May 4, 2012
Rules Set for Reinsurance Program
~ written by Charlene Bigelow, Client Advocate, Human Capital Practice, Willis
The Department of Health and Human Services recently released final regulations that implement standards related to reinsurance, risk corridors, and risk adjustment under the Patient Protection and Affordable Care Act. These programs are intended to mitigate the impact of potential adverse selection and stabilize premiums in the individual and small group markets as insurance reforms and the insurance Exchanges are implemented, starting in 2014. The regulations address the following sections of PPACA:
Under Section 1341 each state must establish a transitional reinsurance program to help stabilize premiums for coverage in the individual market during the first three years of operation of the state insurance Exchanges beginning in 2014 and continuing through 2016.
Under Section 1342 HHS must establish a temporary risk corridors program that applies to qualified health plans (QHPs) in the individual and small group markets.
Under Section 1343 each state must establish a permanent program of risk adjustment for all non-grandfathered plans in the individual and small group markets both inside and outside of the insurance Exchanges.
The reinsurance program is intended to reduce the uncertainty of insurance risk in the individual market by making payments to health insurance issuers for enrollees with high claims costs. Health insurance issuers that disproportionately attract high-risk populations (such as individuals with chronic conditions) will be eligible for reinsurance payments.
The reinsurance program is of particular interest to plan sponsors of group health plans because it is funded through contributions made by health insurance issuers and third party administrators on behalf of self-insured group health plans. Contributing entities are not required to make contributions on behalf of plans or health insurance coverage that consists solely of “excepted benefits,” such as stand-alone dental and vision benefits. For a detailed explanation of what benefits are considered excepted benefits, contact Char Bigelow, firstname.lastname@example.org.