An Alaska judge is backing the state’s decision to repeal a longstanding rule that was meant to keep down health care costs in the state.

Under the 80th percentile rule, which was repealed by the administration of Gov. Mike Dunleavy in January 2024, insurance companies were required to pay out-of-network providers at least the 80th percentile of the average going rate for a medical service.

The rule prevented Alaska patients from receiving large medical bills for out-of-network care. But the Dunleavy administration and the state’s biggest insurance company, Premera Blue Cross Blue Shield of Alaska, argued the rule also increased the cost of health care over time.

The repeal was broadly opposed by dozens of health care providers across the state, who said the removal of the rule will make it harder for them to stay afloat while benefiting insurance companies that are headquartered in the Lower 48.

If insurance companies significantly lower their reimbursement rates, providers said, keeping their doors open may no longer pencil out.

A coalition of providers sued in late 2023 to keep the rule in place, arguing that the Division of Insurance had not sufficiently proven that the rule was responsible for increases in the cost of health care in Alaska.

The case went to trial in February. Late last month, Anchorage Superior Court Judge Yvonne Lamoureux ruled in favor of the state.

“The evidence at trial established the Division (of Insurance) did not make the repeal decision lightly,” Lamoureux wrote in her ruling, concluding that the repeal was “not unreasonable or arbitrary.”

In a statement, Dr. John Morris, an anesthesiologist who spearheaded the lawsuit on behalf of the health care providers, said the coalition is “disappointed with the ruling.”

“Each year insurers pay physicians and healthcare providers less for the same care but somehow also blame doctors for rising health insurance costs,” Morris said. “We remain committed to bringing health care costs down while making sure our seniors and veterans have a doctor to see. This ruling doesn’t help.”

The Division of Insurance had considered repealing the rule for over a decade as part of its efforts to address rising health care costs in Alaska. Premera, an insurance company that controls a large share of Alaska’s individual insurance market, was strongly in favor of the repeal.

Former Division of Insurance Director Lori Wing-Heier previously indicated that repealing the rule would lead to a reduction in Premera’s premium rates by between 2% and 3%.

In reality, rates are set to remain largely unchanged next year, after massive increases in the preceding three years, according to Premera’s federal filings. Premera executives contend that premiums would have gone up substantially next year had the rule remained in place.

At stake in the lawsuit was the question: What is driving the sky-high cost of health care in Alaska? Premera and the state contended that the answer, in part, was that Alaska’s health care providers were charging ever-higher prices because of the 80th percentile rule, thus driving up costs for consumers. Health care providers said that it is insurance companies like Premera that are driving up costs while providers themselves struggle to afford to keep their doors open.

A study from the Medical Group Management Association released last year found that primary care providers in Alaska are the lowest-paid in the country. Advanced specialists, meanwhile, are among the highest paid, the study found.

Court filings indicated that Premera did, in fact, save millions of dollars in 2024, after the rule was repealed. But it was not immediately clear whether the savings for the insurance company were passed along to consumers through lower health care bills.

The end result of the repeal of the rule may be that more Alaska providers join and remain in-network with Premera and other large insurance companies. In 2024, 1,000 providers moved in-network in Alaska, according to testimony from Wing-Heier. No providers reported to the Division of Insurance needing to close their doors due to the repeal, Wing-Heier testified.