Division of Insurance warns Alaska Reinsurance Program faces federal uncertainty; insurers could need large rate increases

Juneau — Lori Winghimer, director of the Alaska Division of Insurance, told the Alaska State Senate Finance Committee on March 12 that the state’s reinsurance program relies on federal premium tax credit mechanics and that federal uncertainty could sharply raise individual-market premiums.

"At this point, the insured state regulated plans ... is just about 15% of the total population," Winghimer said, describing how Alaska’s insurance market is fragmented and why the reinsurance program matters for people who buy coverage on the individual market.

Winghimer reviewed the program’s origins and funding mechanism. The Alaska Reinsurance Program began after the Legislature approved seed funding (HB 374, as described to the committee) and a Section 1332 waiver strategy that sought federal savings from reductions in premium tax credits (APTCs). The state used projected federal savings to fund reinsurance payments that lower premiums. Winghimer said the program has brought in just under $700,000,000 for reinsurance to date and that about $112,000,000 was received for 2024 under the waiver calculation.

Why it matters: Winghimer said the program depends on continued federal rules and funding for premium tax credits; she warned insurers will begin filing 2026 rates in June and that uncertainty about reinsurance funding complicates those filings. She said the department’s modeling estimates insurers’ premiums could rise roughly 67% without the reinsurance program — a level that could be economically painful for sole proprietors and individuals who buy coverage outside employer plans.

Key points from the presentation

- Reinsurance mechanics: Winghimer described how the state identified high-cost conditions and argued to the federal government that removing those costs from the individual market pool would lower premiums and therefore reduce federal APTC outlays. The federal government then authorized waivers that enabled the state to capture a portion of those savings to finance a reinsurance pool.

- Program scale and savings: Winghimer said the program reduced premiums from a projected $343,000,000 to $228,000,000 in the displayed example, producing projected APTC/subsidy savings of about $115,000,000 and netting roughly $112,000,000 to Alaska for 2024 funding. She said the reinsurance program has generated nearly $700,000,000 in reinsurance payments since its start.

- Federal review and subsidy expirations: Winghimer said recent federal reviews have paused and later reinstated some program funding and that federal attention is focusing on Section 1332 waivers and the advanced premium tax credits (APTCs). Enhanced APTCs created during the COVID-era American Rescue Plan are scheduled to expire at the end of 2025 unless Congress acts; Winghimer warned that expiration or changes to waiver authority could remove the federal funding stream the reinsurance program depends on.

- Illustrative premium impacts: Winghimer provided example premiums to illustrate consumer exposure. Using a roughly 50-year-old single adult as an example, she said the monthly premium with enhanced APTCs would be about $282; under prior (original) APTC levels it would be about $407 (an increase of about $125). At higher income levels where subsidies are reduced or eliminated, she said premiums could increase far more — by hundreds of dollars or more — and gave a modeled family-of-four example where premiums could rise by thousands monthly if subsidies and reinsurance were removed.

- Timing and regulatory constraints: Winghimer told the committee insurers must file 2026 rates in June and that the Division of Insurance must provide its assumptions at that time. She said the department has discussed having insurers file two rate sets (with and without reinsurance), but uncertainty remains and would complicate actuarial filings and consumer protections.

Senators’ engagement and questions

Senators acknowledged Alaska’s role in pioneering the waiver-funded reinsurance approach and asked about federal interactions. Senator Hoffman noted the state was among the first to use the strategy; Senator Kaufman asked for clarification of acronyms and asked about impacts for Indian Health Service populations; Winghimer confirmed tribal providers can be in- or out-of-network and that IHS relationships can affect billing and networks.

What did not happen: The committee did not vote on legislation or allocate state funds during the hearing. Winghimer said the division is tracking developments with Alaska’s congressional delegation and federal agencies but offered no immediate policy proposal for the Legislature.

Next steps: Winghimer said the division will continue to monitor federal reviews of Section 1332 waivers and APTC policy and is available to provide written responses or return to the committee as further details emerge.