A New Way to Shop for Individual Coverage
The Affordable Care Act created the health insurance exchanges in each state to offer a new source of coverage to those who previously couldn’t afford individual health plans or were turned down for coverage. Exchanges in each state operate similarly, selling a modest selection of health insurance plans that can be reduced in cost with tax credits issued by the government.
The government announced the marketplace would be a “one-stop shop” for individual health insurance — similar to what was already offered on many insurance websites. The difference? These convenient coverage outlets would be enforced on a massive scale under federal law, as coverage is required for all individuals.
Retail kiosks and storefronts of major carriers also opened nationwide to increase awareness of the marketplaces and provide another method of enrollment.
Health plans sold through the exchange are affordable if you meet the income guidelines for subsidies, and they offer a set of required “essential health benefits” to cover various types of care.
Health Exchange Models
The health law gave states three models to choose from when setting up their exchange: state-run, partnership with the federal government, or federally-run. Sub-types are based on how a state-run exchange contracts with insurance companies.
The lesser chosen and most involved option, this model allows a state to operate the exchange on its own. As an active purchaser, the state asks for bids from insurers and the state chooses the plans it wants to sell. Insurers participate in an open market and price plans competitively.
- Active purchaser: state hand-picks the plans to offer residents from bids.
- Clearinghouse: all insurers can sell plans if they meet the minimum coverage requirements.
A state shares responsibilities with the federal government in implementing and facilitating its marketplace. Most partnership states did not set up their own exchange websites, but they have the option. States must follow federal rules for maintaining their exchanges, and any insurer offering qualified health plans can sell coverage on their state’s exchange.
Many states defaulted the management of their marketplaces to federal healthcare agencies. All insurance companies complying with the health law could sell their wares on the exchange in federally-run states.
Most everyone qualifies for coverage on the individual health insurance marketplace unless they haven’t yet secured U.S. citizenship, though the government may change that provision. Citizenship won’t impact your application for off-exchange plans, so if you can afford it, that option is open.
Otherwise, even if you have other forms of insurance and it isn’t in your best interest to apply, you won’t get turned down by the marketplace, also known as the retail sector of health insurance.
The exchange is optimal for those who qualify for subsidies, as coverage gets discounted. If your income is under 250 percent of poverty, you are eligible for tax credits to discount both your monthly premiums and cost sharing.
If you earn up to 400 percent of poverty, you can receive a reduced rate for your premium only, which still may be a better deal than off-exchange plans.
Types of Policies
Every carrier offers a different plan, but the law requires them to follow these basic rules for creating individual coverage for the exchange. Plans must cover at least 60 percent of total costs and fall into one of four metallic tiers for consumers to more easily identify the amount of coverage.
Copayments, deductibles and coinsurance can vary within each plan, regardless of the metal level and can change depending on a person’s cost sharing subsidy amount.
Calculate Your Subsidy
Find out how much financial assistance you may be eligible for on the exchange with the calculator below.