Group health insurers will join with individual health insurers to fund a temporary individual health insurance reinsurance program, according to officials at the Center for Consumer Information & Insurance Oversight (CCIIO).
The CCIIO, an arm of the Centers for Medicare & Medicaid Services (CMS) at the U.S. Department of Health and Human Services (HHS), talks about temporary and permanent PPACA risk adjustment mechanisms in a final rule on PPACA-related risk management standards and a separate document analyzing the possible regulatory impact of that final rule and other PPACA final rules due to come out shortly.
In September, CCIIO officials argued that getting the risk-management mechanisms right is crucial to maximizing health care efficiency and quality. Otherwise, the officials said, doctors might have an incentive to deliver more expensive care when cheaper care would be at least as good, or skimp on inexpensive treatments that could reduce the risk of devastating, costly complications.
CCIIO officials developed the risk-management final rule and the analysis to implement provisions in the Patient Protection and Affordable Care Act of 2010 (PPACA) that are supposed to buffer health insurers against some of the effects of switching to new market rules in 2014.
If PPACA takes effect on schedule and works as drafters expect, the law will require insurers to sell individual coverage on a guaranteed-issue, mostly community-rated basis.
PPACA drafters have tried to decrease the likelihood that sicker people will buy health insurance and healthier people will get insurance only when they think they will be sick by requiring most individuals with incomes over a certain level to own health coverage.
The individual health coverage ownership mandate has angered people who believe the federal government has no constitutional authority to force them to buy a commercial product. Others say the penalty for doing without health coverage is low enough that many will continue to go uninsured, leading to possible problems with antiselection.
During the first three years the new market rules are in effect, PPACA is supposed to create two transitional risk management programs: a federally run “risk corridors” program that will require the health plans participating in the new health insurance distribution exchanges to share in health care system losses and gains with the federal government.
PPACA also will create a state-based reinsurance program that will require all health insurers in a market to contribute to a fund that will protect individual health insurers.