Under the Affordable Care Act (ACA) much of the expanded coverage will be provided through health insurers offering products on the new health insurance exchanges. To ensure robust markets, exchanges must have in place processes for mitigating the financial risk to insurers associated with enrolling individuals with diverse health care needs. The intention is for issuers to compete for customers based on cost and quality, rather than attracting the healthiest, lowest-cost enrollees. The U.S. Department of Health and Human Services released its initial proposed rules on Standards Related to Reinsurance, Risk Corridors and Risk Adjustment on July 11, 2011. This issue brief prepared by Wakely Consulting Group summarizes the proposed rules and provides perspective on the implications for states as they integrate risk mitigation into the exchange implementation process. The brief highlights the application of the different risk mitigation programs (risk adjustment, reinsurance and risk corridors) to the various insurance marketplaces (individual and small group, both inside and outside the exchange) and includes next steps for states and insurers. The summary of these rules, as well as the authors’ analysis of their implications, is meant for policy-makers and state officials familiar with these complex issues.
Building on this proposed rules analysis, Wakely Consulting Group also prepared a Work Plan that serves as an outline for state officials on the decisions and actions necessary to implement the risk adjustment and reinsurance provisions of the ACA.