Proposed changes could alter health care payment practices across Alaska

[Greenbeard]

Sort of a niche issue brewing in Alaska but one with potentially large consequences. It provides a microcosm of one of the defining tensions in the American health care system: the permanent, seesawing conflict between health care providers and health insurers.

Alaska has the highest health care prices in the country (and thus the highest insurance premiums), which perhaps is to be expected given the state's unique challenges. But state-level policy doesn't seem to have been helping. The state is proposing to scrap a 20-year-old rule intended to protect consumers from exorbitant out-of-network bills that requires insurers to pay quite high prices for out-of-network services. This rule obviously tipped the balance of power toward health care providers in the state with respect to pricing.

Proposed changes could alter health care payment practices across Alaska

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.

Lots of dueling op-eds on the issue, with insurers (and perhaps most policy experts) lining up in favor of tossing this rule:

OPINION: Alaska would be better off without the ‘80th percentile rule’

Unfortunately, one can imagine how rates would be set if a provider controls at least 21% of the market, thereby automatically setting the 80th percentile. As it turns out, many specialists in Alaska do have that level of control over their areas. As early as 2011, the Milliman report concluded: “Since many providers have over 20% of their market share, this implies that those providers can ensure that their charges are below the 80th percentile …” In such a scenario, what would one expect to happen, particularly with specialty areas such as cardiology, urology or orthopedics? In Alaska, we have seen these specialty areas command a vast premium compared to any other place in the world. Consider what the 2019 Oliver Wyman study showed: In 2017, cardiology reimbursement was 627% of Medicare’s fee for service standards, compared to Seattle’s 165%. Compare that with areas where no single provider controls more than 20% of the market, such as ophthalmology: Alaska provider reimbursement in 2017 was 192% of Medicare, compared to Seattle’s 120%.

And providers, predictably, arguing the state should hold onto it:

OPINION: Alaska’s medical providers still need the 80th percentile rule

Our concern is that the proposed changes further unbalance the patient/provider/carrier relationship in the carrier’s favor. Simply put, the proposed regulation changes grant more power to the carriers to force medical providers into their networks. Many of our members are small or single-practice providers. Many patients prefer this simple, personalized treatment setting. Large providers, such as corporate chains/hospitals, have negotiating power in contract negotiations with carriers. For our smaller members, it’s “take it or leave it” -- join our network for a drastically reduced reimbursement, treat the patient for free, or be forced to not accept patients for most payer populations.