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State Health Exchange Basics

The Patient Protection and Affordable Care Act mandates the creation of state-based health insurance exchanges. The exchange is simply a clearinghouse, largely based online, that will provide information on various plans available in the state, and its tier levels (measured by the amount of premium dollars spent on actual health care).

Luckily, there are a few basic things that are already known about the exchange. The National Association of Insurance Commissioners and the National Academy of Social Insurance have developed a list of guidelines. States are diligently beginning to follow these guidelines, and – beginning in 2011 – each state is working towards setting up their own exchanges. Though private companies are barred from actually running the exchanges, the states are allowed to contract out services in setting up the exchanges, according to the legislation.

Are States Required to Set Up an Insurance Exchange?

States are not required to set up the exchange; however, if they fail to do so as deemed by the Secretary of the U.S. Department of Health and Human Services no later than the first of January, 2013, then the federal government will step in to help facilitate an exchange in the state.

Types of Exchanges

Basically, there will be two types of exchanges for each state:

  1. American Health Benefits Exchanges – These are for individuals and families.
  2. Small Business Health Options Exchange – Also known as SHOP exchanges, these are set up for small businesses, in order for them to meet the mandates provided by the Affordable Health Care Act.

Each exchange, no matter which state it resides in, will need to meet some basic requirements.

Requirements for the Exchanges

According to the National Academy of State Health Policy, there are four basic categories of requirements, and the informed consumer should ensure that their state’s health exchange meets these requirements.

  1. Administration & Governance: There are certain types of expenses that are deemed acceptable for state-based exchanges. For example, a private company cannot run an exchange, but private companies may be contracted out to provide services in the administration of the exchanges. States may establish a single state-wide exchange, or they may choose to form subsidiary regional exchanges that serve certain geographic areas. Additionally, multiple states are allowed to band together to form a single regional exchange (for example, Oregon, Washington, and Idaho could choose to form a Northwest Health Exchange)
  2. Insurance Plan Oversight: This set of requirements will act very much like a state insurance commissioner currently does. The state will have sole oversight in deeming whether a plan will meet the guidelines as “Qualified Health Plans” for the exchange. Plans will need to prove they qualify by meeting one of four pre-defined levels of coverage:
    • Bronze: 60%
    • Silver: 70%
    • Gold: 80%
    • Platinum: 90%.
    • Levels are determined by the amount of money spent on health care services (rather than marketing and administration costs for the plan).
  3. Consumer Interaction: Exchanges will need to assist each consumer in determining his or her eligibility for help (whether through the federal government, the exchange itself, or through their employer). Additionally, states will help individuals determine their qualification for federal premium assistance tax credits; and they must also notify an individual of the proper enrollment periods. Finally, states must present the plans in a standardized format, including the benefit tier (whether Bronze, Silver, Gold, or Platinum) and an easy-to-follow outline of the coverage provided. Each exchange will need to notify the consumer of they meet the requirements for an exemption from the individual mandate (the part of the law that requires everyone purchase a health policy).
  4. Information Transfer & Availability: Each exchange will need to communicate with the Secretary of Treasury information about any exemptions from the individual mandate, qualifications for tax credits, and information about employees who are unable to afford employer sponsored coverage.

What’s An Individual to Do in the Face of State Health Exchanges?

As the exchanges are set up, and you find the right exchange in your region or state, be sure to review the guidelines above. Know your rights, and find out if you qualify for an exemption to the individual mandate. The fact is, if you’re employed, you will likely receive coverage through your employer (via the Small Business Health Options Exchange); however, it’s possible that you qualify for help from the government, depending on your income level.

This page will be updated with more information about exchanges as time progresses. Be sure to bookmark this page if you’d like to keep updated on any changes in state-based health exchanges.

Sources

National Association of State Health Plans