What Exactly are Health Insurance Exchanges?

You would think that as nurse practitioners we would know a lot about healthcare reform.  Unfortunately, between seeing patients and managing other work and home related  activities most of us probably don’t have time to educate ourselves on the issue.  Regardless, our patients will view us as a resource to help understand the changes happening in healthcare.  It’s important that we take some time to familiarize ourselves with the basics of healthcare reform.  So, today I have invited a guest to answer the question “What exactly are health insurance exchanges?”.

Coming Soon: The Subsidy Exchanges

By Guest Blogger Craft Hayes for Bernard Health

There is a lot of talk these days about the health insurance exchanges that are supposed to open October 1st, 2013.  When trying to understand their purpose, it can be helpful to start with some context.

The basics: let’s define “exchanges”

According to Google, the definition of exchange is the “act of giving one thing and receiving another (esp. of the same type or value) in return.”

When the government uses is as a noun, as in “an exchange” it means that it is creating a place where it will be easy to exchange cash for health insurance.  Part of making it easy is giving consumers tools to help them compare available plans and choose which one to purchase.  Another part of making it easy is making it so that the insurance companies can’t turn you down or put exclusions or riders on your policy because of health issues.

Wait, don’t we already have lots of these “exchanges”?

You might be thinking- don’t we already have lots of health insurance exchanges?

Yes, absolutely we do.

By the government’s definition, your employer provides an “exchange” whenever they offer you multiple plan options to choose from and tools such as benefit summaries to compare different plans available.  We’ll call these exchanges “Employer Exchanges”.

Insurance companies also provide exchanges.  You can find these exchanges on their websites, where you can generally sort individual and family plans by price, deductible, and other features to help you decide which one to buy.  We’ll call these “Insurance Company Exchanges”.

It’s not just employers and insurance companies who already provide “exchanges”, but there are myriad websites where you can run quotes for different plans and sort them by price, deductible and other features to help you decide which one to buy.  We’ll call these “Private Web Exchanges”.

In fact, even the government already provides an exchange for Medicare plans.  Check out medicare.gov, where you can sort some of the different Medicare options that are available in your area.  We’ll call this one the “Medicare Exchange”.

With health reform, the government is just creating another “exchange” in addition to the ones we already have.  This exchange, however, is really unique.  Why?  Because it is through this exchange that individuals who are under 65 and otherwise qualify can receive the massive subsidies available under health care reform for their health insurance.  We’ll call this one the “Subsidy Exchange”, so that we differentiate from the Employer, Insurance Company, Private Web, and Medicare Exchanges.

Massive subsidies? Wow, that sounds good.  Tell me more.

We’ll get into the subsidies soon.  Before we do, bear the following in mind.

First, it’s important to know that these exchanges are scheduled to open October 1st, 2013. This first year, people will be able to sign up from then through March 2014.

Second, every state gets their own Subsidy Exchange, and they were each allowed to choose how they wanted to implement it.  Most states decided to implement their Subsidy Exchange by letting the federal government do it.  In doing so, in a way they were saying “If you think this is such a great idea, then you do the work.”  Some also believe that these states are protecting their employers from the eventual employer penalties that are part of reform.

This is important to bear in mind if you have children who are away at school and you’re trying to help them choose the right plan.  What you’re learning in your state about how its Subsidy Exchange works is unlikely to apply completely with the other State’s Subsidy Exchange.

Third, because this is new, many insurance companies have decided not to participate in the Subsidy Exchanges.  They may still have policies available, but you would only be able to find them on a Private Web Exchange or an Insurance Company Exchange.

Fourth, industry insiders have begun noticing that some of the best insurance companies are no longer listing their plans on the Private Web Exchanges.  Instead, they are listing their best plans on their own, Insurance Company Exchanges.

Why would they do that?  Some draw an analogy to Southwest Airlines not listing on Expedia or Orbitz.  If you are the best and have a loyal customer base, then why pay the listing fee to the Private Web Exchange?

Okay, now let’s talk about the subsidies

Provided other requirements are met, when one purchases health insurance through the appropriate Subsidy Exchange, they receive a subsidy from the government.

What are the requirements?

They’re complicated, but the bottom line is that your income has to be low enough and neither you nor your spouse can be eligible for a qualified plan from your employer.

How much income is too much?  If you earn more than 400% of the poverty line, then you can’t get a subsidy.  Below that, and you can.  The poverty line is different in every state, so you’ll want to check out what it is in your state.

What makes an employer plan “qualified”?  It has to be good enough to pass certain government requirements and they can’t charge you too much for it.  Just ask your employer and they’ll tell you if it’s “qualified”.

How do you verify to the government your income and whether your employer plan is qualified?  This first year, you’re on your honor with the threat of fines if you’re later audited and got it wrong.  In future years, there will be more mechanisms in place to verify it.

This all sounds complicated, but the good news is that if you’ve historically been unable to get coverage because of health issues or to afford it because of income issues, there is likely a solution to be found now.