under consideration address costs in the individual market.
Support for this work was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the Foundation.