HHS has released a final rule (pdf) on the standards related to reinsurance, risk corridors and risk adjustment under the Patient Protection and Affordable Care Act.
Reinsurance, risk corridors and risk adjustment are three programs designed to eliminate incentives for payors to avoid covering people with pre-existing conditions or people in poor health.
1. Reinsurance. Reinsurance is designed to offset high-cost outliers among health plan members. From 2014 to 2016, each state will have a reinsurance program to help stabilize health insurance premiums in the individual market as people with higher cost needs gain coverage in the first three years health insurance exchanges operate. Individual market plans will receive reinsurance payments from all health insurance issuers, self-insured group health plans and third-party administrators on their behalf.
2. Risk corridors. Risk corridors are designed to protect against inaccurate rate-setting by sharing risk between the federal government and qualified health plan issuers. From 2014 to 2016, health plans with costs that are at least 3 percent less than their cost projections will share some of the savings with HHS, while health plans with costs at least 3 percent more than their projections will receive funds from HHS to mitigate their losses.
3. Risk adjustment. Designed to protect against adverse selection, risk adjustment is a permanent program that will shift some funds from plans that have the lowest risk individuals to health plans that have higher risk populations. This transfer of funds is targeted to reduce or eliminate premium differences that result from risk selection. HHS will propose a risk adjustment methodology this fall.
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Reinsurance, risk corridors and risk adjustment are three programs designed to eliminate incentives for payors to avoid covering people with pre-existing conditions or people in poor health.
1. Reinsurance. Reinsurance is designed to offset high-cost outliers among health plan members. From 2014 to 2016, each state will have a reinsurance program to help stabilize health insurance premiums in the individual market as people with higher cost needs gain coverage in the first three years health insurance exchanges operate. Individual market plans will receive reinsurance payments from all health insurance issuers, self-insured group health plans and third-party administrators on their behalf.
2. Risk corridors. Risk corridors are designed to protect against inaccurate rate-setting by sharing risk between the federal government and qualified health plan issuers. From 2014 to 2016, health plans with costs that are at least 3 percent less than their cost projections will share some of the savings with HHS, while health plans with costs at least 3 percent more than their projections will receive funds from HHS to mitigate their losses.
3. Risk adjustment. Designed to protect against adverse selection, risk adjustment is a permanent program that will shift some funds from plans that have the lowest risk individuals to health plans that have higher risk populations. This transfer of funds is targeted to reduce or eliminate premium differences that result from risk selection. HHS will propose a risk adjustment methodology this fall.
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