Insurance Exchanges

What is it?

One important aspect of the health reform law passed by Congress, the Patient Protection and Affordable Care Act (ACA) was the creation of new state-based Health Insurance Exchanges. These Exchanges will function as new competitive marketplaces where individual consumers and small businesses can purchase private health insurance.

Because they lack purchasing power and the ability to pool risk, individuals and small businesses too often pay higher insurance rates. The Exchanges will change that by providing them with competitive, consumer-centered health insurance marketplaces to compare and buy insurance, increasing their control and options.

Starting in 2014, the Exchanges will serve as a one-stop shop where individuals and small businesses can get information about health insurance options, be assessed for eligibility for the Exchange, and get enrolled in the plan of their choice. They will also learn about tax credits for private insurance and other state coverage programs like the Children’s Health Insurance Program, and Medicaid. Small businesses will also have the option to purchase insurance through the Exchanges.

The Exchange will also ensure premium stability for plans and enrollees in the Exchange, especially in the early years as new people come in to Exchanges to shop for health insurance.

Currently, states are working to set up their health insurance Exchange, and determine how it will be operated and governed. States have great flexibility in the design of Exchanges under the ACA. In order to ensure a process that is streamlined, and standardize across the country, The Department of Health and Human Services (HHS) will establish standards for consumer and provide guidance and options to the states on how to structure their Exchanges, and certify health plans for participation in the Exchange.

By January 1st, 2013, States will have to show that they are able to run an insurance exchange within a year, otherwise the federal government will run it for them.

Forty-nine states, the District of Columbia and four territories accepted grants to help plan and operate Exchanges. In addition, over half of all states are taking additional action beyond receiving a planning grant such as passing legislation or taking Administrative action to begin building exchanges. States will continue to implement exchanges on different schedules through 2014. In drafting these proposals, the administration examined models of Exchanges, held numerous meetings with stakeholders and consulted closely with state leaders, consumer advocates, employers and insurers. To continue that conversation, HHS is accepting public comment on the proposed rules over the next 75 days to learn from states, consumers, and other stakeholders how the rules can be improved and HHS will modify these proposals based on feedback from the American people. To facilitate that public comment process, HHS will convene a series of regional listening sessions and meetings.

Each State can structure its Exchange as a non-profit established by the State, as an independent public agency, or as part of an existing State agency. In addition, a State can choose to operate its Exchange in partnership with other States through a regional Exchange or it can operate subsidiary Exchanges that cover the regions of the entire State. Any combination of these options can be approved as long as the Exchange meets the guidelines laid out in the proposed rule.

To avoid duplication of effort and reduce the administrative burden on the States, HHS will partner with States to make Exchange development and operations more efficient. This includes business functions like eligibility and enrollment systems, financial management, and health plan management. States can choose to develop an Exchange in partnership with the Federal government or develop these systems themselves. This provides States more flexibility to focus their resources on designing the right Exchange for local insurance markets.

Small businesses:

For small employers, the Exchange provides a level playing field where patients have access to high quality health insurance plans at a lower cost like larger companies. One provision of the Exchanges, the Small Options Program (SHOP), will provide a way for small employers to offer their employees a choice of health plans like those offered by large employers and give small employers and their employees greater bargaining power, a bigger risk pool, and choices among affordable health plans. In SHOP, employers can choose the range of plans they want to offer and decide on a contribution toward the coverage; employees then select the plans that best meets their needs and resources. Employers can offer plans from several insurance companies, but will receive a single bill and write a single check.

Individuals:

For individuals and families, the Exchange is a single place where a patient can apply for and enroll in private or public health insurance coverage. The Exchange will be a place for consumers to make apples-to-apples comparisons when shopping for health plans.

Through the Exchange, consumers can apply for tax credits or other help to further reduce your premium and out-of-pocket costs. For millions of uninsured and lower-income Americans, the Exchange is an easy way to enroll in a private health plan, Medicaid, or Children’s Health Insurance Program (CHIP).

To offer insurance through an Exchange, health plans must be certified as Qualified Health Plans (QHPs). To be certified, QHPs must meet minimum standards proposed in the rule but primarily set out in the law. The proposed rule gives Exchanges significant flexibility in setting QHP standards that may reflect market conditions in a particular State. To learn more about Exchange requirements and standards, click here.

What does this mean for my practice?

After 2014, because access to private health insurance will be more affordable, providers will likely see more patients attaining insurance than ever before, and may see a swell in patient load as a result.

Providers who own their own practice or other small businesses will likely have more options for providing insurance to their employees. Starting in 2014, you can offer coverage to your employees through a “Small Business Health Options Program” called a SHOP. States can set the size of the small group market up to 50 employees instead of 100 employees until 2016. And, starting in 2017, States may let businesses with more than 100 employees buy large group coverage through the SHOP.

Small employers participating in SHOP may be eligible for a tax credit of up to 50% of their premium payments if they have 25 or fewer employees, pay employees an average annual wage of less than $50,000, offer all full time employees coverage, and pay at least 50% of the premium. Employees offered affordable, quality health insurance by their employer, however, are not eligible for premium credits for coverage purchased through the Exchange.

Additional Resources:

Healthcare.gov - Affordable Insurance Exchanges

Healthcare.gov - Health Insurance Exchange Fact Sheet

HHS: Affordable Insurance Exchange Announcement

HHS and states move to establish Affordable Insurance Exchanges, give Americans the same insurance choices as members of Congress

Affordable Insurance Exchanges- Small Business Fact Sheet

A primer on health-care 'exchanges'

Focus on Health Reform: Health Insurance Exchanges

Establishing Health Insurance Exchanges: An Update on State Efforts

Find Your State : State Action on Creating a Health Insurance Exchange

Questions About Health Insurance Exchanges