42 U.S.C. § 18061 — Transitional reinsurance program for individual market in each State

(a) In general By January 1, 2014, each State had to add certain reinsurance rules to the standards it adopts under section 18041(b), and set up (or contract with) at least one "applicable reinsurance entity" to run a reinsurance program. (b) Model regulation (1) In general — When HHS built the federal model standards, working with the National Association of Insurance Commissioners, the rules had to let States run a program where: (A) health insurers and third-party plan administrators pay into a reinsurance entity for plan years starting in the three years from January 1, 2014; and (B) the reinsurance entity collects that money and pays it out to insurers that cover high-risk people in the individual market (not counting grandfathered plans) during those years. (2) High-risk individuals and payment amounts — HHS's rules had to spell out: (A) how to identify high-risk individuals — either a list of 50 to 100 high-risk medical conditions (using diagnosis and procedure codes), or another objective method recommended by the American Academy of Actuaries; and (B) a formula for how much insurers get paid for covering those high-risk people, fairly spreading available money, either as a fixed schedule per condition or another method recommended by the American Academy of Actuaries that rewards care coordination. (3) Determining required contributions — (A) HHS had to set a method for how much each insurer and self-insured group plan must contribute each plan year from 2014 through 2016 — based on a percentage of revenue or a flat amount per enrollee, paid in advance or over the year. (B) The method must make sure: (i) each insurer's share reflects its actual insured business, fees, and administrative work; (ii) contributions can include extra money to run the reinsurance entity itself; (iii) total contributions across all States equal $10 billion for 2014, $6 billion for 2015, and $4 billion for 2016; and (iv) on top of that, each insurer also pays its share of an extra $2 billion in 2014, $2 billion in 2015, and $1 billion in 2016. States can still collect more from insurers voluntarily. (4) Spending the money — (A) Money collected in one year can be spent in any of the three years, based on need. (B) Money left over after December 2016 can fund State reinsurance programs from 2017 through 2018. But the extra amounts from paragraph (3)(B)(iv) go straight to the U.S. Treasury's general fund instead — they can't be used for this program. (c) Applicable reinsurance entity (1) An "applicable reinsurance entity" is a nonprofit whose job is to stabilize individual-market premiums during an Exchange's first three years, when the risk of losing healthy customers to other plans is highest. It runs the reinsurance program by coordinating funding and the risk-spreading mechanisms. (2) A State can have more than one such entity, and States can team up to share one across all of them. (3) These entities don't pay federal income tax, except for the tax on unrelated business taxable income under section 511 of title 26. (d) Coordination with State high-risk pools States must change or shut down their existing high-risk pools as needed to make room for this new program, but can still coordinate the two as long as it doesn't conflict with this section.