John Morris: Why Alaska healthcare community sued the state’s insurance division over 80th percentile rule

23
2345

By JOHN MORRIS

A broad coalition including physicians, chiropractors, physical therapists, podiatrists and more — representing the vast majority of healthcare providers in Alaska — recently brought suit to stop the repeal of the longstanding consumer protection known as the 80th Percentile Rule. As a member of that coalition, and a concerned Alaskan, let me explain to Must Read Alaska readers why:

After months of attempting to communicate in good faith with the Alaska Division of Insurance about the dangers of repealing the 80th Percentile Rule without a workable replacement, our coalition reluctantly took legal action to protect the countless Alaska families, workers and patients who will be impacted by this misguided repeal. If the repeal is allowed to stand, the elimination of this rule will severely jeopardize Alaskans’ ability to receive healthcare here at home, will return us to the days before the rule’s implementation in 2004 when Alaskans were saddled with surprise medical bills on top of their already high insurance premiums, and will result in little if any of the promised cost savings. 

Every Alaskan, regardless of their politics or background, should care about this lawsuit because repeal of the 80th Percentile Rule all but guarantees an Alaska where it will be even harder to find a doctor, where wait times will dramatically increase, and where patients will have to pay even more out of their own pocket for healthcare. 

Critics of the 80th Percentile Rule, led by Seattle-based insurance companies, have lobbied heavily to repeal this rule. Collectively, they’ve spent thousands of dollars spreading misleading messages such as Alaska’s doctors are getting paid too much, eliminating this rule is common sense and will lower healthcare costs, this is an outdated and unnecessary government regulation that raises costs and makes doctors more money.   

But when you stop and review the facts there is so much more to this story. For example, if Alaska’s healthcare providers are being paid so much, why does Alaska face the most significant healthcare worker shortage of any state in the nation according to recent studies? One reason is that Alaska’s “competitive” salaries are no longer competitive; they’re being matched or surpassed by Lower 48 states hoping to recruit and retain medical professionals. But let’s use data, not anecdote.  

According to Becker’s and Weatherby Healthcare, two reputable organizations that track physician compensation,  Alaska doesn’t make the top 5 states for highest physician pay and, if you factor in the cost of living, we don’t even make the top 10. More than that, doctors in Alaska are getting paid less each year while insurance premiums have skyrocketed. That’s right, we are paying more each year for insurance but those same insurance companies are paying less each year per service. There are exceptions to this, but they are a small minority. 

How do we know this? We did the work. We surveyed a broad spectrum of healthcare practices in Alaska and asked them to share how much insurance has paid them for a given service over the years. We then graphed those payment trends, together with how insurance premiums have risen, and got a striking picture. Again, despite each of us paying more in insurance every year insurers are, with few exceptions, paying less for the same care each year. Insurance pays less while premiums skyrocket.

If the Alaska Division of Insurance (DOI) knows that medical providers are receiving smaller reimbursements each year, why would they still push the repeal of the 80th Percentile Rule, which contains critical consumer protections and safeguards against insurance companies completely controlling the Alaska healthcare market?

We can’t speak for the DOI but the DOI’s Director, Lori Wing-Heier, told us that she based her decision making on data provided to her by an out of state company called FairHealth.  FairHealth collects claims information and other data from insurers and then, for a fee, provides aggregated data on healthcare costs to various consumers across the country.  Curious, we hired FairHealth too and paid them to give us the same data on how much insurance in Alaska has paid for a given service over the years – how much to deliver a baby or do a heart surgery, how much for a chiropractic treatment, and so on. 

One of the first things we noticed about the FairHealth data was that it listed values for payments and charges for procedures that have never taken place – such as dozens of prices and payments for heart surgeries in Kodiak, Juneau, Fairbanks, and Ketchikan. In case you’re wondering, there are no heart surgeries in Kodiak, Juneau, Fairbanks, or Ketchikan. When we asked FairHealth about this they reported that they use mathematical methods to derive data when they don’t have any to report. In other words, they make it up. So we asked them for another spreadsheet of data, with only real (not derived) data in it. That spreadsheet was much, much smaller and wouldn’t have justified the DOI’s position.

The DOI and Premera say repealing this rule will result in lower health insurance costs – often citing an outdated and incomplete study that blames the 80th Percentile Rule for up to 24% of Alaska’s health care cost increases. But now that the rule has been repealed, we get a glimpse as to what the insurance companies and the Division of Insurance really think the 80th Percentile Rule is “worth”. The answer – not much. Despite the rule’s repeal insurance premiums are once again on the rise next year, just as they did last year, by about 17%, sometimes more. They are rising so much that they are making headlines. Premera now says the repeal of the 80th Percentile Rule will only amount to a savings of 2.5-4% (depending on who they speak to), despite previous claims that it would result in significant cost savings to policyholders.

While healthcare professionals and the 80th Percentile Rule are often blamed for the rising costs of healthcare in Alaska the real reasons for rising costs are sometimes simpler, if not a bit more inconvenient. Before each year starts insurance companies have to receive approval from the DOI for how much they can charge for premiums the following year. It’s called rate review. There are two insurers currently on the individual marketplace, Moda and Premera. Premera holds a virtual monopoly in Alaska but Moda is a big company too, doing over a billion dollars a year in revenue across all the states they operate in. For the year 2023, according to publicly available documents, Moda asked the DOI to only raise their prices 3.97%. It’s safe to assume that Moda would like to grow their business in Alaska, taking some customers from Premera, and having lower prices is a great way to do that. But that lower price request was not approved, and instead the DOI required Moda to raise their rates further by 12.1%. That’s 8% more than originally requested, hundreds of dollars per person more than what they asked for. In 2024 a similar story. Moda asked to raise prices 10.52% but instead was approved for 15.72%. For those interested, detailed information can be found at https://ratereview.healthcare.gov, including insight on what Premera’s prices have done in the same period. 

In conclusion, despite insurance companies charging Alaskans more and providers being paid less for the same work, Alaska continues to grapple with massive shortages in healthcare workers. This shortage, which disproportionately affects vulnerable populations, such as seniors and veterans, continues to make receiving quality and timely medical care in Alaska a significant challenge. The Alaska DOI chose to use ‘derived’ data rather than real, locally sourced and timely data on insurance payments. The DOI decision-making has resulted in higher insurance costs by requiring Moda to charge more than their initial marketplace request – aligning their prices more closely with Premera’s rates. And lastly, all reforms and replacements proposed by the healthcare coalition to preserve the many consumer protections and safeguards found in the 80th Percentile Rule have been rejected by the DOI.

Repealing the 80th Percentile Rule without a replacement will turn back the clock on the significant progress Alaska has made in expanding our healthcare system over the last 20 years and will hand complete control over to out-of-state insurance companies. We encourage you to look beyond slogans and bumper stickers and think about whether you want your insurance company to choose who provides your healthcare, what it will cost you out of pocket if you disagree with their choice, and whether there will be a provider available for you to see at all.  Please join us in working to make Alaska an even better, healthier place to live. 

Five Reasons Repealing the 80th Percentile Rule Is Bad for Alaska:

  • Fewer Consumer Protections: The 80th Percentile Rule provided Alaska patients with protections against predatory billing practices and surprise medical billing. Its repeal means fewer safeguards for policyholders, exposing them to greater risks without the safety net provided by the regulation. For example, recently several Providence based groups gave termination notices to Premera. With the 80th Percentile Rule these patients would be protected from big bills and could still see their regular doctor, no matter how the Providence and Premera fight plays out. Without it, they’re on their own. 
  • Shift in Power Away from Patients and Doctors: With the 80th Percentile Rule gone, access to reliable medical care in Alaska will be significantly impacted. That’s because the 80th Percentile Rule prevents insurance companies from completely controlling Alaska’s healthcare system. Without the 80th Percentile Rule, insurance companies have all the bargaining power, deciding which doctors you see, when and where you’ll see them, and arbitrarily deciding how much they’ll pay. Providers will be forced out-of-network by insurers who see no reason to contract with them and seek to narrow their networks.
  • Premiums Are on the Rise: Despite, big out of state insurance companies insisting that the repeal of the 80th Percentile Rule would result in lower rates, premiums for Alaskans are set to skyrocket in 2024 –– with one insurer raising rates by 17.8%.
  • Decreased Access Competition: Without Alaska’s 80th Percentile Rule, insurance companies have ZERO incentive to negotiate with your doctor. The result – they get to pick the winners and losers in our healthcare system; shrinking our healthcare market, reducing access, and driving specialists out of Alaska. For vulnerable populations like seniors, veterans, and rural residents, this would be catastrophic and would result in less access to care at home. Providers will be forced to limit or stop seeing non-privately insured payers all together as their fees will be drastically cut by insurers.
  • Insurance Companies Continue to Reimburse Alaska Doctors Less, While Increasing Patient Premiums: Despite claiming doctors and medical providers are the primary driver of rising health insurance premiums, out-of-state insurance companies reimburse Alaska doctors less and less each year. How are local doctors the problem if 1) Alaska faces on the most significant healthcare worker shortage of any state in the nation and 2) insurance companies are paying providers less but charging you more?

For more information, please visit our website at www.reliablemedicalaccess.org.

John Morris is an Anchorage-based board-certified pediatric anesthesiologist and chair of the Coalition for Reliable Medical Access.


23 COMMENTS

  1. This all may be true, but the fact still remains that I was fired by Native Health as the sole provider in a Bush village because I refused the untested/unsafe COVID vax. No amount of money replaces bad/stupid management. The whole system is broken, not just insurance reimbursements.

    • So sorry to hear that you got fired over this! Glad that you stood your ground – stay healthy! It is hard to find good providers in the villages. The healthcare system is broken. Now it is just bent on killing people, not keeping them healthy. Prayers that more Alaska Natives wake up and see that this government is not there to help them.

  2. It’s inexplicable and frankly despicable that the Division of Insurance required a company to charge Alaskans MORE!! So we’ll be paying more because some bureaucrat is forcing Moda to charge us more than the company wanted to. What a racket!

  3. After how so many of you treated people during Covid, why should I trust you?

    At least you admit you want to make more money.

  4. As a Juneauite, we lack certain aspects of care because we are an isolated community where it rains over 100 days a year and we lack many of the niceties of larger communities.

    I’d say nice try, but do your homework.

  5. Very poignant. How many docs who wanted to practice in AK were rejected though they are practicing in Washington to very high standards with outstanding outcomes? That would be interesting to know in this exclusive medical cloister. I believe AK docs would love to have new wonderful colleagues here practicing medical care in our little but interesting population. During covid the door slammed mysteriously, but forcefully shut. Thanks bunches state of AK. How terribly exclusive to practice medicine in AK, eh?

  6. Hmmmm, sounds kind if like the FNSB Assessor( making it up as she goes along). ALL OF US need to be watching our government, what they do, how they do it and why. Mostly you can follow the money trail and it leads to the yellow brick road. Our kids, our health and our sanity depend on it!

  7. Dr. Morris has written an excellent article with real information allowing a much clearer understanding of what is really going on. Economists frequently research and write abut “Regulatory Capture”. This is when a regulated industry, like electric utilities, politically undermine and control the very agency set up to regulate their prices, like a public utility commission. They do this with political contributions, behind the scenes lobbying, revolving door of employment with people working for the government then retiring to cushy industry positions etc.

    Is this what is going on with the Alaska Division of Insurance (DOI)? Sure looks like it!

    Regarding Dr. Morris’ graphic, “Where is the Money Going?” This has the key information but unfortunately it is pretty fuzzy. Right above it there is this link,

    We then “graphed those payment trends”

    Be sure to press it and you can then see a crystal clear expanded version of it.

  8. OK. So this is not my insurance but it IS my insurance I am too beneath white people to comment I get it. RIGHT? it is the old keep our tiers in strict social order. We can’t MIX those up.

  9. “Alaska doesn’t make the top 5 states for highest physician pay and, if you factor in the cost of living, we don’t even make the top 10.” So what you’re saying is that Alaskan physicians are in the top 10 states for pay. I won’t begrudge you earning what you do, but let’s not pretend that physicians pay doesn’t enter into the equation. Healthcare, insurance, and the entire industry is corrupt that’s why government wants to be involved more and more. Doctors and lawyers are the only professions that never actual perform their jobs, they just practice their jobs.

  10. This article on first brief perusal sounds a lot like the AMA argument that of ALL healthcare providers in the USA, please make sure medical doctors maintain the distinct vaunted privileges of those with much-advanced medical school training … over any of the dentists, pharmacists, and now the advanced practice nurse practitioners that first occurred in the 1980s when socially just Medicare rules were established. This proposition about 80% whatever for this group is like presenting a stop-gap measure in a seemingly benign action favoring only one of the participants, when if one were actually to examine the whole picture, as one of the responsers suggests, why in heavens name should the State of Alaska be dinking around attempting to placate this group in the whole arena, when the very idea of folks having to be paying what some might view as outrageous dues to only one of two insurance clubs, when the true issue is ‘health’. If, anything, this current insurance situation doesn’t seem much more advanced or accessible than the 70s when I had to fky out to Seattle for surgery as there wasn’t even a CT scan in the whole of Alaska. Instead of stopping at satisfying the temporary desires of these most financially able to ‘survive’, therefore most able to promote real fairness to all, why aren’t they considering beneficial reforms to the whole system?

  11. This entire medical system and reimbursement system needs to be dumped – it is all a scam to make more money for the globalists. I like the stories about the old days where doctors’ practices stayed open because they treated the patients right and actually cared for the patients. If a doctor is crappy, he gets a reputation and patients don’t return. If a doctor charges too much, patients don’t return. No middle men handling the bills, collecting the money, and doling out “fair shares” to everyone.

  12. Got some chutzpah, this one.
    .
    So soon victims should forget the role of Alaska’s healthcare community during Covid Hysteria, their heroic efforts to magnify the effects of Covid on sufferers and non-sufferers alike, what they did which, even in polite circles, could be considered iatrogenic manslaughter?
    .
    Does the Herr Doktor not appreciate the schadenfreude ignited by his contemptibly pathetic appeal for more money, which today has no more credibility than yesterday’s lies, obfuscations, and arguably manslaughter committed in the name of Covid hysteria?
    .
    Did the Herr Doktor not foresee the possibility that what he and his colleagues did in the name of Covid hysteria helped strangle Alaska’s economy to the point that it can no longer support them in the style to which they have become entitled?
    .
    Killed the goose that laid their golden eggs, and their victims should sympathize?
    .
    Surprise billing? Herr Doktor perhaps forgot to familiarize himself with the “No Surprises Act” which took effect Jan. 1, 2022, no?
    .
    Ultimately, nothing changes, Herr Doktor gets money from medical insurers, medical insurers get their money from customers, government officials get their cut, customers still get the bloody shaft, no?
    .
    More to the point, could it be all about persuading Alaska’s Legislature that nothing short of forcing compulsory state-sponsored insurance on productive Alaskans will solve the problem, while permitting Alaska’s healthcare community to thrive in the style to which they have become entitled?

  13. Simple fact: I’ve known all my adult life insurance companies are not on my side.

    Until Covid, the healthcare industry was supposed (more or less) to be.

    During Covid, the healthcare insurance proved they are “on my side” as long as I follow their rules and acknowledge their supremacy over me.

    I prefer my honest enemy to my dishonest so called friends.

  14. supposedly we pay more than any other state, which probably means the highest in the world. How do we get a better deal? We have visiting docs in rural AK. Should we have them in Anc? How much do docs with various specialties make in Anc v. L48?

  15. The strongly hinted, although not explicitly stated, concept is that Alaska can’t attract medical professionals because compensation is not superior to other states. Could it also be the distances, isolation, lack of “city lights” (and all that entails), the growing homeless issue in any location that might be considered “city living”, the weather, etc? Could it also be that Alaska has a very limited set of health care organizations for a medical professional to align with (i.e. Providence, etc) and those same organizations are fairly draconian in demanding compliance with their policies?

    It’s too simplistic to assert that pay is insufficient for medical professionals in Alaska and then jump from that to arguing against policy decisions that could / might / possibly reduce the extraordinary pay rate of those professionals.

  16. Notice that this misleading article never discusses, or even hints at, exactly what the “80% Rule” is actually all about. Here is the answer- some years ago, physician groups convinced/bribed the Insurance Department Commissioner to institute the rule. It limits insurance companies to use 80% of local “prevailing rates” that physicians charge for any given procedure, rather than the prevailing nationwide average rates.
    Over time, my greedy colleagues all jacked their rates and jacked their rates, to the point that just about all procedures, especially invasive ones, like placing heart stents, any operation, cancer treatments, etc., cost four to five times as much as the same procedure performed just about anywhere in the lower 48 states.
    As a personal example- a “port” is a permanent IV line installed in one’s chest (usually by a surgeon or radiologist). I called around for my patient. Providence demanded $20,000 just to use an operating room for 45 minutes. Then there was the doctor’s fee, the X-rays, the anesthesia and anaestesiologist who administered the drugs, etc. Total costs were almost $40,000 at both hospitals- and this procedure is performed only at the hospital, up here. Hospitals in Seattle, Denver and Charleston all wanted a total of $8,000 to $12,000 for everything. I found a non-hospital facility in Denver for which the total fee is $3,600.
    As you could imagine, the patients who are reamed the hardest by this predatory medical pricing system are those without insurance. They are stuck paying five times what they would pay, anywhere else in the country.
    Also, many docs here still do not accept Medicare, (and we have to bill Medicare before we can then bill any other insurance company that a client might be paying for). In fact, docs often will refuse to see even long time clients, once they go on Medicare. So people who go on Medicare become defacto uninsured. No surprise that a significant percentage of all bankruptcies here are due to astronomical, unpayable medical bills.
    The 20% copay that patients must cough up, in Alaska, is often as much as the entire cost of the same procedure done Outside. No wonder that insurance companies are now willing to pay to fly a patient and his/her assistant or spouse to Seattle or Phoenix or Denver, pay for their meals and hotel, and pay 80% of all the medical costs. The insurance company and the patient both save a ton of money.
    But here is the hook- doctors up here will then drop that patient as a client, and refuse to provide any “aftercare.” So they are stuck flying Outside, again and again, for routine aftercare visits.
    Now you know what this economic turf fight is really all about.

    • Thanks, Disgusted Doc for your valuable input. I worked in the medical field for 20 years and saw things I refuse to talk about, but you are right on the money. The system itself is indeed broken. This is also why Obama Care does not work for the patient. It was written for the insurance companies to require insurance to even vote, among other things. Failure to have insurance meant no tax refund until you got insurance. It was all a scam to enrich the insurers. The insurance companies profited immensely.

Comments are closed.