In this issue brief, researchers from the Kaiser Family Foundation explain the three provisions included in the Affordable Care Act called risk adjustment, reinsurance, and risk corridors (sometimes known as the 3Rs). These provisions were designed to help health insurers cover the uncertainty about how to price and pay for the health insurance coverage that many newly insured Americans would receive under the act. The 3Rs were intended to promote stability in the insurance markets in years following implementation of the law on Jan. 1, 2014. Previously, insurers denied coverage to those with pre-existing conditions, some of whom were considered to be uninsurable. Given that the ACA did not allow insurers to deny coverage to anyone with a pre-existing condition, insurers were concerned that insuring these individuals would cause wide swings in premiums each year as insurers learned what these individuals needed in terms of care, how to pay for that care, and how to adjust premiums to account for those costs. To keep premiums stable from year to year, the 3Rs were expected to cover some of the insurers’ losses.
