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Permanent risk adjustment
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Permanent risk adjustment was a program established by the Affordable Care Act that redistributed funds from insurers that covered lower-risk enrollees to those that covered higher-risk enrollees.[1]
Overview
The risk adjustment program required insurers that sell individual and small group plans (both on and off the exchanges) and have relatively lower risk to make payments to individual and small group insurers with relatively higher risk. According to the Henry J. Kaiser Family Foundation, the intent of the program was to spread financial risk to prevent market disruptions known as adverse selection and risk selection during the initial years of the Affordable Care Act. Adverse selection occurs when individuals who are more sick are more likely than healthy individuals to purchase health insurance. Risk selection occurs when health insurers avoid enrolling sicker individuals.[1]
The program was also meant to encourage health plans to provide coverage to high-risk, high-cost individuals, such as those with pre-existing conditions. Unlike the other two stabilization programs, transitional reinsurance and temporary risk corridors, the risk adjustment program was permanent and did not expire.[1][2]
See also
- Obamacare overview
- History of healthcare policy in the United States
- Temporary risk corridors
- Transitional reinsurance
External links
- Healthcare.gov glossary
- Kaiser Family Foundation, Explaining Health Care Reform: Risk Adjustment, Reinsurance, and Risk Corridors
Footnotes
