Doctors vs. State of Alaska and Lower-48 insurers: Lawsuit filed over ’80th percentile rule’

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In 2004, Alaska introduced a regulatory measure known as the “80th Percentile Rule,” requiring health insurers to reimburse medical providers at least up to the 80th percentile of billed charges within the same geographical area. However, this rule is set to be repealed by the Alaska Division of Insurance on Jan. 1.

A consortium of medical providers, representing a significant portion of the healthcare community, has taken legal action against the state in an effort to preserve this rule. Their argument says that without it, insurers will refuse to negotiate with providers and could attempt to coerce providers into joining insurance networks.

“After months of attempting to communicate with the Alaska Division of Insurance on the dangers of repealing the 80th Percentile Rule without a replacement, we have reluctantly filed suit to protect the countless Alaska families, workers and patients impacted by this misguided regulatory repeal. Every downstream result of abolishing the 80th percentile rule and its consumer protections means less access to care, fewer doctors to see, bigger bills for patients, and the return of the predatory insurance practices that the rule successfully worked to eliminate,” said Dr. John Morris, Chair of the Coalition for Reliable Medical Access.

Premera Blue Cross, on the other hand, has vigorously advocated for the elimination of the 80th Percentile Rule. It asserts that the original intent of this regulation was to shield patients from balance billing (when a provider bills you for the difference between the provider’s charge and the allowed amount), but it has actually contributed to Alaska’s escalating healthcare costs. According to Premera Blue Cross, the rule allows providers to gradually raise charges with limited motivation to control expenses or join insurance networks.

The Division of Insurance has determined that the 80th Percentile Rule is a driving factor behind the rising medical costs in Alaska.

Medical professionals and providers argue that without adequate reimbursement, many doctors may opt to leave the state.

The coalition of healthcare entities filing suit contends that repealing the rule without implementing a suitable replacement would expose doctors and providers to unfair treatment by profit-driven insurance companies. The absence of this rule could grant insurance companies the power to dictate the winners and losers within the healthcare system, potentially leading to smaller provider networks and reduced access to medical care for certain individuals.

“Repealing the 80th Percentile Rule without a replacement turns back the clock on the significant progress Alaska has made in expanding our healthcare system over the last 20 years and hands complete control over to out-of-state insurance companies,” said Dr. Steven Compton, President of the Alaska State Medical Association. “This ill-conceived regulatory change only magnifies the control big, lower-48 insurance companies continue to hold over patients and their ability to choose the medical provider of their choice. Sadly, in their effort to quietly push this repeal forward, the Division of Insurance and their insurance industry allies continue to misinform Alaskans, misstate facts, and ignore the harm they’re doing to Alaska patients.”

The 80th Percentile Rule protects patients from balance billing and out-of-pocket costs for healthcare, and encourages insurers to work with providers in good faith, the Alaska doctors said. Further, according to the coalition, the federal No Surprises Act applies only to emergent care and does not replace patient protections in the 80th Percentile Rule.

The 80th Percentile Rule does not apply to Alaska Native and American Indian healthcare, which is covered by the federal government, nor to Veterans Administration patients. However, it does affect those covered by major insurers such as Premera Blue Cross and Moda, some of the the largest insurers in the state and in America

The lawsuit was filed in Anchorage Superior Court by the Coalition for Reliable Medical Access, made up of various organizations, including 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 Society.

32 COMMENTS

    • The government, unions, insurance, the industrial healthcare complex, Obamacare, the list is a mile long.

      We haven’t had free market healthcare in decades.

    • Until I can walk into a doctor’s office, look at a “menu” and determine what a particular service will cost BEFORE it is rendered, we will never have a free market healthcare system.

  1. So many questions…

    -how do we benefit from this one way or another? What we have now is pushing people out of the state.

    -how, exactly, does Primera claim this is driving up costs?

    -considering how the healthcare industry treated and abused (don’t forget lying)us during Covid, why should we believe them? They sorta gave their credibility away on the alter of politics.

    -why has the Division of Insurance not communicated with the healthcare industry in any meaningful way?

    -exactly, specifically, can the DOI illustrate how the 80% rule is a driving factor in our prices always going up?

    I could go on, but the point is hopefully made. Neither side has done a decent job of proving their point. I’m not inclined to believe either, frankly.

    I need one side of the other to explain to me in very simple terms, how their position will lead to me not having to go out of state for affordable secondary care by competent professionals.

    • A few answers:
      1)We benefit by the undoing of a costly regulation that is unique to Alaska. In the long run, eliminating this regulation will reduce the costs of healthcare.
      2)The 80% percentile rule drives up costs by allowing providers in specialty markets, who control at least 21% of the market, to unilaterally set the price for a procedure, when insurance is paying part of the cost. Think urology, cardiology, etc.
      3)Both sides of this discussion have monetary incentives, but the incentives point against each other. Medical care providers are incentivized to support this regulation; insurance companies the opposite. During Covid, all monetary incentives were in the same direction (increase panic to increase revenue)
      4)DoI had public hearings. Here is a link to their hearings: ‘https://www.commerce.alaska.gov/web/ins/resources/notices/80thPercentileRule.aspx
      5)The 80th rule has driven costs up between 8 and 24%, per this ISER study:
      ‘https://www.commerce.alaska.gov/web/Portals/11/pub/INS_ISER_2018Study.80thPercentile.pdf

      As for your last point, it is possible that if cardiology in Alaska can no longer command 627% of Medicare, compared to Seattle at 165% of Medicare, some cardiologists would have changed incentives about operating in Alaska. However, I would argue that this distortion in rates already made it not affordable.

      • 1)We benefit by the undoing of a costly regulation that is unique to Alaska. In the long run, eliminating this regulation will reduce the costs of healthcare.

        Nothing is going to reduce the cost of healthcare !!

  2. The state of Alaska, Division of Insurance needs to take a step back. Patients count here and they are not looking at the real picture of why every insurance company has passed muster in the state to create the business they are in with patients and create a healthy business choice for people. Div. Of Insurance has demanded across the United States in every state that insurance companies undergo the same regulatory process in order to practice. Every board creates the same process according to the laws of the state. This is an effort to disengage the insurance industry in state and across the United States to the point that a patient won’t be able to be referred to another clinic of specialists out of state for treatment. This is the out of step Dunleavy Administration’s attempt to “fool” you into thinking you are getting the best but in truth you are getting the worst. This is the “reform” that the state wants in but if you look deep, you will find that it’s the beginning of this charade chosen from a communist format used in Red China. Break it down little by little till there is nothing left of the “freedom” of capitalism and the creation of business and companies in any industry. It’s call the “State of Reform.” If the communists target anything, they go for social health and welfare. Dunleavy Administration is going down that path in an innocuous plan that the public is unaware of and may not have the information to understand Dunleavy’s strategy. Go to your representative and senator with letters and calls. Make them understand your position and put a stop to this unwarranted plan by the Dunleavy Administration. This a socialist tactic to “kill” your freedom of choice and block your choice of obtaining what you as a patient would need.

  3. The question is really “what is Usual and Customary procedure charge (CPT code)?” The cost of living in an area is a determining factor for the Usual and Customary. Some other government regulations have pre-established the Usual and Customary charges to protect consumers and providers. We have many out-of-state providers who either fly in or do telemedicine at the Alaska rates. Alaska is known as a “cash cow” for providers. For those living in Alaska, the cost of living (e.g. housing) is prohibitive to charge Lower 48 rates. The entire system needs to be reassessed. I testified many times in the House of my medical procedures out of state / country at a quarter the cost than Alaska. Medical tourism is a real potential but there appears to be providers in Alaska who revolt against it, just as they express fear factors to patients who contemplate going out of state / country. We need a system that protects consumers, providers, and sets standards which insurance companies can expect and must abide to “play in Alaska.”

  4. So, the Alaska provider community that charges so much more than anywhere else in the US is boo-hooing the end of the regulatory gravy train as revealed by the data examined by ISER. Some specialist docs are charging more than 5 times similar specialist rates elsewhere in the northwest. So much, that it makes fiscal sense for insurance companies and self-funded plans to fly two people out of Alaska, first class, put them up in a nice place for recovery, and pay the docs and facilities who perform lots of these procedures with excellent outcomes, and still save over 50% compared to a “discounted” procedure here in Alaska.

    Primary care is underfunded in Alaska and prices could even grow some, without the 80th percentile rule. This is chiefly about specialists used to charging more than anywhere else in the US.

    “Big outside insurance companies” is a focus group term tested for maximum revulsion and negative reaction. I wonder what the corollary on the other side is? Maybe “self-serving, greedy, entitled ….”

    • Part of the difference in rates in the Lower-48 and Alaska is the higher penetrance of managed care, PPOs and discount medicine. Alaska is one of the last bastions of fee for service. Part of this has been from the combination of strong unions and the “easy money” of the pipeline years. Also, Alaska is a CON (certificate of need) state that acts like granting “royal charters” giving exclusive privilege to some to practice without oversight into cost containment and value returned to the consumer. …. literally minting money. As the industry says…. “capturing your ancillaries”.

      On the other hand, Alaska isn’t Newport Beach or Malibu. There is a premium for having care… good care in Alaska. People can rant all day about free markets and such, but when crunch time happens it’s all in for socialized medicine. For decades high quality health care was always outside…. now it isn’t. It is available in Alaska. The problem is that every generation of medicine winds up having some killing the golden goose for a quick score. Adjustments can be and must be made but carefully.

    • Last time I did this, I never got to fly 1st class. And my companion fare wasn’t fully covered.

      I got a decent but not complete reimbursement for a Holiday Inn style hotel near the hospital.

      I still had to cover all the expenses Primera wouldn’t. And I still had to meet my deductible.

      Is out of state care better? Usually. But at least with Primera I didn’t get a luxury excursion with a side order of necessary surgery.

    • Premera Blue Cross Blue Shield of Alaska wouldn’t let me go “outside” for care that would have helped my neurological condition. The care isn’t available in Alaska, so they said I do not need it. I’d like to know who gets flown out of state 1st class to get medical care.

      ISER said they published the study by Guettabi but that the work was not ISER work, and they did not support its conclusions.

      Did you notice how MODA asked DOI for an increase, but DOI DENIED that request INSTEAD ORDERING AN INCREASE MORE THAN 5% higher than what was requested so that MODA pricing would be less than 1% lower than Premera? PREMERA BLUE CROSS CONTROLS THE ALASKA DIVISION OF INSURANCE AND THE DUNLEAVY ADMINISTRATION WHEN IT COMES TO ANYTHING MEDICAL.

      There is no free market of insurance in ALASKA because Premera has PURCHASED the last several administrations

  5. And the average Alaskan will still get screwed.
    The medical industry gets richer and the people get pourer.
    I wish all trades that do business with the doctors and lawyers would charge like fees.
    If they need a plumber or electrician the hourly rate they charge should start at 1000 dollars an hour.

  6. The Masked avenger asks some great questions and I’ll do my best to answer them in order below:

    1. There is no benefit of repealing the 80th percentile for Alaskans. The DOI published that they did it to decrease insurance premiums. Next year premiums are increasing roughly 17% on the individual marketplace, but premera has messaged that they would have increased even more without repeal. The discount claimed by Premera has ranged from approx 1.5% to 4.4%, depending on who they were talking to.

    Reforming the 80th, with recommendations made by the coalition representing the vast majority of healthcare providers in Alaska, would benefit Alaskans directly by expanding access dramatically particularly for seniors and veterans, and indirectly by preventing the harms caused by the current repeal without replacement.

    2. I can’t speak for Premera. I would honestly love to see how they came up with their (differing but always small) estimates of savings.

    3. Regarding COVID, I hear you and I agree. I will say this – I am not one of those doctors. My company stayed open, never stopped caring for patients for even one minute, and never treated people differently because they were vaccinated or not.

    4. I can’t speak for the DOI. The healthcare community – physicians, podiatrists, chiropractors, physical therapists, and others – have bent over backwards trying to communicate our concerns for how this repeal without replacement will hurt Alaskans – making it even harder and often more expensive to see a doctor here in Alaska to the DOI. A letter signed by over 600 Alaskan providers was ignored. Our comments were ignored. A meeting but no listening at DOI.

    5. Again, won’t speak for the DOI, but the fact is they can’t show that the 80th increased costs because the 80th hasn’t, at least not for the vast majority of healthcare providers. Despite insurance premiums skyrocketing over the past 5 years payments per service by insurance to providers have only decreased, with very few exceptions. Thats right, insurance is paying doctors less each year while charging Alaskans more.

    For supporting information on my comments above plz check out the Coalition’s website at http://www.reliablemedicalaccess.org.

  7. The 80 th percentile rule is a total rip off for Alaskans who pay for insurance or get it as a benefit for work. It keeps the ripoff artist quacks in business in this state and attracts more flybynight out of state operations. If it’s so great, why not change it to the 100 th percentile rule?

  8. I have a lot of empathy for the small primary care providers because this is going to be hard for them. They have already had so many extra ways to bring in money taken from them by big insurers (like direct bill labs). They work so hard and do solid work in our community.

    That being said, I don’t understand how a cardiac MRI in Utah can be around $600 and 2500+ here. If I have a 20% copay that is a large cost share difference to me. I am quite sure the quality of life and take home pay difference between our primary care providers and our local specialists is a large gap. If the community really understood how much many of the specialist here make people would have a fit about the charges.

    The idea behind this rule also had to due with the cost of providing care here but it’s outdated. Leave it in place for areas that are truly rural or for primary care, or primary care that take Medicare or Medicaid. Otherwise, it may be time for specialist to make do with double what’s made outside vs 5 times what is made.

    At the end of the day we as patients pay a cost share so the higher the charge the higher the share I pay until sometime around the end of November (if I’m lucky) I hit a very large max out of pocket.

    This is not a simple issue but it’s a bit hard to feel sorry for those outside of primary care or internal medicine who can’t bill regularly for procedures to drive their profits up.

    Clearly how it’s been isn’t working well for Alaskans. Many of us wonder how we can retire here before 65 because the cost to buy insurance on the exchange is ludicrous. Something needs to change.

  9. Addressing the corruption? Nope. There are lots of natural remedy that work. Like 70% of cancer is actually parasites. UC cured with Slippery Elm. Most thyroid issues can be cured with Black Cohosh. Autism is some level of brain damage, and/or heavy metal poisoning; which can be proven with a cat scan and a hair analysis. So tired of the lying. Ivermectin cures influenza, but not Covid? It just goes on and on.

  10. The healthcare industry in Alaska is rampant with exorbitant fees for often times lackluster results. It kind of follows the equally corrupt public education model – pay more and get less!

  11. Liberal corporations work hard to hurt targeted political enemies many of whom have no idea they are not preferred and are being processed as laughable political outcasts in Alaskan small population base. I have attended seminars where medical billers were told that insurance companies have literal stickers which they may place upon groups. A teddy bear sticker might mean “never quarrels or confronts”. Warning, you don’t want to be in that group. So do what works best for patients. Keep that status quo. The judges won’t hear such anecdotes in any table of evidences though.

  12. Usually good reporting shows robust arguments from both sides. This article is 95% on the side of providers, with only the following on the flip side. “The Division of Insurance has determined that the 80th Percentile Rule is a driving factor behind the rising medical costs in Alaska.” Is it too much to ask to see a follow-up article on the DOI rationale?

  13. As a physician my overhead continues to rise. My personal healthcare premiums have continued to rise while services provided by the same insurance company continue to be decreased or totally denied. Professional reimbursement continues to be decreased yearly. As a result I have not received a paycheck in the last 4 months and have actually infused money into my practice. Have no illusions about these insurance companies, they exist for their bottom dollar and have no to little concern over patients’ welfare.

  14. Between the 80% mandate and the anti competitive CON (certificate of need) law Alaskans are being legally over charged by the medical monopoly/medical-industry-complex.

    80% and CON law needs to end. Keep in mind that we didn’t get to the current price structure over night and it may take a decade for the correction to put an end to the overcharging.

  15. Oh my gosh!! You mean Doctors in Alaska might actually feel pressure to negotiate with health insurers for more reasonable reimbursement rates than the currently mandated 80th percentile??? Say it isn’t so! How will they maintain their standard of living (i.e. million dollar-plus houses, private airplanes, fancy boats and cars, five star first class vacations, etc) on a 3-day workweek??? The horror! Might as well throw a few miscellaneous millions at suing the State… after all, it will be worth a whole lot more than that if they win! And for you rubes thinking the high cost of medical care in Alaska is due to insurance company profits, remember that since 2011 Obamacare requires government audits to demonstrate that at least 80% of premium revenues are used to pay medical charges from doctors- if the Medical Loss Ratio (MLR) is not met, customers must receive a rebate.
    The remaining 20% (or less) of premiums is used to pay for office space, employees, billing & pmt systems, etc and whatever might be left is allowed to be profit. Many doctors in Alaska are filled with greed and egoistic displays of opulence. No one is auditing them to make sure the fees they charge are not producing excessive profits.

    • Since the Affordable Care Act ‘limited the profits’ of health insurers, the nation’s largest insurer – United Healthcare – has seen its market cap rise 813% while the S&P 500 rose only 194%. Somehow the value of the publicly traded health insurer saw its value increase 4 times as fast as the rest of the economy AFTER its profits were ‘limited.’ Average health insurance premiums have risen 233% over the same period. Credit to Charlie Bilello blog. For the impressive graph, see below.

      ‘https://twitter.com/charliebilello/status/1034439089825742850?lang=en

  16. It wasn’t just the Division of Insurance that determined the 80th percentile caused increased health care costs in Alaska. See an independent study here: ‘https://scholarworks.alaska.edu/bitstream/handle/11122/8980/2018_05_29-80thPercentileReport.pdf?sequence=1&isAllowed=y
    This issue has been discussed for years. Thanks to the Division of Insurance (which is solely set up to regulate insurance companies on behalf of consumers and compel legal compliance) for finally getting rid of this antiquated rule that had been driving up costs by eliminating competitive pricing for medical services. Why try to be competitive when insurers are mandated to pay 100% of what 8 out of 10 medical providers charge (i.e. the 80th percentile)?

  17. Until people are first and the native corporations and tribal council and Alaska Federation of Natives votes are certified by the Alaska public office commission to ensure proper and uniform voting processes in the law and application of these laws & voting integrity since ancsa determined the state would provide oversight – it’s a train wreck but….

    Most importantly!!!! Until SB 319 is repealed along with the Alaska Apology Law nothing will get better.
    “An Act relating to claims for personal injury or wrongful death against health care providers; and providing for an effective date.”
    ‘https://www.akleg.gov/basis/Bill/Detail/23?Root=SB319

    As it stands now it’s ok for the Alaska tribal health compact et al (all 16 + health facilities included) and the Alaska Federation of Natives can dictate and essentially overreach management and impact the laws effecting everyone regardless of race or ancsa status. If they are not held accountable and allowed to jerrymander in totally unwholly illegal and unconstitutional ways people will continue to leave, costs will go up and everyone there will be a slave to the these special interests and DNC manipulation – the southeast tribal groups have usurped power because they have the state capitol all to themselves. There needs to be parity in law. This is crazy…. The capitol needs to be on the road system in a neutral zone not beholden to one group.

    How come Gottlieb et al are not in prison for falsifying records establishes the level of corruption up to the US attorney – their former business partner…

    Clarify the laws and hold them accountable for human rights laws and unconstitutionality in their contracting, compacting and hiring practices and application of these laws..

    You’re a sample in Alaska! Not a patient. Support modernization of the laws…

  18. Is this not what Obamacare was intended to achieve?
    .
    Wasn’t the objective to create a situation so irreversibly FUBAR’d that leading industry and public figures, and mainstream news media talking heads would clamor loud and long for Alaska to be used as a test bed for nationalized health care because that’s the only viable fix?
    .
    Could the fact that the 80th Percentile Rule doesn’t apply to Alaska Native, American Indian, and VA healthcare, all covered by the federal government, be used to justify solving the problem by forcing State-run health care on productive Alaskans?
    .
    Is it any coincidence that the only part allowed to thrive in Alaska’s medical-pharmaceutical-insurance-government cabal seems to be government?
    .
    (https://mustreadalaska.com/alaska-is-first-in-nation-for-financial-health-of-state-budget-says-truth-in-accounting-report-for-2023/)
    .
    Every other part of the cabal’s in terrible shape financially and getting worse, according to them, but productive Alaskans don’t know why.
    .
    Yet the Alaska Native, American Indian, and VA healthcare industries seem to chug along unaffected.
    .
    Any other situation this bad, you’d think Somebody Important could explain what happened, but no medical-pharmaceutical-insurance-government cabal member seems able to explain clearly what the problem is, much less how to fix it.
    .
    This thing has so many moving parts that if the 80th percentile piece falls off, the whole circus grinds to a halt?
    .
    If so, productive Alaskans should be asking the Governor and Senate leadership in no uncertain terms to keep that 80th percentile rule in place.

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