Health care spending leveled off for the state of Alaska in the last fiscal year, bucking a trend of dramatic cost increases over the previous decade.

“We’re expecting the (health care) cost trend for fiscal year 2014 will be pretty flat and we’re hoping that will continue into 2015 with even a slight possible decline,” Department of Administration Commissioner Curtis Thayer said Oct. 9 at the State of Reform health care conference in Anchorage.

The flat lining of costs in fiscal 2014 was mainly due to bringing Aetna Inc. on board as a third-party plan administrator, Thayer said.

When choosing Aetna the state looked less at the cost of administering the health plans — active and retiree — and more at the ways future savings could be drawn from the $600 million the state spent on them, he said.

The savings have been immediate.

In the first quarter of the current 2015 fiscal year that began July 1, the state has saved $15 million year-over-year with Aetna at the helm of its health plan, according to Thayer. Part of the savings has come from a new dental network that cut premiums by 10 percent, he said.

Since 2001, state health care expenditures have more than doubled from less than $1 billion to $2.28 billion in fiscal year 2013. Increasing Medicaid costs have been the driver, according to Administration Department data.

Currently, the State of Alaska contributes about 25 percent of all the health care dollars spent in Alaska on the 84,000 employees, retirees and their family members its plans cover, he said.

Health insurance benefit credits paid by the state, which have seen an annual growth of 7 percent and nearly doubled over the last 10 years, should begin to decrease slightly in fiscal 2015, Thayer said. In 2014, the credit cost peaked at $1,389 per employee per month; that cost is expected to be $1,371 at the end of the current fiscal year, according to department figures.

To continue the trend Alaska health care providers must agree to join the state’s plan network.

“More than ever we need to build this network out,” he said.

Expanding provider options for members will help the state meet its goal of providing quality health care at a sustainable price point, particularly during a time of low oil production and declining oil prices, the ultimate pulse for every aspect of state government. Thayer said the times when the Legislature could simply foot the state’s medical bills regardless of the cost are over.

An issue the state has faced in the past is providers that “balance bill” health plan members, something the plan and its members cannot afford, he said. Additionally, Thayer insisted providers must move away from the common practice of raising fees by 5 percent to 7 percent per year if quality health insurance is to remain sustainable.

Aetna Northwest Market President Norm Seabrooks said the insurance provider understands the situation the state of Alaska is in and the responsibility that comes with managing public dollars.

“It’s not a never-ending well of money flowing out of the ground anymore,” Seabrooks said.

Controlling spending in a state with a virtual monopoly on health care delivery requires bringing every stakeholder to the table, he said. Aetna is gathering nationwide data on provider practices to see how they can be applied to Alaska’s unique situation.

“The role we play is to make sure that information is accessible to the provider, the member and sponsor so that we can get everyone collaborating on getting a good outcome for the member,” Seabrooks said.

Talk of revamping the state’s 40-year-old retiree health plan is nothing new and Thayer outlined a few changes to the Public Employees’ Retirement and Teachers’ Retirement systems (PERS/TRS) that could be in the works as the state looks for cost-saving measures over the next couple years.

The state-sponsored retirement health plan in place now, which covers 65,000 individuals, starts with $150 individual and $450 family deductibles. It has an $800 after-deductible out-of-pocket annual cap and a $2 million lifetime limit. Features that make it particularly outdated are that preventative care is not covered and student dependents are covered to age 23, not 26 as mandated by the Affordable Care Act, Thayer said.

The State of Alaska is further burdened by picking up 100 percent of monthly premiums, something only four states still do. The other 46 ask retirees to cover 20 percent of their health insurance premiums.

“I think it’s safe to say this is one of the most generous retirement health care plans in the country by far,” Thayer said. “As we go through natural attrition this plan will likely fall by the wayside in the next 20 to 30 years.”

A new Tier 4 plan the state is investigating would probably be something new retirees would enter and could mirror the active employee plan, he said. Such a plan would raise individual deductibles to $500 and raise the annual out-of-pocket cap to $1,000, but the lifetime limit would be eliminated along with the dependent age being raised, Thayer speculated. Adding preventative care coverage would respond to complaints by members, too.

The University of Alaska System, which is not on the larger state health plan, is working to optimize benefits after bringing its health insurance into the 21st century, UA Director of Benefits Erika Van Flein said.

It covers about 4,500 eligible UA employees, about one-third of which are represented by one of four unions.

The UA health wellness program has evolved greatly since first being tried in 2005 as simply a voluntary risk assessment for employees and spouses, who in return received $100, Van Flein said.

Since, the wellness program has gone through a failed telehealth coaching experiment to on-site coaching and fitness programs, which, though popular, were discontinued in 2013 because of a $1.85 million cost with no hard data to show results, she said.

The second round of a multi-year, credit-based program starts Nov. 1 with $600 “rebate” incentives for each employee and spouse. The program will begin with personal health assessments and biometric screenings. In year two, the tests will be accompanied by five credits awarded for dental visits and eye tests, getting flu or shingles vaccines, being tobacco free or being active in a tobacco cessation program, Van Flein said.

By the third year of the wellness program long-term participants will have to show 10 percent improvement on health metrics or fall in their prescribed range. Alternative standards will be available for individuals unable to meet desired goals.

“The real way to reduce cost is to take cost out of the plan,” she said. “The best way to take cost out of the plan is to have a healthier population.”