Mark Farrah Associates August 23, 2017
In January 2014, the Affordable Care Act (ACA) established state-based Reinsurance and Risk Adjustment programs to reduce the financial risk for participating health insurance companies selling coverage on the public exchanges. The goal of these programs was to protect against adverse selection and risk selection in the market while stabilizing premiums, ultimately resulting in healthier competition in health insurance markets.
The Reinsurance provision was designed to prevent large premium increases in the individual market. The program provided funding to individual health plans that incurred high claims costs (costs exceeding the attachment point) for enrollees. The objective, in a nutshell, was to protect health plans against unusually high claims costs. This was a temporary, three-year program that ran from 2014-2016.
The...
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