Health Insurance Exchanges
Health Insurance Exchanges: What Are They?
Health care reform is a notoriously complicated issue – and with the passage of the recent health care reform law, the topic has become even more convoluted. The law, officially known as the Patient Protection and Affordable Care Act (PPACA), calls for several major changes in the way that health care is administered in the United States. One of the main provisions that were created by this act is the idea of health insurance exchanges.
Health Insurance before PPACA
Understanding how a health insurance exchange operates under PPACA first involves understanding how insurance was formerly sold and administered prior to the passage of the law.
To obtain health insurance, there were usually only two practical options: Shopping independently for a health insurance company, or getting coverage from one’s place of employment. Indeed, most Americans under the age of 65 – 61.9% in 2008 – are covered through employer-based insurance.
With these two options, you are limited by either where you work or where you live. Not every company operates in every state, and some plans that you prefer may be out of reach because you cannot get that specific job, or do not have an employer who can offer that coverage to you. Plus, if you change jobs and move, your employer-based insurance does not follow you.
Now, though, health insurance exchanges offer a different option.
What is an Exchange?
A health insurance exchange, as created by the PPACA, is essentially a government-regulated marketplace featuring buyers (the consumer shopping for health insurance) and sellers (the health insurance companies themselves). This is not merely a meet-and-greet, though, but is a marketplace governed by rules designed to make the process fair for consumers and businesses alike. Basically, you can enter an exchange and compare plans, options, and prices from competing businesses, all with certain protections in place for you.
Simply put, the idea is to encourage competition, lower premiums, and a set of regulations that protect the consumer from unfair practices, high premiums, and denials due to preexisting conditions.
By 2014, insurance exchanges are mandated for every state. As of now, only a few states – namely Massachusetts, Utah, and New York – have exchanges in place. Insurers must meet certain requirements in order to participate in an exchange. As of now, the states are tasked with forming plans for what businesses are allowed to participate in the exchanges, subject to approval from the Secretary of Health and Human Services.
Who can Participate in an Exchange?
Exchanges are limited by law to those who meet certain criteria. These include people who are:
- Self-employed or unemployed
- Retired but not qualified for Medicare
- Employed by a small business (one with less than 100 employees)
- Employed by a company that doesn’t offer insurance
Starting in 2017, those who are employed by medium and large businesses can participate in the exchange. While the PPACA creates overarching guidelines for governing businesses and insurers, the majority of regulations will be worked out by the states.
Will Exchanges Work?
America’s experience with health insurance exchanges is rather limited, and it is too early to say whether or not they will work with certainty. As more states start up their exchanges, there will undoubtedly be some growing pains and subsequent modifications. What a consumer needs to know, though, is that exchanges are on their way and offer a third possibility for finding affordable health insurance plans on the open market.