Senate passes health insurance bailout

The Alaska Senate voted 14-2 on Friday to approve a $55 million bailout of the state health insurance program that covers “high-risk” Alaskans.

House Bill 374, approved earlier in the week by the Alaska House, is intended to keep Alaskans in the Affordable Care Act’s individual marketplace from seeing steep rate hikes in the coming year, but the bill passed with only reluctant support from senators who begrudge any additional spending as the state faces a multibillion-dollar deficit.

“Essentially, we’re up against a wall,” said Sen. Mia Costello, R-Anchorage and the bill’s Senate sponsor. “If we don’t pass it, 23,000 Alaskans will see their premiums go up, possibly 70 percent.”

There’s no guarantee that the bill will prevent those rate hikes, but the $55 million bailout gives the individual marketplace’s sole insurer — Premera — one less reason to raise rates.

The state has previously offered a 50 percent tax credit to Premera and other insurers to offset the costs incurred by these “high risk” Alaskans. That wasn’t enough, so now the state has turned to a direct subsidy.

The problem, as explained by Costello on the floor, is that the federal Affordable Care Act (better known as Obamacare) caused the number of “high-risk” insurance customers to rise. These are people who suffer chronic medical problems like diabetes, heart disease or obesity, and thus are frequent users of their medical insurance.

To work, medical insurance needs to have a large pool of healthy customers to pay premiums that cover the few sick people who incur costs. If there aren’t enough healthy people paying premiums, the insurance program will run at a loss.

Only about 500 Alaskans are in the “high-risk” pool, but because their health insurance costs are so high, the premiums paid by 23,000 Alaskans in the individual marketplace aren’t enough to meet their needs.

Insurers have been leaving Alaska’s small marketplace since 2013 because of cost concerns. When 2017 begins, only Premera will be left.

Letting those 500 Alaskans go uninsured isn’t an option under the Affordable Care Act, and if Premiera leaves Alaska because of the cost of their care, the state might be required to set up its own health insurance organization, something that could cost hundreds of millions of dollars.

The $55 million allocated by HB 374 will be paid with an existing tax on insurance policies of all kinds — homeowners’ insurance and automobile insurance is included in that tax.

“There’s a huge issue here that we can’t take up in this special session,” said Sen. Anna MacKinnon, R-Eagle River and co-chairwoman of the Senate Finance Committee.

The Senate amended HB 374 to set a two-year sunset on the bill, and MacKinnon said she intends for the finance committee to create a working group to draft a long-term solution to the health insurance crisis.

HB 374 returns to the House, where lawmakers will asked whether they agree with the sunset added in the Senate. No significant objection is expected, and if the House concurs with the Senate changes, the bill will go to Gov. Bill Walker for his signature.

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