What is a Health Insurance Exchange?

What is a Health Insurance Exchange?

Change has been in the air since the U.S. Supreme Court ruled on the Patient Protection and Affordable Care Act (Act). Adjustments are being made to recent changes and preparations are being made for changes that are yet to come. Though opinions about the Act’s desirability and efficacy vary, many are experiencing a shared anxiety over one of the more significant changes on the horizon—Affordable Insurance Exchanges.

The Act calls for the creation of state-based competitive marketplaces where individuals and small businesses will be able to purchase affordable private health insurance. These new marketplaces, or Exchanges, are designed to make it easy for consumers and small businesses to compare health plans, get answers to questions, find out if they are eligible for various tax credits, and enroll in a health insurance plan that meets their needs.

The main functions of Exchanges, which are to be operation in 2014, include:

  • Certifying, recertifying, and decertifying health plans offering coverage through the Exchange, called qualified health plans;
  • Assigning ratings to each plan offered through the Exchange on the basis of relative quality and price;
  • Providing consumer information on qualified health plans in a standardized format;
  • Creating an electronic calculator so consumers can assess the cost of coverage after any advance premium tax credits and cost-sharing reductions;
  • Operating a website and toll-free telephone hotline offering comparative information on qualified health plans and allowing eligible consumers to apply for and purchase coverage;
  • Determining eligibility for the Exchange, tax credits and cost-sharing reductions for private insurance, and other public health coverage programs, and facilitating enrollment of eligible individuals in those programs;
  • Determining exemption from requirements to carry health insurance and granting approvals based on hardship or other exemptions; and
  • Establishing a Navigator program to assist consumers in making choices about health care options and in accessing their new health care coverage.

Though resources and support are available, Exchanges are to be run by the individual states. If, however, a state does not establish an acceptable Exchange, the U.S. Department of Health and Human Services (HHS) will assume that that state has elected not to do so, and the HHS will operate a federally-facilitated Exchange in that state.

To offer guidance, the HHS published rules setting forth standards to be followed by states when establishing and operating Exchanges. The framework provided by the HHS includes standards for:

  • Establishing and operating an Exchange;
  • Qualifying health insurance plans for participation in an Exchange;
  • Determining an individual’s eligibility to enroll in health plans and insurance affordability programs;
  • Enrolling in health plans through Exchanges; and
  • Determining employer eligibility for participation in the Small Business Health Options Program (SHOP).

Despite these standards, the HHS gave states some flexibility to meet specific needs. For example, each state can elect to structure its Exchange as a non-profit entity established by the state, as an independent public agency, or as part of an existing state agency. A state can also choose to operate its Exchange in partnership with other states through a regional Exchange and to operate multiple Exchanges that cover distinct areas within the state.

Despite this flexibility, Exchanges must have safeguards to prevent conflicts of interest and promote ethical and financial disclosure standards. Consumers utilizing Exchanges should enjoy easy access to information about plan choices and comparisons, protections to ensure fair marketing and enrollment practices by health plans, and appeals rights in case something goes wrong with Exchanges or health plans.

The Act provides that a state’s plan to operate an Exchange must be approved by the HHS no later than January 1, 2013. However, the HHS may provide conditional approval if the state is advanced in its preparation but cannot demonstrate complete readiness by January 1, 2013.

The prospect of conditional approval confirms that though the deadline draws near, much remains to be done. At this point, it is too early to tell how or if the Exchanges will do what they were designed to do. This uncertainty has no doubt been the source of anxiety for many. Unfortunately, those wanting confirmation that the Affordable Insurance Exchanges contemplated under the Act are in fact the wave of the future will have to wait until then.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the rapidly changing health care landscape. Be sure to check back with us periodically for future informational updates. In the meantime, if you have specific questions about health care reform or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, please contact us.