Thought Leadership in Action

What is a state health exchange?

It is a government-run insurance marketplace and part of the Affordable Care Act program.  The Affordable Care Act requires state Exchanges to provide health insurance information in a manner that is easy to comprehend for consumers. State Exchanges offer information from multiple carriers via information kiosks placed in key locations.

Exchanges Have 5 Main Functions:

1. To make comparing plans and prices easy for people.
2. To create competition so people get the best rates.
3. To offer truthful information about plans, premiums, coverage, benefits, and other benefits-related issues.
4. To provide a place to purchase insurance coverage while a person is either unemployed or in transition from one job to another.
5. And, for those who need assistance, to serve as portals where people can check for eligibility and subsidies, and then help them enroll in plans and pay premiums via a call center system. The Exchanges have five categories of health plans that vary in monthly price. They are explained this way on the official ACA site:

There are 4 main tiers of “qualifying health plans” or “metal plans” you or your employer can purchase on the exchange. They range from lower quality, but more affordable “Bronze plans”, to “Silver plans” to a more expensive plan with better coverage called a “Gold plan”. There is also a “Platinum plan” which is the highest quality and cost plan. Lower premium plans will have higher deductibles, less benefits and larger out of pocket costs. All plans offer at least ten essential health benefits including free preventive services.

Breaking it down a little further :

• Bronze Plan:insurance companies pay 60% of the covered healthcare expenses  with HSA out-of-pocket limits
• Silver Plan:insurance companies pay 70% of the covered healthcare expenses with HSA out-of-pocket limit
• Gold Plan:insurance companies pay 80% of the covered healthcare expenses with the HSA out-of pocket limit
• Platinum Plan:insurance companies pay 90% of the covered healthcare expenses with the HSA limit
• Catastrophic Plan:For those below the age of 30 and are exempted from the mandatory purchase of health policy.

Though the Act leaves it to the states to decide upon the form and medium of the Exchanges, most states, barring a few, will eventually govern their own health insurance Exchanges.

Structure of an Exchange

The Act directs every state to have a state-based health insurance Exchange as health insurance rules vary from state-to-state. A state Exchange gives a greater sense of control and ownership to its citizens. The Exchanges are funded by federal dollars. The Act also has provisions calling for the federal government to create and administer an Exchange when states refuses to do so on their own. There is a possibility that, at some later date, all state health insurance Exchanges will be integrated into a single national Exchange. This would reduce the administrative costs associated with the Exchanges at a state level. A national Exchange also would ensure that consumers are not deprived of coverage even when they change their state of residence.

Operating an Exchange
Administrating a state based Exchange that operates on federal dollars and adheres to both federal and state regulations requires solid collaboration by federal and state governments.

• Since Exchanges are funded largely by the federal government, each state’s Exchange is audited by federal agencies to ensure compliance with federal health insurance regulations.
• Since states administer the Exchanges, it is important that state governments and their respective insurance departments form an Exchange Board to oversee operations. The effective management of the Exchanges will ensure that consumers reap the maximum benefits when purchasing health insurance.

In Summary

The state based health insurance Exchanges are one of the most important aspects of the healthcare reforms of 2010. The Act sets certain guidelines to which every Exchange has to adhere and yet it leaves enough flexibility for states to insert their individual preferences and regulations. The Act provides a platform for consumers to more easily purchase health insurance in general, and at a cost that fits into their budget.