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AK’s (un) Affordable Care Act

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The sometimes not-so Affordable Care Act is focusing national attention on Alaska, the once oil-rich state facing no end of problems due to the global slump in oil prices.

Writing in “The Atlantic” magazine this week, reporter Vann R. Newkirk II warns that “Alaska’s (health care) exchange has perhaps already fallen into the dreaded ‘death spiral.'”

The death spiral he is describing is the one that leaves a state devoid of private health insurers thus forcing who knows what kind of experiment in creation of a state-run health insurance business.

Alaska will be down to just one insurer – Premera Blue Cross – come next year, and that company had to be bribed to stay. The Alaska legislature voted to put up $55 million to convince Premera not to leave.

The money is earmarked to subsidize the costs of ACA enrollees, as Politico reported, but the end result is that the cash flows to the state’s lone insurance company. The subsidies are vital to convince Alaskans to buy federally required health insurance that is so expensive almost no one can afford it sans subsidy.

The average, pre-subsidy premium in the 49th the state this year is $863 per month or a little under $10,500 per year, according to healthinsurance.org.

At that rate, health insurance costs would devour 2015’s record Permanent Fund Dividend (PFD) of a little more than $2,000 in less than two and half months. The PFD is a distribution of the state’s oil wealth Alaska residents annually recieve for sticking it out through another cold, dark winter.

Unforunately, health insurance costs in Alaska are now so high as to make the PFD almost meaningless to anyone needing to obtain their own health insurace. The numbers clearly dictate that anyone forced to go looking for non-subsidized private coverage would be better off moving Outside.

The average monthly payment across all states is $396 per month or about $4,800, according to healthinsurance.org.  An individual decamping Alaska in favor of an average state would save themselves more than $5,000 per year – the equivalent of five PFDs at future rates.

Because the PFD is going down. Alaska Gov. Bill Walker capped the payment at $1,000. He said the state needs to use some of the permanent fund earnings to stay afloat in the face of a nearly $4 billion deficit. The state’s fiscal problems are large.

The problems of the Affordable Care Act might be larger.

Griffin suggests Alaska could  be the proverbial canary in the coal mine warning of disaster. Residents of the far off, sparsely populated, nothernmost state, he writes, were “precisely the sort of population that the Affordable Care Act was designed to serve by expanding coverage, expanding access to health care, and making health care cheaper.

“But instead of proving the usefulness of health reform, the new health infrastructure in the state is quietly failing.”

He suggests that if Premera uses its monopoly status to boost rates even higher or decides to leave the state because a $55 million per year subsidy still isn’t enough to make it profitable to do business in the north, Alaska could be forced to create its own insurance company.

That, he writes, “would immediately be the largest and most liberal such experiment nationwide. Given the cost difficulties that have already existed for private insurers that have been around in private markets for years, that option would be questionably feasible and unquestionably expensive for Alaska.”

Add one more problem to the growing list of problems facing the state’s political leaders.

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10 replies »

  1. In another rich irony, I find myself tempted to agree with my old adversary, Jim Duncan’s, idea that we should extend the State’s employee insurance to any resident or business willing to pay for it. We’d need some waivers or 10th Am. suits to escape some of the more onerous, and stupid, provisions of the ACA, but while expensive, State employee/retiree insurance is quite good and more affordable than ACA. Jim’s ASEA has abandoned the State plan for a “Trust,” but that has more to do with the legal restrictions on dues money as opposed to “trust” money than with the viability of the State plan.

    A problem we always faced was every provider wanting special coverage for whatever s/he specialized in and some Legislator always being willing to carry the water for it. That will only be aggravated with extended eligibility; everybody and his dog will be trying to get mandated coverage for the illness de jour. Ironically, there’s that word again, State employees will probably be the best bulwark against foolish coverage mandates because they well know, or at least their unions do, that every dime that goes to health care isn’t available to go to wages. There is always the liability of health care interests and the unions ganging up to buy a Governor, but that liability already exists.

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    • it’s nice to see you here talking sense, Art Chance. you’ve suggested an option that should be considered. and the state should consider rolling all those different school district health plans into one state system as well. there could be some significant budgetary savings there.

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  2. I had to enroll in Obama Care Jan 1, 2016 as my insurance company quit AK. I paid my premiums for years and never had a claim. Made an effort to stay healthy and believe me they made a lot of money off of me. Alas, I had to source new insurance through the marketplace and started my payments which jumped 435 % in 6 months. I cannot afford the high deductible and co-pay while shelling out close to $19,000 a year to keep my Premera insurance. How can this happen to hard working, responsible people doing the right thing? Obama Care was designed to fail.

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    • damn Laurie, you have my sympathy. i almost ended up in the same situation and it was simply unaffordable. i would have been forced to do without and pay the government its ransom. the system sounds nice in theory. in practice, if you have a job in Alaska that pays you enough to live decently private insurance is likely to cost you so much you can’t live decently. you can visit a lot of doctors in a year for $19,000, even cover some out-patient surgery.

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  3. I’m a little surprised there is so much complaining about ACA in Alaska, and so little information about how to avoid ACA in Alaska (hint Craig, potential article?). It’s easy to change your residence to another state (especially if you are retired). Choose a state that has low ACA payments and get a driver’s license there, register your vehicles there, sign up for a mail forwarding and receiving service and file your 1040 from there, and make Alaska your “vacation residence”. This is a common practice for people that want to avoid state income taxes. Should work for ACA. Residence swapping is so common that there are companies that help you do this, SD for example: http://www.mydakotaaddress.com/.

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  4. Currently, Alaska spends $2.8 billion on healthcare for employee and retiree insurance, Medicaid, Workman’s Comp, prisoners etc; or about $4000/resident. For what, maybe 200,000 people? Government and insurance has so botched medical care that it is likely beyond remedy; it is impossible for any provider to execute a simple business model because income and expenses are totally unpredictable. Will Medicaid pay, ever? And how much? Currently they have postponed payments to defer costs to another fiscal year. The PPO system puts all insurance payment amounts at the sole discretion of the insurer. Only two options remain, in my opinion. Remove all government and insurance from the business, or place all care under a government umbrella, with two tiers of care: that provided by government and private payer. A basic medical coverage in Alaska should be easily covered by the current $2.8 billion spent and removing all other insurance from the state. I hate to propose such a bureaucracy but that’s where we are drifting with the present mess. The government mandated private-pay costs are completely out of reach for nearly everyone. I pay $1032/month for myself under an old grandfathered plan. To replace it under ACA is more than $2500 for worse coverage. I know a young family of 5 who pay $2700/month. And these levels are not enough to keep a company profitable. Why? Likely culprit is Medicare and Medicaid reimbursements far below the cost of providing care requiring subsidy by other payers; or a hidden tax to obscure the true cost of care. Example: surgery in our family last year; surgeon billed $32000 and Medicare paid a little more than $4000. How can anyone call that reasonable? It ain’t gonna be purdy when it all falls apart.

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  5. I live in Alaska and have for over 20 years. There is little love up here for the ACA and our legislature has fought the governor at every turn in his efforts to expand medicaid. So the irony is: Alaska,one of the reddest of red states, could usher in a government run single payer plan.

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