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Health Insurance Exchanges: What Exactly Are The Basics



Not so long ago, debate raged over whether or not the federal government should get involved in issues of private health care coverage. Today, the debate continues, but the issues revolve around how, not if, or even when, health care coverage may become mandatory for all citizens. One of the hot button topics focuses on the establishment of health insurance exchanges.

These exchanges are intended to make it easier for uncovered individuals to evaluate options and choose the right health insurance plan for their needs. Here learn about what a health insurance exchange is, how it works, and how to use an exchange to select a health care plan.

Health Insurance Exchanges Defined

The first thing to know about a health insurance exchange is that those “in the know” refer to it as a HIX. So if you see references to a HIX online, you will know what you are reading. A health insurance exchange is a contained marketplace designed to offer a specific product — health care plans for uncovered individuals and small businesses with up to 100 employees.

It is not certain yet whether employees working for larger companies will eventually be able to use exchanges as well. For students set to graduate with a master of public health programs degree, this may well be a policy issue relevant to your career.

HIX Activation Date

The formation of health insurance exchanges coincides with the activation of the Obama administration’s Patient Protection And Affordable Care Act, which is scheduled to take effect beginning January 1, 2014.

This law, which was ratified by President Obama in March 2010, mandates that all states must make a selection of health care plans available to uncovered residents who must purchase their own health insurance. One of the ways that states can do this is through creating their own health insurance exchange. Another way states can fulfill this obligation is through partnering with the federal government. A third way states can accomplish this is by ceding their authority to operate an exchange to the federal government.

Types of Health Insurance Exchanges

There are three main types of health insurance exchanges.

  • State exchange. Some states have opted to set up their own in-house exchange that offers insurance plans to residents (the deadline for this option was December 14, 2012).
  • State-Federal partnership. Some states have opted to set up a partnership exchange with the federal government (the deadline for this option was February 15, 2013).
  • Federal-run. States that did not choose either of the other two options will have their exchange options operated through the federal government.

Plan Levels

Perhaps the number one question on uncovered individuals’ minds today is, “What types of health coverage plans will be offered and what services will they cover?” There are four basic plan levels and one plan for catastrophic coverage that only certain individuals are eligible for. All basic plans provide for essential health benefits as determined by the federal government, including emergency care, hospital care, maternity care, a prescription drug plan, pediatric care, laboratory work, and other services as yet to be determined. What differs from plan to plan is how much of the costs each plan will cover.

  • Bronze level. 60 percent of service costs are covered by the plan.
  • Silver level. 70 percent of service costs are covered by the plan.
  • Gold level. 80 percent of service costs are covered by the plan.
  • Platinum level. 90 percent of service costs are covered by the plan.
  • Catastrophic plan. This is a special plan available only to uncovered individuals ages 30 and younger or exempt individuals.

Affording Mandatory Health Insurance Coverage

Another question many uncovered individuals have about the new federally mandated health insurance coverage program is, “What if I can’t afford the required premiums?” The good news here is that individuals who annually earn between 133 percent and 400 percent of the federal poverty level income may be able to qualify for a federal subsidy to afford their premiums.

While there are still some details to be worked out to ensure a simple, comprehensive plan rollout in 2014, these basics will get you started towards selecting and budgeting for the right health care plan for you.