An Anchorage Superior Court judge last week upheld the State of Alaska’s decision to repeal the long-standing “80th percentile rule,” a regulation that for nearly two decades had governed how health insurers reimbursed out-of-network medical providers.
The ruling from Judge Yvonne Lamoureux came after a four-day bench trial in February, in which a coalition of Alaska medical associations, including the Alaska State Medical Association, the Alaska Podiatric Medical Association, the Alaska Physical Therapy Association, and the Alaska Chiropractic Society, challenged the Division of Insurance’s repeal of the rule. The groups argued the repeal was arbitrary, lacked transparency, and would harm patient access to care by driving down reimbursements for independent providers.
The judge disagreed, siding with the Division of Insurance, which has long argued that the 80th percentile rule drove up health care costs in Alaska by incentivizing providers to raise their charges in order to capture higher reimbursements.
The 80th percentile rule was adopted in 2004 and required insurance companies to reimburse out-of-network providers at or above the 80th percentile of charges billed in a given geographic area. Supporters said the rule protected patients from being underpaid by insurers and ensured that providers could continue offering care in a state with some of the nation’s highest medical costs.
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The Division of Insurance and some large insurers, argued the regulation created a feedback loop of escalating charges, since providers knew insurers were bound by the percentile benchmark. After years of debate, the Division formally repealed the rule effective Jan. 1, 2024.
The coalition of doctors and medical associations has not ruled out an appeal to the Alaska Supreme Court. If pursued, the high court would be asked to determine whether the Division’s repeal was legally sound and consistent with Alaska’s administrative law requirements.
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Until an appeal, the Superior Court decision is a victory for the Division of Insurance.
Read the court ruling here:
Good ruling. The rule encouraged providers to not join insurance networks where they have negotiated payments, usually much less than 80 percent of billed. Just look at your EOB from your insurance company and you will see what I mean. By not being in-network, the provider can price gouge the patient, and still charge them for the balance after the insurance pays. I’ve seen it too often.
I’ve already lost two of the best practitioners I’ve ever had because they will no longer accept VA, Medicaid/Medicare. After seeing the EOB from the VA, I understand why…they are only being paid pennies on the dollar.
In 2002 when I graduated from University of Washington, my total tuition cost was almost exactly $100,000 at 2.5% interest. I came to Alaska in November 2002.
Two years later, that rule was adopted.
Now, in 2025, health care tuition costs at UW are over $400,000 at closer to 6% interest for the same degree.
Insurance reimbursements have not even come close to keeping up with inflation. The top three health insurance CEOs are making over $20,000,000 per year. That can influence a lot of judges.
Insurance companies are winning the PR game, while they auto-deny and stall every claim and demand more and more hoops to jump through, paying some nice person in India $4/hour to talk to your healthcare provider’s staff who needs $25 an hour. They are winning the financial “war” and opening their own schools to keep people’s choices limited.
Insurance companies do NOT care for their subscriber’s well-being.
Ditto. The patient ends up with any overages after reimbursements even if services were from a “In-Network” provider/facility. You may find that not all services at a “network” facility are actually part of the network.
For example, if you have a surgical procedure performed at a network hospital, you may find that the hospital and surgeon are in the network, but the anesthesiologist is out-of-network. When you get your bill, you’ll see that it reflects the negotiated network rates for your hospital and surgeon. The anesthesiologist, however, may charge what they choose since they have no negotiated contract. If the anesthesiologist claim exceeds the recognized charge, you may [WILL] receive a bill for the balance.
I don’t know if the repeal of Alaska’s 80th percentile rule will impact out-of-network surprise charges as outlined above.
The impact is not just the medical field. The mental health provider gets pennies from Medicare–an Outside unnamed contractor determines the reimbursement. We have Tier 1 from the state, but Aetna pays not a dime for mental health care, chiropractor or physical therapy services. We pay what Medicare does not. Alaska’s health care costs are simply out of line in many cases, but that has more to do with insurance overhead–malpractice and business insurance–than it does with the cost the procedure. The cost of the procedure is high due to the overhead of the business.
Alaska’s health care costs have far exceeded national averages for years. These costs are driven by what greedy doctors and medical facilities in Alaska charge for their services. The 80% rule added to this problem.
Health Insurance company profits are closely monitored by the Division of Insurance to ensure they are not gouging customers. Each year they are audited to ensure that 80% or more of the premiums charged go toward paying direct health care costs of their customers – that leaves 20% for overhead, processing and paying claims, arguing with medical providers who perform or prescribe treatments that are not medically necessary and yes profit. The doctors and medical facilities have no such audit requirements and can charge whatever they want. Next time you see your doctor, ask to see their audited statement of revenues, expenses and profit.
The only way medical charges have any controls at all is through insurance company networks bargained on behalf of their customers. Just imagine how high the costs would be without insurance company network efforts. Without the buying power of insurance networks, individuals would have zero ability to negotiate charges down. In that scenario, the only people who could afford to go to the doctor would be… other doctors.