Proposed changes could alter health care payment practices across Alaska

Proponents claim a provision that’s currently in place raises costs for providers and patients, while those against the move maintain it serves as a consumer protection, even if imperfect
The Div. of Insurance is proposing to repeal a policy that was originally designed to protect Alaskans from surprise medical bills.
Published: Mar. 30, 2023 at 6:22 PM AKDT
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ANCHORAGE, Alaska (KTUU) - The state of Alaska is proposing changes to and repeal of a health care-related policy that could alter payment practices for providers, and in turn patients, across the state.

The change to a longstanding policy known as the 80th percentile rule, which would require alterations to Title 3 of the Alaska Administrative Code, is being pushed by the Division of Insurance and at least one major health care provider that serves Alaskans with health insurance.

The policy, as written, requires health care insurers to pay out-of-network health care providers for covered services and supplies based on an amount that is equal to or greater than the 80th percentile of charges in the geographical area.

Despite the provision having been established as a way to protect consumers and keep costs from being astronomical, proponents of the move claim the change would reduce health care costs in Alaska. However, people against the removal of the policy caution against what it could do to already costly visits.

One of Alaska’s main insurance providers, Premera Blue Cross Blue Shield of Alaska, claims the regulation itself has “contributed to Alaska’s soaring healthcare spending,” and has said the rule encourages providers to raise their prices. That company and others have also pointed to the federal No Surprises Act, a national law that was implemented in January of last year that is meant to additionally protect health care consumers, as a backup and equally shielding piece of legislation, despite it only covering certain types of surprise medical bills for out-of-network providers.

“The 80th percentile regulation unnecessarily makes the state’s health care more expensive,” Premera staffers wrote in a release dated Feb. 9 of this year. “The regulation allows providers to increase charges over time with little incentive to keep costs low or to join insurance networks. With the implementation of the Federal No Surprises Act in 2022, which protects consumers from balance billing, the 80th percentile regulation is no longer needed.”

On the other hand, many providers, including groups such as the Alaska State Medical Association and Alaska Medical Group Management Association, said repealing the 80th percentile rule could actually lead to even higher health care costs for patients and providers. This is in addition to further reducing access to health care by creating additional cost barriers and boxing potential providers out of the state, according to representatives for both of those entities.

“Without this regulation in place, the insurance company arbitrarily decides what they pay the out-of-network provider,” said Kati Harkreader, the practice administrator for Alaska Hand Rehabilitation who also serves as a spokesperson for the Alaska Medical Group Management Association. “Anything over that amount ends up being billed to the patient.”

“The No Surprises Act only covers specific emergency situations in patient care when a patient has no choice of their provider or there is no in-network provider available, and for air ambulance services,” she said, “so the No Surprises Act has a very limited scope of protection.”

Harkreader said the campaign to remove the regulation, spearheaded by the largest insurance payer in the state, is also touting an outdated study and using inaccurate data points.

“I also think that health care providers are being unfairly vilified for the sharp rise in the cost of health insurance premiums for employers, when in actuality, most in-network providers ... have only seen their rates reduced over the last 20 years since this regulation was in place, some, close to 40%,” Harkreader said. “So that’s like a 40% reduction in pay for these providers that are in-network. So while our expenses have increased astronomically, it’s incredibly difficult to find support staff, and even health care workers, doctors, nurses, we’re also getting paid less and less.

“So providers are being forced to go out of network,” Harkreader said, “or into cash practice, or just fleeing the state, which only is putting more limitations on access to quality care.”

A 2018 report from the University of Alaska Anchorage Institute of Social and Economic Research showed spending for health care in Alaska increased from $1.5 billion in 1991 to $4.8 billion in 2005, jumping to $8.2 billion by 2014, with the average annual increase in spending from 2005 through 2014 being $376 million. The same study — which is notably from the pre-pandemic era and does not include data from the last five years, a time period that saw tremendous increases in the consumer price index, inflation and other key economic points — points to the 80th percentile rule accounting for anywhere from 8% to nearly 25% of that annual growth.

The study also acknowledges that over time, providers can increase their charges, and insurance payments and payouts would have to keep up.

Dr. Steve Compton of the Alaska State Medical Association said providers covered by the 80th percentile rule tend to be primary care providers, general practitioners or specialists who are in rural areas — especially those off the road system.

“Those are the most vulnerable people in the Alaska health care scene,” Compton said. “They have less access to care to begin with, and this strategy will pull the rug out from underneath them.”

Citing recent state population data from the Department of Labor and Workforce Development, he also pointed to the increase in older people living in Alaska, who are known — as is the entire demographic of older Americans, particularly those who are beyond retirement age — to face higher health care costs.

“The money that goes to health care providers ends up being something like 6 or 7% of the overall national health care cost. So this idea that that is the primary driver of Alaskan health care expenses, it doesn’t really match the math,” Compton said. “The price people will pay will have to do with reduced access to care.

“I think it’s interesting that the insurance companies have made record profits, with COVID in the last several years,” Compton added. “I’m a small business owner; we have over 300 employees. We have to buy health insurance for our employees, and we pay more every year. So the idea that we’re the ones who are responsible for the increasing costs I think is laughable.”

The comment periods on the 80th percentile rule are now closed but have over the years garnered hundreds of pieces of public testimony through the phone, virtual meetings, email, and written statements. During the most recent 30-day comment period, the vast majority of written testimony was against repealing the rule.

Harkreader and Compton both suggested that although the final decision on the change can be made by the Division of Insurance, it was being left to Gov. Mike Dunleavy.

Dunleavy’s office responded to a request for comment, including a question on whether he would be making the call on the proposal to repeal, by saying only that “the division has the regulatory authority to make the decision on the 80th percentile rule and will issue that decision in the near future.”

To alter the policy, the division said in its public notice that it would make changes to Title 3 of the Alaska Administrative code, deleting certain paragraphs and revising others, all of which deal with the basis of payment for health care services or supplies. A final decision is expected by this summer.