The Patient Protection and Affordable Care Act (Act) fundamentally changes the way that health insurance is regulated in the United States. These changes are part of an ambitious statutory scheme that comprehensively reforms insurance underwriting practices. Reforms include new guaranteed issue, availability, and renewability standards, along with modified community rating requirements.

Congress was justifiably concerned that the Act’s changes to insurance underwriting practices, particularly as they apply in the individual and small group markets, could destabilize these markets and invite adverse selection. The Act therefore tries to address these concerns by, among other things, directing the Department of Health and Human Services (HHS) to develop a series of “premium stabilization” programs, the collective purpose of which is to address these concerns. One of these programs — the transitional reinsurance program — is funded by contributions from health insurance issuers and self-funded group health plans. The transitional reinsurance program is financed with payments made to programs established state by state. If a state declines to establish such a program, then HHS will do so. The transitional reinsurance collection program requirement spans three years – 2014, 2015, and 2016 – but states are free to continue it thereafter.