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CMS Moves Ahead with Reinsurance Project

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The Centers for Medicare & Medicaid Services (CMS) wants to know more about entities that could help protect health insurers against antiselection during the first 3 years that new health insurance distribution exchanges are up and running.

CMS has published a request for information (RFI) about organizations that could run a transitional reinsurance program today in the Federal Register.


States and others are fighting to get the U.S. Supreme Court to declare the Patient Protection and Affordable Care Act of 2010 (PPACA) to be unconstitutional, and PPACA opponents are also fighting to get Congress to repeal all or part of the act.

If the act takes effect on schedule and works as drafters expect, new, government-supervised exchanges, or Web-based insurance supermarkets, will help individuals and small groups use new tax subsidies to buy health coverage starting in 2014.

An exchange could be supervised by a state, a group of states, or the federal government. States can choose to oversee exchanges on their own or ask the federal government to help with some or all aspects of exchange administration.

Other PPACA provisions will require carriers to sell health coverage on a guaranteed-issue, mostly community-rated basis.

PPACA Section 1341 authorizes states to set up a temporary reinsurance program to help stabilize individual health insurance premiums from 2014 to 2016, while carriers, regulators and others are getting used to the new system.

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“The reinsurance program, which is a state-based program, will reduce the uncertainty of insurance risk in the individual market by making payments for high-cost cases,” CMS officials say in the RFI. “This program will stabilize individual market rate increases that might otherwise occur because of the immediate enrollment of individuals with unknown health status.”


CMS might hire one or more vendors to help set up the reinsurance program, depending on how many states ask for reinsurance program assistance, officials say.

The officials say a reinsurance contractor might be responible for tasks such as collecting reinsurance contributions, processing requests for reinsurance payments and providing reinsurance program customer service.

“CMS is seeking to engage formally, in a transparent and participatory manner, with entities that understand the reinsurance market, and would be able to perform the responsibilities of a reinsurance entity under the statute and associated regulations,” officials say.

CMS officials note that conflicts of interest could arise if the same companies could act as either exchange carriers or exchange program reinsurers.

Officials are asking any companies that might participate in the reinsurance program to discuss possible conflicts of interest and strategies for eliminating or reducing the influence of conflicts.

Answers are due Feb. 29.