CMS Issues Proposed Rule: Single Risk Pool

Update: June 25, 2013 — HHS Releases Final Rule on Single Risk Pool

December 27, 2012

On November 20, 2012, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule regarding the single risk pool requirement. The single risk pool is required by the Affordable Care Act (ACA) to ensure that products are rated consistently by issuers within each market. Comments due December 26. 

What is the Single Risk Pool requirement?

As specified in the ACA, the rule requires issuers to use a single risk pool for all non-grandfathered products in the individual market and a single risk pool for all non-grandfathered products in the small group markets. If a state chooses to merge the individual and small group markets, then there would be one single risk pool to cover the individual and small group markets. 

What is an index rate and how does this apply?

As part of the single risk pool requirement, the proposed rules have specified how rate development will be done for products in these markets. The "index rate" is the starting point in each market to develop rates for non-grandfathered products. This is a statewide "index rate" for each market (individual and small group, or combination in a state that merges the markets). The index rate must be based on an estimate of the combined claims experience derived from providing the essential health benefits (EHBs) for all non-grandfathered products. The index rate must be adjusted for the total market-wide payments and charges that an issuer expects for risk adjustment and reinsurance in a state. In other words, the index rate must be the same for all products in a given market. 

How will product specific rates be determined?

Product level adjustments to the index rate are permitted to allow issuers to arrive at product level rates. Adjustments may be made with respect to:

• Actuarial value and cost sharing design.
• Provider network, delivery system characteristics and utilization management practices.
• Benefits in addition to the EHBs. Index rate adjustment for any additional benefits must be consistent for all products with the same additional benefits (i.e., must determine index rate for non-EHBs so that if the same additional benefit is added to two plans, it leads to the same rate adjustment in each of those plans).
• Expected impacts of specific eligibility categories for catastrophic plans.

Where can I find more information?

More information can be found in the Health Insurance Market Rules proposed rule (as published in Federal Register on November 26). For more Reform Alerts, see BCBSM/BCN's Health Reform site.

The information in this document is based on preliminary review of the national health care reform legislation and is not intended to impart legal advice. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. The impact of these reforms on individual situations may vary. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. As required by U.S. Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.