Fairbanks Daily News-Miner: Alaskans question what effect health care reform would have on state

FAIRBANKS - The two chambers of Congress have yet to ink final plans for remaking the country's health care system, but state leaders have long been wondering how the final product will treat Alaska.

In particular, questions have sprouted about a proposed tax on high-priced, generous insurance policies. The tax would apply to the price of insurance premiums, which are high in Alaska, and is one leg of the plan to finance other sections of reform.

Sen. Mark Begich, who generally supported the Senate bill, twice tried to change or erase the so-called Cadillac tax in favor of taxing incomes of the wealthy to help finance health care reform.

He wrote Wednesday to Democratic Senate leaders that they again need to consider both options when ironing out the final product this month.

"I understand the intent is to force the design of more efficient and less costly plans - and thus slow the overall growth of health care spending - but I believe the actual effect of this tax will harm middle-class workers and their families," Begich said.

Sen. Lisa Murkowski, who opposed the Senate bill, cited in-state estimates that the rate of health care policies in Alaska subject to the insurer-paid tax could be twice the national average before decade's end.

The estimates, crunched by the Institute for Social and Economic Research, assume health coverage costs will rise faster than the national average due in part to Alaska's relatively young population, which will move into "high cost" ages - 45 to 65 - over the next few years.

Broader concern came from Gov. Sean Parnell, who last week directed the state attorney general to comb the pending health reform plans for legal questions.

In the announcement, Parnell said the federal government had provided "ambiguous treatment of the state's health insurance plan for employees." Murkowski's office said the plan does not exempt public entities, and state government and the University of Alaska, self-insured public entities, have yet to estimate how many public employees' plans might leave the state on the hook for taxes.

State officials also have questioned whether it, or the university system's, self-insured health care programs would fall under umbrella definitions of "insurance" under the bills and also whether public retiree plans would apply.
"We're taking a wait-and-see (approach)," said Mike Humphrey, director of benefits for the university system. Humphrey declined to estimate how many of the system's 4,200 policyholders might trigger payments under the high-cost tax until a final plan emerges from Congress.

Proponents of the so-called "Cadillac tax" on high-priced policies say most employers and single policyholders across the country would escape the tax because the cost of average policies would remain below the plan's benchmark costs.

But Mark Foster, a health care consultant working with the Institute of Social and Economic Research, estimates one out of every two health insurance policies in the state - assuming health care costs here would grow faster than the bill's inflation index (the Consumer Price Index plus 1 percent, according to Begich) - could top the Cadillac benchmark within six years.

It could be mid-sized companies, with between two-dozen and 100 employees, that would get hit earliest, according to separate figures from the Senate Finance Committee.

Government revenue from the Cadillac tax would help finance broader changes in the heath care, and proponents say it will lead employers to reduce spending on insurance, changes they suggest would assuredly lead to more take-home pay for employees.

Premera Blue Cross Blue Shield, likely the largest insurance company in Alaska, agrees with those that think health care reform will generally hike costs here harder than elsewhere, spokesman Eric Earling said. The Cadillac tax could result in higher premiums if employers don't reduce benefits, and other aspects of the bills including new taxes on insurers will likely add costs as well, he said.

"While current proposals will expand coverage, which is good, they do too little to meaningfully address the issue of rising costs," Earling said.

The state's congressional delegation is on the sidelines as senior members of Congress shape the final plan. Some combination of the two bills will thus emerge from negotiations between key congressional leaders within weeks, and that's when the real analysis across the state will begin.

"There's going to be a lot more work on this," said Ward Hinger, a special assistant to Parnell, of immediate interpretations of the plans' possible implications to Alaska.

Source: By Christopher Eshleman. Originally published in the Fairbanks Daily News-Miner on January 10, 2010.