January 1 of 2014 marked the start of a new era for health insurers; a time when they must accept all applicants, regardless of preexisting conditions.
Of the millions of individuals who bought insurance during the first ACA Open Enrollment Period, experts envisioned a disproportionate number of applicants with high claims; something called adverse selection.
To help protect health insurance companies from unpredictable losses, and keep consumer’s premiums from soaring out of control, The ACA created Programs called “the 3 R’s.”
Risk Adjustment redistributes funds from insurers with healthier- than- average customers to plans with sicker-than-average customers.
Reinsurance pays insurers (for 2014) 80% of the claims between $45,000 and $250,000 for the relatively rare customer with catastrophic claims.
Risk Corridors also redistributes gains and losses between insurers. To learn more about these Programs, click here.
Renewal premiums for the first ACA plans are about to be unveiled. Let’s hope these badly needed risk adjustment tools have at least started to work!