The Centers for Medicare and Medicaid Services (CMS) issued final rules on March 23 on reinsurance, risk corridors, and risk adjustments to mitigate potential financial risks to health insurance plans under health care reform and to alleviate insurers’ needs to build large risk premiums into their rates. The rules are based on section 1341 of the Affordable Care Act (ACA) which requires each state to establish a reinsurance program to help stabilize premiums in the individual health insurance market for the first three years of Exchange operations (2014-2016); section 1342 of the ACA which requires CMS to implement a risk corridor program in the individual health insurance market and the small group health insurance market over the same three year period; and section 1343 of the ACA which requires states to create risk adjustment programs in the individual and small group markets over a longer period, offering adjustments to health insurance issuers that disproportionately serve high cost populations such as individuals with chronic conditions. If a state elects not to set up a section 1341 or a section 1343 program, CMS will do so for that state.
CMS received over 700 comments on proposed rules that were published last July 15 and clarified various provisions in response to those comments. Key clarifications in the final rule include confirmation that states have the flexibility to establish such programs and to use Exchange Establishment grant funds to do so whether or not they choose to launch state-based Exchanges. The final rules are effective May 22, 2012.