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Statement of Need: This rule would provide additional guidance for several programs including risk adjustment, reinsurance, and risk corridors. The purpose of these programs is to protect health insurance issuers from the negative effects of adverse selection and to protect consumers from increases in premiums due to uncertainty for issuers. The rule would also provide new information on the cost-sharing reductions (CSRs) and advanced premium tax credits (APTCs) programs. These programs provide financial support for purchasing insurance and increase access to care for individuals through the Affordable Insurance Exchanges. They also provide assistance on user fees and administrative fees used to implement the Federally-facilitated Exchange and the risk adjustment and reinsurance programs.

Summary of the Legal Basis: The provisions that are included in this rule are necessary to implement the requirements of sections 1341, 1342, 1343, 1401, 1402, 1411, and 1412 of the Affordable Care Act.

Alternatives: None. This is a statutory requirement.

Anticipated Costs and Benefits: Payments through reinsurance, risk adjustment, and risk corridors would reduce the increased risk of financial loss that health insurance issuers might otherwise expect to incur in 2014 due to market reforms such as guaranteed issue and the elimination of medical underwriting. These payments would reduce the risk to the issuer and the issuer could pass on a reduced risk premium to enrollees. Administrative costs would vary across States and health insurance issuers depending on the sophistication of technical infrastructure and prior experience with data collection and risk adjustment. States and issuers that already have systems in place for data collection and reporting would have reduced administrative costs. Federal financial assistance for enrollees through the CSR and APTC programs would enable many low- and moderate-income individuals to purchase health insurance. The user fees and administrative fees would be charged on a per capita basis to issuers of certain plans. Those fees would be used to administer the Federally-facilitated Exchange and the HHS-operated risk adjustment and reinsurance programs.

Risks: If this regulation is not published, the Exchanges may be at risk for not becoming fully operational by January 1, 2014, thereby delaying the benefits of health insurance coverage to millions of Americans.