A simplified Guide to Health Insurance Exchanges
The Patient Protection and Affordable Care Act (PPACA) requires every state to create health insurance marktplaces/exchanges for businesses, employees and individuals/families by the 1st October, 2013. And, if a state fails to set up the marketplace/exchange in time, the federal government will step in or will partner with the state.
What exactly is a health insurance Marketplace/exchange?
A marketplace or exchange is a place where things or services are sold/exchanged, such as a store or shop specializing in merchandise usually of a particular type- in this instance- services for health insurance.
Today’s health insurance Marketplaces/exchanges typically include the following components:
• A choice of two or more health insurance options
• Advice and recommendation on what health insurance options best fit your needs
• Automated billing for the chosen health insurance plan premium(s)
• On-going support for the chosen health insurance plan(s)
How a Specific Health Insurance Exchange Works
Because the Arizona marketplace will be run by the federal government,it will be at www.healthcare.gov
Health insurance Marketplaces/exchanges can come in many different shapes and sizes. To understand how a particular health insurance marketplace/exchange works, we need to ask:-
1. Is the health insurance marketplace/exchange Public or Private?
2. Is the health insurance marketplace/exchange Individual Market Based or Group Market Based?
3. Who is eligible to participate in the health insurance marketplace/exchange?
4. What products are available in the health insurance marketplace/exchange?
5. What is unique about the health insurance marketplace/exchange?
#1. Is the health insurance Marketplace/exchange Public or Private?
• A private health insurance exchange is a health insurance exchange run by a private company.
• A public health insurance Marketplace/exchange is a health insurance Marketplace/exchange run by a government ( local or federal or government-contracted) entity.
Since the PPCA requires states to create the Marketplaces/exchanges in 2013 those Marketplaces/exchanges will be considered public health insurance Marketplaces/exchanges.,
#2. Is the health insurance Marketplace/exchange Individual Market Based or Group Market Based?
In general, there are two core health insurance Marketplaces/exchange models:
1. Group Market Health Insurance Exchange – An exchange that sells “group” health insurance to employees of employers.
2. Individual Market Health Insurance Exchange – A Marketplace which sells “individual” health insurance to individuals and families (that may be employees) in the individual health insurance market.
PPACA requires states to create both a Group Market Health Insurance Marketplace/Exchange (called the “SHOP”) and an Individual Market Health Insurance Marketplace/Exchange (called the “American Health Benefit Exchange”) in 2013.
#3. Who is eligible to participate in the health insurance Marketplace/exchange?
A health insurance Marketplace/exchange may have specific eligibility rules outlining who can participate in the Marketplace/exchange. For example, a Marketplace/exchange might limit eligibility to only specific individuals or business based on:
• An individual’s household income
• An individual’s employer
• A business’s size (i.e. number of employees)
• A business’s ability to meet minimum employer contribution requirements
• A business’s ability to meet minimum employee participation requirements
Initially, the SHOP Marketplace/exchange limits eligibility to only businesses with up to 50 employees.
Similarly, the (individual/family) American Health Benefit Exchange limits eligibility to only individuals who are U.S. citizens and legal immigrants who are not incarcerated.
#4. What products are available in the health insurance Marketplace/exchange?
A health insurance Marketplace/exchange may offer a variety of insurance products from a variety of providers. There is no minimum or maximum requirement. For example, a health insurance Marketplace/exchange might offer:
1. Different Medical Plans from Multiple Carriers, and/or
2. Different Medical Plan Designs from a Single Carrier.
Both the SHOP Marketplace/Exchange and the American Health Benefit Marketplace/Exchange will provide multiple major medical carriers with multiple plan design options.
#5. What is unique about the health insurance Marketplace/exchange?
Starting in 2014, small businesses can only access the small business healthcare tax credits through the public SHOP Marketplace/exchange.
Similarly, starting in 2014, tax credits (subsidies) will be available for Individuals earning less than 400 percent of the federal poverty level and will limit the cost of health insurance to 2% – 9.5% of household income.
Individuals can only access the tax credits through the public American Health Benefit Exchange Marketplace/exchange.
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