Health Care Falters on the Last Frontier

Officials are struggling to make health-care reform work in Alaska. Does it hold lessons for the rest of the country?

Jon Elswick / AP

Health care, like just about everything in Alaska, is expensive. The official poverty threshold for a family of four in Alaska is $6,000 higher than that of the contiguous states, and the Kaiser Family Foundation reports that families require an additional $70,000 per year to live in the same above-poverty standard as those who make four times the poverty threshold or more in the contiguous states. Per-person health-care spending in 2009 was the third-highest in the country—over $2,000 more than the national average—and comparable to spending in Massachusetts and Washington, D.C., which are known for having broad and expensive health-care programs. In prior years, Alaskans have had among the highest premiums for employer and individual market insurance.

It might not be a surprise to learn that Alaskans are much more likely to be uninsured than most other Americans. They are also more likely to live in remote areas and more likely to be people of color than those in the continental United States. They’re 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.

While residents and policymakers in other states are anxious about Obamacare exchange premium hikes, competition, and sign-ups for healthy people, Alaska’s exchange has perhaps already fallen into the dreaded “death spiral.” Only a handful of insurers remained in the market in 2015, and their premiums increased by up to 40 percent from 2015 to 2016. Most people who select plans on the health-insurance exchanges are protected from feeling premium increases because of tax-credit subsidies, but thousands more in Alaska don’t qualify for those subsidies and have to pay the full costs. Rising premiums also reflect rising costs for insurers and the federal government. Premiums that rise this sharply are symptoms of dysfunction of the overall state system.

This year has been and will be even worse than the last. All of the insurers save one will exit Alaska’s exchange market in 2017, leaving Premera Blue Cross—which suffered heavy losses in 2015—as the only remaining insurance option for people seeking coverage through the exchanges. State Republican lawmakers scrambled this June to divert a $55 million fund from taxes on insurance premiums to shore up the market, essentially bailing out Premera Blue Cross to make way for one more year of coverage. For its part, the insurer has said it is committed to the market. But the underlying financial issues of the exchange haven’t been fixed, and someone—whether it be insurers, the Alaska government, the federal government, individual beneficaries themselves, or a combination of all parties—will be footing increasing bills to cover those financial losses.

What happens if Premera Blue Cross leaves, or if it uses its practical monopoly to make premiums too high to afford? Alaska, a red state that has been resistant to the optional liberal reform of expanded Medicaid for poor childless adults, would be the first state to implement a state-administered private plan—a public option. A couple of other states have created quasi-public options in Basic Health Plans, which provide subsidized care for a small sliver of low-income people, but if Alaska were forced to administer its own exchange plan it 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.

The underlying problems that have gutted Alaska’s exchanges are also threats elsewhere. The Kaiser Family Foundation estimates that rural regions, counties, and states are more likely to have single-insurer markets than their metropolitan counterparts and have faster-growing premiums. The main reason for these differences is that rural citizens tend to be sicker than city-dwellers. Health-insurance markets may also be too sparse in rural areas to provide the critical mass of enrollees needed to balance risks. Local rural provider monopolies may not be keen on working with insurers and weaker health-provider infrastructure in rural areas may discourage sign-ups. Each of these problems could become endemic to any state with a significant rural population; indeed Alabama also only has one exchange insurer. With premiums expected to rise nationally and the loss of “risk corridors” as a federally-funded backstop against runaway premium increases, Alaska’s fate might be a possibility for some other rural states.

But Alaska is a unique state, and its combination of naturally high costs, rurality, and remoteness is not replicated anywhere in the continental United States. Although it could presage difficulties for other state exchanges, it is just as likely that it is an unreachable extreme. Regardless, it will be an example to watch in figuring out how well the Affordable Care Act works—and how to fix it.