Legislature(2023 - 2024)BUTROVICH 205
01/30/2024 03:30 PM Senate HEALTH & SOCIAL SERVICES
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| Presentation: Alaska's 80th Percentile Regulation by the Division of Insurance | |
| Adjourn |
* first hearing in first committee of referral
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| + | TELECONFERENCED | ||
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ALASKA STATE LEGISLATURE
SENATE HEALTH AND SOCIAL SERVICES STANDING COMMITTEE
January 30, 2024
3:30 p.m.
MEMBERS PRESENT
Senator David Wilson, Chair
Senator James Kaufman, Vice Chair
Senator Löki Tobin
Senator Forrest Dunbar
Senator Cathy Giessel
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
ALASKA'S 80TH PERCENTILE REGULATION BY THE DIVISION OF INSURANCE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
LORI WING-HEIER, Director
Division of Insurance
Department of Commerce, Community, and
Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Offered a presentation on Alaska's 80th
Percentile Regulation.
ACTION NARRATIVE
3:30:57 PM
CHAIR DAVID WILSON called the Senate Health and Social Services
Standing Committee meeting to order at 3:30 p.m. Present at the
call to order were Senators Kaufman, Dunbar, Tobin, Giessel, and
Chair Wilson.
^PRESENTATION: ALASKA'S 80TH PERCENTILE REGULATION BY THE
DIVISION OF INSURANCE
PRESENTATION:
ALASKA'S 80TH PERCENTILE REGULATION
BY THE DIVISION OF INSURANCE
3:31:30 PM
CHAIR WILSON announced the consideration of the presentation
Alaska's 80th percentile regulation by the Division of
Insurance.
3:32:31 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), Anchorage,
Alaska, moved to slide 2 and stated the following:
[Original punctuation provided.]
Notice of Pending Litigation
As of late 2023, the Department of Commerce,
Community, and Economic Development and the Division
of Insurance are in active litigation concerning the
repeal of the 80th percentile regulation.
Due to the pending litigation, the Assistant Attorneys
General assigned to the lawsuit will be attending this
presentation before Senate Health and Social Services.
If the Director is asked a question that counsel feels
could impact the litigation, they will advise the
chair and ask that the question not be answered.
3:33:22 PM
MS. WING-HEIER moved to slide 3 and began discussing the
who, what, and where of the 80th percentile regulation. She
stated that the discussion would focus on the underlined
portion of the regulation.
[Original punctuation provided.]
What was the 80th Percentile Regulation?
3AAC 26.110(a)
"a person that provides coverage in this state for
health care services or supplies on an expense
incurred basis for which benefits are based on an
amount that is less than the actual amount billed for
the health care services or supplies shall?.determine
the final payment for a covered service or supply
based on an amount that ?is equal to or greater than
the 80th percentile of charges [based on a
statistically credible profile for each geographical
area] for the health care services or supplies
MS. WING-HEIER explained that the 80th percentile regulation is
used in Alaska to pay out-of-network claims. She clarified that
in-network healthcare involves a contract between the provider
and the insurer or payer, such as a union trust or Alaska Care,
with agreed-upon rates and fees. For out-of-network care, these
agreed-upon rates do not exist, so plans regulated by the
Division of Insurance are paid under the 80th percentile, a
regulation in place since 2004 to address concerns about low
reimbursements. This set a minimum for health care
reimbursements to out-of-network providers. However, the
landscape has changed, with many providers now entering network
agreements, making it rare to find a provider without such an
agreement. The 80th percentile was not intended to eliminate
balanced billing, meaning consumers still face out-of-pocket
costs for out-of-network claims. Over time, the 80th percentile
has impacted the cost of healthcare, and consequently, the cost
of health insurance in Alaska, which concerns the Division.
3:35:39 PM
MS. WING-HEIER explained how the 80th percentile is determined.
Insurers can use their own data if they have a large enough
sample to create a statistically credible profile. Most
insurers, however, use an independent nonprofit organization
based in New York called Fair Health. This organization, which
cannot be owned by an insurance company, holds the largest
collection of private healthcare data, maintaining over forty
billion commercial insurance claims for more than 10,000 Current
Procedural Terminology (CPT) codes and adding two billion claims
annually. Fair Health's data is considered statistically
significant in all 50 states and the District of Columbia. It is
certified by the Centers for Medicare and Medicaid Services
under the Department of Health and Human Services as a
nationally qualified entity, ensuring its statistical
credibility.
3:36:38 PM
SENATOR GIESSEL asked how many Alaskans are insured in-network
and out-of-network.
3:37:00 PM
MS. WING-HEIER moved to slide 6 and noted that percentage
of Alaskans insured in state regulated plans is about 15
percent, approximately 100 to 120 thousand people. The
state has never exceeded 20 percent. As of 2022, 15 percent
of Alaskans were in an insured plan, which includes the
individual market, or a small or large group regulated by
the Division. The chart for the 2022 policy year shows
Alaska had $456 million in claims submitted in the
individual and small group markets. Of that, $409 million
were in-network and $47 million were out-of-network,
meaning just over 10 percent of the claims paid in those
two markets were out-of-network. She noted that the out-of-
network providers are both in-state and out-of-state. She
reiterated that while she does not have the exact number of
Alaskans in each network, out-of-network claims were just
over 10 percent in 2022.
3:38:26 PM
MS. WING-HEIER moved to slide 4 and discussed the following
points regarding why the Division repealed the regulation:
[Original punctuation provided.]
Why did the division repeal the regulation?
• The regulation has been criticized for increasing
the cost of health care in the state.
• Consumers have new protection under the NO
Surprise Act (NSA) passed by the US Congress in
2020.
• 80th Percentile Regulation Repealed effective
January 1, 2024.
•
MS. WING-HEIER stated that several studies have shown Alaska
consistently ranks among the highest in terms of healthcare and
health insurance costs. The Division of Insurance (DOI) has
reviewed data from independent studies and academic groups,
understanding that rising healthcare costs are a significant
factor in increasing insurance rates. The DOI has taken this
seriously, implementing measures like the Reinsurance Program.
However, healthcare costs remain high in Alaska compared to
other states.
3:40:36 PM
MS. WING-HEIER reported hearing from various groupsindividual
market participants, small groups (50-100 employees), and large
groups (100+ employees)that the high cost of insurance hinders
their ability to expand, hire, or give raises. These groups are
required to provide healthcare under the Affordable Care Act
(ACA). Providers acknowledge the rising healthcare costs,
attributing them to factors such as inflation and staff
shortages, which affect all jurisdictions, not just Alaska.
MS. WING-HEIER highlighted that the No Surprises Act, passed in
2020 under the Trump administration, aimed to increase
transparency without eliminating balanced billing. It requires
providers to give upfront estimates of charges and insurance
payments, applicable to both in-network and out-of-network
services. The Act also mandates that insurers cover emergency
services at in-network rates because patients cannot choose
providers during emergencies. It recognizes situations where
patients might unknowingly receive care from out-of-network
providers at in-network facilities, providing consumer
protections but not eliminating balanced billing.
MS. WING-HEIER emphasized that addressing healthcare costs in
Alaska will involve some difficulties for consumers, who will
need to make informed decisions based on the No Surprises Act
and their network plans. This might mean choosing between
continuing with an out-of-network provider or switching to an
in-network provider to manage costs. While this can be
challenging, especially for those with long-term provider
relationships, it is necessary to balance the needs of a few
with the broader goal of making healthcare affordable for all.
3:43:37 PM
SENATOR KAUFMAN asked if there is evidence showing the extent to
which regulation is the driver for increasing the cost of health
care in Alaska,
3:44:36 PM
MS. WING-HEIER replied that although she has not drilled down
the data to present it, the DOI has reviewed the overall cost of
healthcare in Alaska, including out-of-network claims and cost
increases. She referenced a chart titled "Annual Per Capita
Physician & Clinical Services Costs by State and by Year" on
slide 4, developed by Risk and Regulatory Consulting in 2023
using CMS data to trend healthcare costs in Alaska. The graph
indicates that in 2004, when the 80th percentile regulation took
effect, Alaska's costs began to rise above the national average,
which coincided with an increase in overall healthcare and
insurance costs.
3:45:50 PM
SENATOR KAUFMAN noted the significance of 2004 as an inflection
point and expressed interest in understanding the drivers behind
Alaska's high healthcare costs to help reduce them. He asked if
repealing the 80th percentile regulation would lower costs or
merely cause them to plateau above the national average.
Additionally, he inquired about the specific areas where cost
reductions would occur if the regulation were repealed.
3:47:44 PM
MS. WING-HEIER replied that the primary intent of repealing the
80th percentile regulation was to lower healthcare costs and
align them more closely with national averages, making health
insurance more affordable for consumers and employers. The DOI
observed about a 2 percent impact on 2024 rate filings due to
this change and expects this trend to continue for several
years. While costs may eventually plateau, this is not
anticipated in the near future.
MS. WING-HEIER mentioned that Senator Giessel had convened a
committee to examine healthcare costs, challenging the DOI to
investigate this issue. Close to 100 Current Procedural
Terminology (CPT) codes were analyzed, and an independent
consultant compared these costs to those in Seattle, North
Dakota, Idaho, and another state. The consultants provided a
comparison as a percentage of Medicare costs, revealing
significant disparities. For instance, the cost of seeing an
ear, nose, and throat specialist might be 1500 percent of
Medicare in Alaska, compared to 300 percent in Montana. This
data, available on the DOI's website for years, could be updated
for relevancy.
MS. WING-HEIER expressed hope that within 10 years, Alaska's
healthcare costs would be closer to those of other states. She
said the selected states for comparison share similarities with
Alaska, such as being rural and having oil and gas industries,
and comparable demographics. Despite some differences, the cost
disparities should not have been as high as they were.
3:50:09 PM
SENATOR GIESSEL thanked Ms. Wing-Heier for reviewing the
previous work. She noted that the Kenai Peninsula Borough
School District sends people to Seattle for healthcare
because it is cheaper. She mentioned that the Alaska Health
Care Commission, which operated for over 10 years,
consistently identified the 80th percentile as a factor
increasing healthcare costs in Alaska. She asked if the DOI
has observed any change in the number of in-network
providers since the repeal was implemented on January 1.
3:51:11 PM
MS. WING-HEIER replied that the DOI is aware that certain
clinics and air ambulance services have reached out to insurers
to become in-network. She said she could not specify the number
but mentioned that some have inquired about forming contracts.
Although the DOI does not oversee network agreements, staff can
facilitate introductions. She also stated that she is not aware
of any insurer dropping a provider due to the repeal of the 80th
percentile regulation.
3:51:41 PM
SENATOR GIESSEL acknowledged the difficulty in establishing
causality but mentioned she has a list of providers whose
contracts have been canceled by insurance companies. She said
she would try to give names to DOI, even though it has no
control over and does not monitor such contracts.
3:52:24 PM
SENATOR TOBIN noted the 10 year window cited by Ms. Wing-Heier
is a very long time and asked if DOI had made any attempts to
reform, rather than repeal, the regulation to make it more
inclusive for seniors and veterans who use Medicaid and
Medicare.
3:53:26 PM
MS. WING-HEIER stated that the DOI has discussed the issue
extensively with the Department of Health (DOH) and found no
easy solution. She noted that the impact is small because most
providers are in-network and the reason they are in-network is
not due to the repeal of the 80th percentile regulation but
because of the overall cost of health care. Over the past 4-5
years, more providers have joined networks. She opined that the
small portion of providers who remain out-of-network are often
higher priced due to their specialties, which somewhat drives
the increase in costs.
3:54:30 PM
SENATOR TOBIN stated that from the chart on slide 4, and
considering reform, it is clear the No Surprises Act is intended
to provide some of the protections that the 80th percentile
regulation covered. She asked if the Act provides all the
protections that the regulation covered.
3:55:16 PM
MS. WING-HEIER replied that the No Surprises Act was intended to
reduce balance billing, not eliminate it. The Act places some of
the onus back on providers and consumers, enabling consumers to
make more informed decisions regarding the cost of care. Under
the 80th percentile regulation, the consumer received care,
billing went to the insurer, which paid the 80th percentile, and
the consumer received a balance bill without knowing the cost in
advance. Therefore, the consumer could not make an informed
decision about whether they could afford care from an out-of-
network provider. Consumers need to be assisted in getting the
best value from their healthcare dollars. They are examining
protections under the No Surprises Act as well as network versus
out-of-network providers.
3:56:32 PM
SENATOR DUNBAR said that when he looks at slide 4, he sees an
inflection starting in 1996 with significant deviation in 2001-
2002 that puts Alaska on a trajectory noticed in 2004. He asked
what changed between 2000-2003 that caused a jump before the
80th percentile regulation went into effect.
3:57:14 PM
MS. WING-HEIER replied that she does not know but is willing to
research what occurred. She opined that, from her knowledge of
living in Alaska during that time, the medical community
expanded, which may be a partial reason.
3:57:38 PM
SENATOR DUNBAR opined that the person who was hired to
create the chart should do the research and provide the
answer. He clarified that it is not Ms. Wing-Heier's
responsibility, but if her team can provide that
information, it would be helpful. He further opined that
whoever provided the graph misidentified the inflection
point or perhaps accurately identified that Alaska was on a
trajectory that the 80th percentile rule did not seem to
change as intended, which is the most he can take away from
the chart. He also asked, now that more people are in-
network, what's to prevent large insurers, like Premera
with 70 percent of market share, from dictating rates to
providers since a mechanism is no longer in place for
providers to access people because costs would be so much
higher. He asked if the market power had shifted from
providers to insurers and, if so, what mechanism ensures
that insurers pass savings onto consumers if they secure
lower rates.
3:59:29 PM
MS. WING-HEIER replied that some statutes within Title 21, which
is the DOI, mandate that reimbursements to providers must be
fair. She stated that while she does not control network
agreements, if a provider calls and claims unfair reimbursement,
such as five cents on the dollar, DOI would investigate to
ensure fairness. The intent of the repeal is not to impact
access to healthcare in Alaska. Title 21 provides protections
for both consumers and providers, but they must inform DOI of
the issue for it to be addressed. She said DOI is willing to
discuss insurance payments with both providers and consumers to
ensure payments are made correctly and to correct any errors.
However, the 80th percentile floor is no longer in place.
4:00:47 PM
SENATOR DUNBAR said that what she described is addressing unfair
billing after the fact, but contract agreements are made
beforehand, potentially shifting power dramatically to Premera
and other insurers. He asked, regarding Senator Kaufman's
question, what mechanism ensures that insurers pass any savings
onto consumers if there is essentially a monopoly or oligopoly
in this market segment.
4:01:28 PM
MS. WING-HEIER replied that to answer his question, she would
first discuss the Affordable Care Act (ACA). The ACA mandates
that in the small group and individual markets, insurance
companies must spend 80 percent of premiums on healthcare or
return it to the payer or consumer. For large groups, this
percentage is 85 percent. This is federal law. Regarding
healthcare rates for 2025, which start coming in late spring or
early summer, filings will include a line for "contingency,"
meaning profit for the insurance company. In her tenure as
director, she has never approved more than a 3 - 5 percent
profit margin or contingency for a health care insurer. She
stated that in the matter of negotiating power, insurers claim
that with the 80th percentile rule, they could either accept it
or stay out of network, so there wasn't much to push rates down.
Providers argue that insurers do not negotiate fairly. While
discussions have been held with both insurers and providers, she
noted that she has no statutory authority to enforce fair
negotiations, though she can remind insurers that reimbursements
must be fair. She emphasized that her role is limited to having
conversations without the power to enforce actions.
4:03:33 PM
CHAIR WILSON referred to the chart on slide 4 and noted that
Alaska is one of four states where Medicaid rates are higher
than Medicare rates. He wondered if the increase in Medicaid
rates started with the state pay option and if the divergence
began when the state started changing Medicaid rates.
4:04:08 PM
MS. WING-HEIER said the graph on slide 4 is from a report, which
she can review to see if Medicaid expansion was a cost driver.
She chose the graph because it shows healthcare prices
increasing more significantly than in other states, which was
her point.
4:04:54 PM
MS. WING-HEIER moved to slide 5 and stated that the 80th
percentile is often misunderstood. It does not mean 80 percent
of charges. Instead, it represents a data point where 20 percent
of charges are above it and 80 percent are below. This is how
the 80th percentile is computed, based on the statistical
distribution of submitted charges.
4:05:39 PM
MS. WING-HEIER moved to slide 6 and reiterated that the 80th
percentile regulation does not apply to self-insurance,
AlaskaCare, union trusts, Medicaid, Medicare, Indian Health
Service, TRICARE, or the VA. It affects only 15 percent of the
population, specifically those in the individual, small group,
and large group markets regulated by the Division of Insurance.
4:06:07 PM
MS. WING-HEIER moved to slide 7 and provided data on health care
rates in Alaska and DOI's decision to repeal. She noted that
when the ACA was passed in 2014, four insurersPremera, Moda,
Aetna, and Kelticoffered plans in the individual market.
Alaska's average rate increase was close to 32 percent the first
year, nearly 40 percent the second year, and by 2017, only
Premera remained. DOI sought $55 million from the legislature
and the authority for a Reinsurance Program, becoming the first
state to secure federal funding for this purpose. The goal was
to stabilize the market, not to repeal or deny access to
healthcare. The Reinsurance Program initially used state funding
and helped stabilize rates, preventing the loss of the last
insurer. She clarified that the Reinsurance Program does not
apply to the small or large group markets. She said two years
ago, DOI considered merging small and individual groups, but it
did not suit Alaska. She emphasized that DOI continues to
explore ways to reduce health care costs and remains proud of
the Reinsurance Program's impact on the individual market. She
stated DOI started to notice an uptick in the market in 2022 and
Moda rejoined Alaska's health care market.
4:08:29 PM
MS. WING-HEIER moved to slide 8 and stated that when DOI came to
the legislature for the $55 million, it was all state funding.
She described the work needed for Alaska to obtain the
Reinsurance Program. Oliver Wyman conducted the required studies
and predicted the amount of money Alaska would need each year
from 2017 to 2024 to keep its market stable. She noted that
starting in 2019, Alaska had not used any state funding and had
been overfunded by the federal government compared to what the
state expected to receive. She said the federal government
allows the state to apply the overfunding to following years,
except for the amount required by the waiver for holding in the
current year.
The chart shows that Oliver Wyman estimated that in 2021 Alaska
would need $74 million and Alaska allocated $80 million; in
2022, Alaska would need $79 million and allocated $100 million;
in 2023, Alaska would need $87 million and allocated $120
million; and in 2024, Alaska allocated almost $50 million
additional dollars and has taken a 16 percent increase. She
stated that DOI has no money to put into the Reinsurance Program
to stabilize the market, so they are trying to find other
solutions.
4:10:51 PM
MS. WING-HEIER stated that she does not know how expensive
Alaska's insurance would be without the Reinsurance Program, but
the fact remains that DOI will not have an additional $50
million to put in the fund to bring it to $190-$200 million. All
the federal funding received in prior years has been used to
keep rates as low as possible for consumers.
4:11:20 PM
SENATOR GIESSEL asked whether the repeal of the 80th percentile
would have an impact on the market's stability.
4:11:29 PM
MS. WING-HEIER replied that DOI hopes the repeal will bring down
the cost of claims, which was the intent. However, it will not
have a direct impact on the Reinsurance Program.
4:11:59 PM
MS. WING-HEIER moved to slide 9 and called it her, "Where does
it hurt slide," which shows insurance rates. She said in health
care everyone in a family has their own charge. She provided two
examples of what consumers are paying for health insurance
costs:
Example 1
Plan: Moda Silver
Family of 4
2 parents age 40
2 children under age 14
Monthly Premium - $2758
Deductible - $4500
Out-of-Pocket Maximum - $7750 per family member
Copay for Primary Care - $30
Copay for Specialists - $60
Additional Coinsurance
Balance Bill
Example 2
Plan: Moda Bronze
Family of 5
2 parents age 40
2 children under age 14
1 child age 20
Monthly Premium - $2611
Deductible - $6350
Out-of-Pocket Maximum - $8700 per family member
Copay for Primary Care - $50
Copay for Specialists - $100
Coinsurance - 40 percent in-network 60 percent out-of-network
She opined that people are going uninsured because they cannot
afford health care premiums. She stated that DOI must come up
with a plan to drive down the cost of health insurance.
4:14:09 PM
SENATOR TOBIN said she would be remiss if she didn't point out
that she is very fortunate to have government health insurance.
She asked how the repeal of the 80th percentile regulation will
affect Alaska's aging population. She stated that she hopes DOI
has a solution that will be beneficial but expressed deep
concerns.
4:14:46 PM
MS. WING-HEIER said she would address the question later in the
presentation.
4:15:00 PM
MS. WING-HEIER moved to slide 10:
[Original punctuation provided.]
Health Care is Complex
• Health care is complex, and it is fractured federal
programs, state programs, and commercial market are
all funded differently and subject to different
statutes and regulations.
• The cost of health care is a burden throughout our
economy, including federal and state budgets as well
as employers both small and large.
• Health care insurance rates, regulated by the Division
of Insurance, are an indicator of issues throughout
the health care system.
• The health care industry, the insurance industry,
governmental entities, and stakeholder groups have
been working on health care reform for years.
• Once you identify a problem or reform, it likely takes
multiple divisions/departments and the private sector
to address.
• As policymakers, where should our focus be:
square4 Building a strong primary care system?
square4 Leverage new technologies and expand access to care?
square4 Working with consumers to understand their health care
insurance options?
• How are we addressing health care needs before acute
care or hospitalization? How do we support people when
they step down from hospitalization?
• The Division of Insurance director has broad authority
to protect consumers but sometimes the regulatory
authority to face some of these challenges is not
within the DOI.
MS. WING-HEIER said healthcare is complex and fixing it will be
very challenging. She noted that the system is fragmented, with
federal programs, state programs, commercial markets, VA,
TRICARE, and workers' compensation all operating differently. It
often feels like playing whack-a-mole, addressing one issue only
to have another arise. Her responsibility as the director of
insurance is to regulate the market she oversees, but she does
not control Medicare, Medicaid, or VA programs. Solving these
issues will require collaboration from all parties involved.
MS. WING-HEIER said that since her tenure began, she has worked
with various organizations, including Commonwealth North, the
Chamber of Commerce, the National Association of Benefits and
Insurance Professionals, the Alaska Health Care Transformation
Project, the Alaska Health Care Commission, the Alaska Policy
Forum, Alaskans Together for Medicaid, Alaskans for Sustainable
Health Care, tribal healthcare partners, healthcare insurers,
and providers. Everyone has been discussing how to address these
challenges. There is no simple solution, and what works for one
group may not work for another. However, collaboration is
essential.
MS. WING-HEIER said Alaska currently lacks some elements that
could help, such as managed care and a greater emphasis on
primary care. While we can't solve everything in one day, there
are steps we can take over time to increase access to healthcare
and lower overall costs.
4:16:58 PM
MS. WING-HEIER moved to slide 11 and stated the following quote
speaks to the crux of the problem in repealing the 80th
percentile regulation:
[Original punctuation provided.]
Cost Shifting
"?the repeal could affect the entire health care
landscape in Alaska, and particularly those who rely
on Medicare and Medicaid, by making it harder for
providers to subsidize care for Medicare and Medicaid
recipients through their reimbursements from privately
insured patients."
-Dr. Steve Compton as quoted from January 18, 2024,
ADN Article
MS. WING-HEIER stated that she does not have a complete solution
to the problem but for a fact knows that privately insured
patients can no longer afford to subsidize Medicare and
Medicaid. Cost shifting is a real concern. She noted that as
part of the repeal, DOI is working with DOH and has contributed
$5 million to begin examining Medicaid reimbursement rates.
While Medicare is part of the solution, it needs to be addressed
separately. The 80th percentile regulation allowed cost
shifting, and insured market employers can no longer afford to
subsidize Medicare and Medicaid. She expressed hope that the
repeal does not have a negative impact but acknowledged that
even with the 80th percentile regulation, some providers did not
accept Medicare and Medicaid.
4:18:36 PM
MS. WING-HEIER moved to slide 12 and discussed other
agencies that DOI will work with to deal with the high
costs of health care and health insurance:
[Original punctuation provided.]
Going Forward
What else are we doing?
The Division has committed $5 million in FY 2024 to
the Department of Health to examine Medicaid provider
reimbursement methodologies.
The Division requested voluntary agreement from major
insurance carriers in Alaska to leave in-network
contracts at current reimbursement rates until the
calendar year 2025 to protect providers.
The Division required insurance companies to provide
their out-of-network payment calculation methodology
to be submitted with their proposed premium rates for
2024.
The Division continues to meet with providers and
insurers to discuss alternative minimum reimbursement
options. Continuing the work on our Health Payment &
Utilization Database.
4:20:01 PM
MS. WING-HEIER moved to slide 13 and said that in November,
the Department of Commerce and Economic Development put out
a request for information. Many groups have worked on
healthcare throughout Alaska. The department is asking for
proposals to be submitted by March 1. The intent is to
review the proposals and have independent consultants
determine if there is merit in taking the proposals
further.
[Original punctuation provided.]
Request for Information
Request for Input on the Future of Health Care Costs
and Reimbursement in Alaska:
• DCCED put out a request on November 8, 2023, for
comments.
• Comments will be accepted through March 1, 2024.
• We encourage providers, consumers, employers, etc. to
provide input.
• Comments can be submitted via email to
[email protected] or through the Online Public
Notice System. Scan the QR code below to see the
Public Notice and leave a comment or use the link
provided.
4:20:33 PM
SENATOR GIESSEL asked if DOI was going to implement an all-
payers claims database.
MS. WING-HEIER replied no. DOI received funding, as did DOH, to
create a health payment utilization database, which is
volunteer. AlaskaCare and Medicaid will contribute, and DOI has
asked Premera and Moda to participate. However, because it is
volunteer, the database will not be as robust as an all-payers
claims database.
SENATOR GIESSEL restated that the volunteer database is similar
to but not as robust as an all-payers claims database. She asked
if DOI could also use data from Fair Health.
MS. WING-HEIER replied that Fair Health does have data, but it
is expensive, and retrieving data would be limited to a specific
number of tries. Previously, when Fair Health was used for CPT
codes, it was on a contract basis for a specific purpose.
4:21:42 PM
SENATOR DUNBAR recollected that Premera and Moda had agreed to
participate in the database. He asked if they had participated.
MS. WING-HEIER replied that Premera has committed to
participating, but Moda has not confirmed participation.
SENATOR DUNBAR said a similar conversation took place last year,
with Premera agreeing to provide data. He asked why it is taking
so long for them to provide the data.
MS. WING-HEIER replied that it has taken time to build the
database and ensure it can accept their data. She stated that
Premera has not dragged its heels in providing the data.
CHAIR WILSON said he knows the request for proposal went out in
October to build the database and find a vendor. He asked where
the department is in terms of building the database and having a
platform.
MS. WING-HEIER replied that DOI contracted with Onpoint Health
Data to build the database, which is almost complete. The data
entered needs a standardized format. DOI is working with the
volunteers to establish that format, so the data is relevant
once it enters the database.
4:23:17 PM
SENATOR DUNBAR asked if the new database and incoming data might
change DOI's current course of action. He questioned how
unexpected data from Alaska could impact the recent process,
noting that reinstating the 80th percentile regulation seems
unlikely. He inquired if any other reforms could result from
analyzing the new data.
MS. WING-HEIER replied that as DOI has worked with the
healthcare transformation project, the Health Care Commission,
and others over the years, reference-based pricing often comes
up as a solution. This approach involves reimbursing providers
at a set percentage of Medicare rates, such as 240 percent for
primary care. She emphasized that moving beyond the 80th
percentile regulation will require a statewide program,
involving both the privately insured market and government-
funded programs like Medicaid and Medicare. All parties will
need to agree on sustainable payment rates to ensure no one
party bears a disproportionate share of the costs.
SENATOR GIESSEL commented that in the repeal bill for the 80th
percentile regulation that she offered in 2017 - 2018, she had
reference-based billing set at 300 percent of Medicare for
primary care. She asked if the database would provide
verification on the appropriate amount to set healthcare costs.
MS. WING-HEIER replied that it is the intent of DOI to identify
reasonable reimbursement or payment for services based on the
charges, which DOI expects to vary, depending on the type of
care. She said that analyzing Alaska's own data will help those
working to lower health care costs.
4:26:09 PM
MS. WING-HEIER moved to slide 15 and stated the primary
role of DOI is protecting consumers. She stated DOI took
the action of repealing the 80th percentile regulation to
protect consumers so they can afford health insurance and
have access to health care. She stated the following
information is posted on DOI's website:
[Original punctuation provided.]
Frequently Asked Questions
How do rates or premiums get set?
• The division is required by Alaska's statutes to
review all rate filings submitted by health care
insurers. In this process, the division, utilizing
independent actuaries, looks to paid claims, health
care trends, anticipated number of enrollees, and
the various financial documents of the insurer that
establish financial solvency. The division must
approve the filing provided that the rates are
adequate, not excessive, and not unfairly
discriminatory.
How does the Affordable Care Act apply?
• The Affordable Care Act requires insurance
companies to spend at least 85 percent of their
revenues on insurance claims. If they spend less
than that, they are required to reimburse the
difference to their policy holders.
Which health plans did the 80th percentile rule apply
to?
• The 80th percentile rule only applied to out-of-
network charges in private insurance plans. Private
insurance plans make up roughly 15 percent of the
insurance market in Alaska. The 80th percentile
rule did not apply to Medicare, Medicaid, Indian
Health Services, VA, TriCare, or self-funded health
plans.
MS. WING-HEIER said DOI is required by statute to look
at rates and ensure they are adequate and not unfairly
discriminatory. When reviewing filings, DOI also
considers healthcare trends, past payments, and future
expectations using inflationary figures. She
emphasized that the most important thing the division
does is ensure insurance companies are solvent. DOI
must always be respectful of insurance companies'
financials when looking at rate increases or
decreases, ensuring they can justify their book of
business based on the rates they have filed. MS. WING-
HEIER stated that she would never want to be in a
position where claims could not be paid because DOI
approved too low of a rate filing, causing the company
to go into liquidation. She mentioned that DOI has not
been able to hire an actuary for a couple of years, so
they have contracted actuaries on staff to review all
filings.
4:28:14 PM
CHAIR WILSON said the state will pay for a person to take
actuarial exams. The state has a great plan for anyone who would
like to become an actuary.
MS. WING-HEIER added that the classification of an actuary for
the department is now above that of the governor. Other measures
have also been tried to make the position more competitive with
the commercial market.
4:28:58
CHAIR WILSON said he wanted to go back to a statement made
earlier about the health utilization database. He noted that
there is no statute to compel health entities to submit claims.
However, the more claims entered into the database, the more
useful the data becomes. He asked if the department might, in
later years, consider pursuing statutes to help incentivize
healthcare providers to input the data.
4:29:26 PM
MS. WING-HEIER replied that this is a door that is wide open.
There have been several attempts at passing an All-Payer Claims
Database (APCD) bill, but none have crossed the finish line.
4:29:50 PM
SENATOR GIESSEL replied that cost has been an issue. She
wondered if the repeal of the 80th percentile regulation will
help address the situation where healthcare companies located in
the lower 48 were charging based on the 80th percentile because
the patient was in Alaska. She noted that this practice was
quite a scam and should be addressed by the repeal.
MS. WING-HEIER agreed.
SENATOR DUNBAR said the data missing from the presentation was
any projections on how this repeal will bend the cost curve. He
noted that there must have been some projections made to justify
the repeal and asked for an estimate. He inquired if there was
an expected reduction or slowdown in the increase of premiums,
asking if the division had a projected percentage of impact. He
emphasized that everyone agrees the premiums are too high and
sought specific projections from the division.
4:31:12 PM
MS. WING-HEIER replied that she needs to go back and look at
that question, clarifying that she is not trying to avoid it.
She explained that while DOI firmly believes the cost will come
down due to the repeal of the 80th percentile regulation,
inflation could counteract those savings. It is challenging to
separate the impacts of various factors, such as the repeal,
technology, and other influences on healthcare costs and rates.
She stated that DOI will review the data and provide a better
explanation.
4:31:47 PM
SENATOR DUNBAR stated that Alaska is dealing with a workforce
shortage. He asked if there is any concern that the repeal will
lead to healthcare workers leaving the state or an increase in
patients going out of state for care.
MS. WING-HEIER replied that she hoped not. She noted that 10
percent of the market consisted of out-of-network providers, who
are impacted by this repeal. While acknowledging that they
cannot compel anyone to stay in the state, she expressed hope
that the impact would not be significant. Given the number of
providers already in-network, she does not expect the repeal to
dramatically impact access to healthcare.
MS. WING-HEIER thanked the committee for the opportunity to
discuss the repeal of the 80th percentile regulation.
SENATOR GIESSEL expressed appreciation for Ms. Wing-Heier's
work.
4:33:02 PM
CHAIR WILSON said Alaska is lucky to have Ms. Wing-Heier with
the Division of Insurance. He noted that with the Reinsurance
Program she made national news.
4:33:40 PM
There being no further business to come before the committee,
Chair Tobin adjourned the Senate Health and Social Services
Standing Committee meeting at 4:33 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| FAQ 80th Percentile Regulation Updated 1.25.2024.pdf |
SHSS 1/30/2024 3:30:00 PM |
SHSS 1.30.24 DCCED Div of Ins 80th Percentile FAQ |
| DCCED Division of Insurance Presentation on the 80th Percentile to the Senate Health and Social Services Comm 012924.pdf |
SHSS 1/30/2024 3:30:00 PM |
SHSS 1.30.24 DCCED Div of Ins 80th Percentile Presentation |