Because of the Patient Protection and Affordable Care Act, insurers can no longer deny people coverage or charge them higher premiums because of pre-existing conditions.
This provision on its own could cause problems for the insurance industry; health insurers might compete to avoid sicker consumers or become uncertain about how to price coverage.
However, the PPACA includes other provisions that aim to stabilize the insurance market and promote insurer competition based on quality and value, according to a report from the Kaiser Family Foundation. Here are the three market stabilization factors included in the law.
1. Risk adjustment. The PPACA risk adjustment program redistributes funds from health plans with lower-risk enrollees to those with higher-risk enrollees. It's meant to protect against adverse selection and risk selection inside and outside of the reform law's health insurance exchanges. This program will be in effect from this year onward.
2. Reinsurance. Under the reinsurance program, health plans that enroll higher-cost individuals get payments to offset their expenses. All health insurance issuers and self-insured plans contribute to the reinsurance funds, and individual market plans subject to new market rules inside and outside of the PPACA exchanges are eligible for payments. This program takes effect this year and runs through 2016.
3. Risk corridors. This program limits health plans' losses and gains beyond a specified range to stabilize premiums and prevent inaccurate premium setting during the early years of the PPACA exchanges. HHS collects funds from health plans with lower-than-expected claims and makes payments to those with higher-than-expected claims. This applies only to qualified health plans offered through the exchanges and is in effect from 2014 to 2016.
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