The Affordable Care Act creates the risk adjustment, reinsurance and risk corridors programs (referred to as the premium stabilization programs), the cost-sharing reductions program, and Marketplace affordability programs such as advance payments of the premium tax credit. These programs are designed to provide consumers with affordable health insurance coverage, to reduce incentives for health insurance issuers to avoid enrolling sicker people, and to stabilize premiums in the individual and small group health insurance markets inside and outside the Marketplaces. Specifically, these programs are:
- Reducing the incentives for health insurance issuers to avoid enrolling people with pre-existing conditions: The permanent risk adjustment program will assist health plans that provide coverage to individuals with higher health care costs and will help ensure that those who are sick have access to the coverage they need.
- Stabilizing premiums in the individual market for health insurance: The transitional reinsurance program is a three-year program designed to reduce premiums and ensure market stability for issuers and thereby reduce premiums for enrollees in the individual market to ensure market stability with the implementation of new consumer protections in 2014.
- Protecting health insurance issuers against uncertainty in setting premium rates: The temporary risk corridors program protects qualified health plans from uncertainty in rate setting from 2014 to 2016 by having the Federal government share risk in losses and gains.
- Assisting low and moderate-income Americans in affording health insurance on the Marketplaces: Advance payments of the premium tax credit will help eligible individuals pay their premiums and make coverage purchased through a Marketplace affordable for low- and middle-income consumers. The cost-sharing reduction program will further reduce the out-of-pocket spending for health services for low- and middle-income individuals, and Indians.