Background
The Affordable Care Act (ACA) creates three interconnected risk management programs intended to protect consumers by stabilizing premiums during the initial years of the law’s implementation. Two of these programs (Reinsurance and Risk Corridors) are temporary and will provide much needed premium stability for consumers in the first three years of the reformed markets. The third program (Risk Adjustment) is designed to protect against adverse selection in the reformed marketplace.
Together, these three programs—commonly known as the “3Rs”—help to create a stable and predictable environment for consumers seeking health insurance coverage during the initial years of the reformed marketplace. The American Academy of Actuaries notes that the 3Rs will facilitate “competition based on efficient care management and quality rather than risk selection.”1 Similar programs were successfully used to mitigate risk among private plans offered under Medicare. The 3Rs will serve the same purpose for the 2014 reforms under the ACA by creating confidence in the new marketplaces and stability in premiums for consumers.