HHS-Proposed Rule on Risk Adjustment, Risk Corridors, and Reinsurance

This proposed rule would implement standards for states related to reinsurance and risk adjustment, and for health insurance issuers related to reinsurance, risk corridors, and risk adjustment consistent with title I of the Patient Protection and Affordable Care Act (ACA). The regulation includes three components that would encourage insurers to cover high-risk policy holders just as they would those who are healthy.¹

• A permanent risk adjustment formula that would pay insurers higher rates for sicker patients, such as those with chronic conditions. The adjustment would apply to those in the individual and small group markets inside and outside of the exchanges.
• A three-year reinsurance program that would establish a nonprofit to handle temporary payments for insurers that cover patients with high medical claims in the individual market.
• A three-year risk corridor program that would give insurers inside the exchanges more certainty by limiting losses and gains. Insurers whose claims are at least 3 percent higher than projected would get more federal funding, while those whose costs are at least 3 percent less than projected would get fewer federal dollars.

The public has 75 days to comment on the proposal.

¹Adams, Rebecca. Health Exchange Risk Programs Would Protect Insurers Against Losses, Consumers Against Adverse Selection. Washington Health Policy Week in Review. The Commonwealth Fund. 11 Jul, 2011. Retreived from http://www.commonwealthfund.org/Content/Newsletters/Washington-Health-Policy-in-Review/2011/Jul/July-18-2011/Health-Exchange-Risk-Programs.aspx.