The Dunleavy administration repealed a rule aimed at lowering health care costs, sparking opposition from hundreds of health care providers who said the regulation was necessary. A lawsuit challenging the state's authority to remove it is underway.
Under the rule, which officially repealed on Jan. 1, insurers were required to pay out-of-network providers at least the 80th percentile of the average going rate for medical services. Without this rule, insurance companies would be free to pay lower rates for services, and consumers would have to pay the difference.
Since its implementation in 2004, the rule, which applies only to the private insurance market, has effectively prevented Alaska patients from receiving large medical bills for out-of-network care. But the state argues that the rule increased health care costs over time by incentivizing providers to keep prices high.
the country claims The repeal could help lower Alaska's health care costs, which are among the highest in the nation.
Even if regulations are lifted, insurance premiums will continue to rise. Premera Blue Cross Blue Shield of Alaska, which controls more than 70% of Alaska's health insurance market, will raise premiums by 5.2% for the small group market this year. But Jim Glazko, the company's Alaska president, said rates would have risen sooner if the rule was still in effect, and that without repeal, rates would have risen an additional 2.5%. Ta. For individual plans, Premera prices rose 16% in 2024, according to a federal database.
Dozens of health care providers say it will be difficult to continue operating if the rule is lifted. Insurers say they may not be able to keep their doors open if they significantly reduce reimbursement rates.
And there's no guarantee that long-term savings for insurance companies will translate into long-term savings for consumers, they say.
“Repealing the 80% rule will not reduce health care costs; it will simply shift those costs to health care providers, while lowering costs for insurance companies. Providers will pass those costs on to the patients they serve. We have no choice but to pass it on,” said Dr. Laura Moore. , an Anchorage-based doctor, told the health department that one of the following: hundreds of letters Submitted to the state by a medical professional.
Insurers have said in public testimony that the idea for the repeal came directly from Premera, which told Alaska employers that the repeal would reduce the cost of their insurance. For many years, he has lobbied the state for reform. Worker.
Glazco said Premera is required under state law to “pass on the savings from the repeal or repeal of the rule through interest rate reductions.”
“We can't keep that money. That money needs to go to consumers,” he said.
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A flurry of opposition from health care providers culminated in November, when a coalition introduced a bill that: lawsuit It challenges the department's authority to repeal the rules.
Plaintiffs include the newly formed Coalition for Reliable Healthcare Access, the Alaska State Medical Association, the Alaska Medical Group Management Association, the Alaska Podiatric Medical Association, the Alaska Physical Therapy Association, and the Alaska Chiropractic Association.
“I understand the medical community's concerns, but I also understand the consumer sentiment that they don't need to contribute any more toward medical costs. And we have to make a decision or continue to be at the 80th percentile. “We're at a point where health care costs are going to be high,” Health Department Director Lori Winghier said at a Congressional hearing last year.
“Unreasonable and arbitrary”
The lawsuit, filed in Anchorage Superior Court, alleges the Insurance Department's decision was “unreasonable and arbitrary” and asks that the repeal of the rule be declared “null and void.” The providers also asked the court to temporarily halt the state from repealing the rules while the lawsuit is pending.
The state has not yet responded to the lawsuit. The health department said in a statement that it complied with administrative procedures. Wingheier declined to answer a series of questions about the repeal, citing ongoing litigation.
“Despite steady annual increases in health insurance premiums, payments to Alaska's health care providers, with very few exceptions, have not increased,” the providers said in the lawsuit. , alleging that the Insurance Department “did not adequately consider whether repealing the rule would result in cost savings.” It would mean a loss for consumers, and for Alaskans, of the health care providers they rely on for health care. ”
Health care providers say that for the foreseeable future, Alaskans can expect to pay higher costs for out-of-network care because of the regulation, which was previously unheard of in the state. In the long term, lower reimbursement rates from insurance companies mean fewer health care providers will choose to set up clinics in Alaska, and patients will have to leave the state to receive specialized care. They say that will increase.
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Dr. Stephen Compton, president of the Alaska State Medical Association, said, “Eliminating these important consumer protections without some kind of alternative will simply return us to the status quo of 2004.”
Compton was among a group of health care providers who met with Gov. Mike Dunleavy in September to discuss potential changes to the 80th percentile rule. Compton said the group is proposing to require all health care providers who benefit from the regulation to accept patients covered by federal insurance programs, including Medicaid and Medicare.
They argued the proposal would help solve another long-standing problem in Alaska's health care industry. They argue that federal insurance program reimbursement rates are too low for Alaska's health care providers to accept, limiting options for Alaskans who rely on public insurance options.
Compton said Dunleavy “listened and said he would get back to you right away, but we didn't say anything else.”
In August, the health department convened a group of health care providers “to discuss alternative methods of payment to health care providers.” Another meeting was scheduled for September, but the providers “advised the department that it was not considered worthwhile to proceed” and the meeting was canceled, the department said.
Asked Friday about the governor's meeting with health care workers, Dunleavy spokesman Jeff Turner said, “We cannot comment on the 80th percentile rule because there is ongoing litigation.”
Compton said waiting for a response from the governor led the provider to cancel a second meeting with the health department and ultimately file the lawsuit.
In November, the Department of Commerce, which has jurisdiction over the insurance sector, demand “Comments on Health Care Reimbursement and Future Health Care Payments in Insurance Marketplaces and Other Payers,'' due March 1.
The insurance department said in a statement that the rule only affects the insurance market, which accounts for about 20% of Alaska's population. Of this, the division estimates that out-of-network redemptions account for about 10% of the market. This rule does not apply to government-issued insurance such as Medicare or Medicaid.
But Compton said the repeal would make it harder for health care providers to subsidize care for Medicare and Medicaid recipients through reimbursement from privately insured patients, making Alaska's health care system as a whole more dependent on Medicare and Medicaid in particular. He said it could have an impact on people in the area.
“The problem we face is just a fundamental social question: 'Are we going to take care of each other or are we not going to take care of our neighbors?' 'Is that so?' he said.
“Slight gap”
The 80th percentile rule was introduced in 2004, but “consumers in Alaska were left with huge balance bills or surprise bills when their insurance companies paid out too little.” Because we were dissatisfied,” Wingheier told lawmakers last year.
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Ms. Winghire said she supported the rule because she believed “Alaska consumers would no longer be hit with fees or surprise charges.” For almost 20 years, this rule has protected Alaskans from situations common in other states.
But Winghire argued that the federal No Surprise Act, which took effect in 2022, made Alaska's rules unnecessary.
The No-Surprises Act was enacted to prevent surprise medical bills for out-of-network care, but it applies to narrower situations related to medical emergencies. If a patient seeks specialized non-emergency care provided only by an out-of-network provider, they are not protected under federal law.
Wingheier told lawmakers last year that “there may be some gaps” between what the anti-surprise law covers and what was once covered by Alaska's 80th percentile rule. ” he said.
Winghire said that without this rule, if there is a disagreement between a health care provider and a patient about how much they should pay for a service, the amount would be determined through an adjudication process and the patient would be exposed to higher-than-expected costs. He said there is a possibility that he will have to pay. -Network services.
“I haven't seen many convictions in Alaska because of the 80th percentile,” Wingheier told lawmakers last year.
Even after the rule is repealed, the state still requires private insurance companies to cover a portion of out-of-network charges. Glazko said Premera's plan is to reimburse out-of-network providers at a minimum of 185% of Medicare reimbursement rates.
“So our hope is that all providers who choose not to contract will think twice and come to the table knowing that they will be paid at the 80th percentile of their billed rates. “You're most likely going to get a much higher amount because that's where negotiations most often end up in Alaska,” he said.
“A unique moment”
This is not the first time the state has considered eliminating the 80th percentile rule. In 2018, the Department of Insurance sought comment on possible deregulation, but did not move forward.
At the time, researchers at the University of Alaska found that the rule contributed to rising health care costs. Health care providers said the study did not take into account other factors contributing to rising costs, such as Alaska's aging population, and Wingheier said at the time the study was published that its conclusions were “uncertain.” he suggested.
No additional research has been conducted on this topic since 2018. Wingheier did not respond to questions about what changed between 2018 and 2023.
One thing has changed since then. The Alaska Legislature approved the creation of a $1.5 million health care payment utilization database in 2022. Although this database is not yet complete, it is expected to provide Alaskans with more transparency about the cost of health care services and how much individuals pay for services under various plans.
“One interpretation of the sequence of events is that the insurance industry wants to reduce the 80th percentile before the database goes live, giving it more control over the market,” Compton said.
Glazko said Premera is “happy to participate” in the database and that Premera “supports market transparency 100%.”
Premera has taken an active role in advocating for the repeal of this rule, both in 2018 and recently.
“We've been trying for a long time to get the public, and really everyone, to recognize the fact that we need to get rid of this rule because of the effects of inflation,” Glazko said. “I was finally able to communicate with people.”
In the lawsuit, the providers claim they filed an information request in September seeking communications between the insurance department and executives at Premera and other insurance companies. The lawsuit asks a judge to require the state to provide information, which it has not yet provided.
Premera made no secret of his support for abolition.A week after the health department announced it was considering lifting the regulations, Premera Posted The department's website includes a “call to action” asking people to force the department to move forward with repeal. This webpage provided a public comment letter template and was used by many employers and business groups.
“This is a unique moment, a short period during which we have the opportunity to remove the rules,” Premera declared on its website. “If we miss this opportunity, we probably won't have another one, and the current situation will continue as costs continue to rise.”
