Opinion: Eliminating the 80th percentile rule is the change Alaska needs

It is impossible to get change without changing.

For years, we have heard from Alaskans that health care costs need to change. Too expensive. Nothing has been done about it. No one can stop this price spiral.

According to a June 2023 report from the Health Care Cost Institute (HCCI), Anchorage ranks third in the nation for health care costs, with prices similar to San Francisco.

The repeal of the 80th percentile rule, which went into effect on January 1, 2024, is the type of change that could have a real impact on these high costs. The 80th percentile rule is intended to protect patients from surprise charges that occur when a health care provider charges a patient the difference between the billed amount and what the patient’s insurance pays.

When the 80th percentile rule was established in 2004, it stated that health plans would either pay the eighth highest rate out of 10 submitted or be charged if it is lower than the eighth highest rate. . The higher the bill, the more the provider will be paid.

While the 80th percentile rule served the purpose of protecting consumers from surprise bills, it also meant that providers could artificially inflate prices in their never-ending quest to get to the top.

This is because there are no regulations governing or capping what health care providers can submit to health plans for payment. Insurers like Premera had to pay the eighth-highest premiums to non-contracting insurers. So, as a health care provider, why contract with a health plan if you can choose your own reimbursement rates? The sky is the limit for you.

Now, I’ve spent years managing underwriting teams, the teams responsible for the complex calculations that determine insurance rates, so I’m good with numbers. And what I can say is that numbers based on the 80th percentile rule are simply not sustainable.

One way that cost increases can be measured is through trends in health care costs. Medical cost trends are the extent to which treatment costs are expected to increase compared to the previous year, and are one of the factors when setting insurance premiums. According to our data, the average medical service cost trend in Alaska for out-of-network providers below the 80th percentile is 4%, compared to 1.8% for in-network contracted services.

I was shocked to see the 2022 claims data. Why does something like a mammogram cost $1,200 through the Alaska network but only $105 through the Washington network? This is standard preventive care. Why can I get a COVID-19 antigen test from the Alaska network for $139 but only $40 from the Washington network? It’s a simple and easy test.

The cost of living in Alaska is high, but that seems ridiculous to me. There are no regulations or governing bodies to control healthcare costs. Meanwhile, health insurance rates are established under the supervision of both the Federal Insurance Administration and the Alaska Department of Insurance.

Without the inflationary effects of the 80th percentile rule, Premera would be:

• Requested a 2.5% reduction in employer contribution rates for 2024.

• Worked with the Department of Insurance to establish a new reimbursement rate of 185% of Medicare for out-of-network providers.

• Commit to maintaining all current in-network provider agreements through 2025.

However, since the repeal was announced, we have heard from providers across the state who claim it will drastically reduce their salaries and make it impossible for them to continue operating.

Let’s take a look at the numbers you’ve heard on the news several times. One registered nurse said the repeal of the 80th percentile rule would reduce her salary by 70%. What this calculation shows is that before repeal, she was paid at least 600% of her Medicaid rate. Why should such providers continue to line their pockets while Alaskans bear the brunt of exorbitant costs?

I’ve also heard that patients end up receiving surprising bills from out-of-network providers. We contract with over 80% of Alaska’s providers, ensuring our members have a robust list of quality providers to choose from within our network. We are working hard to reach agreements with the remaining out-of-network providers. Doing so will ensure that Medicare pays more than his 185% and protects members from high costs.

You may be wondering what will happen to your savings. It is immediately passed on to members and customers. Insurers are legally required to allocate at least 80% of their premiums to their members’ medical expenses, so if prices fall, members will receive relief.

We understand that there is a delicate balance between controlling costs for members and adequately compensating providers. It is not in our interest to “drive” health care providers out of Alaska by negotiating lower reimbursement rates. Without a strong network of providers, we would not be able to provide our members with our core service of providing access to quality care.

All of this ultimately leads to change. The status quo simply wasn’t sustainable, and major changes were needed before Alaskans could begin to see a reduction in health care costs. But providers opposed to the repeal don’t want the change. And why would they do that when they can basically set prices as high as they want under the 80th percentile rule?

The numbers just don’t add up.

Jim Glazko He is president of Premera Blue Cross Blue Shield of Alaska, based in Anchorage. The company and its predecessors have been operating in Alaska since 1952.

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