Q: What is a health insurance exchange?
A: A health insurance exchange is an online marketplace where consumers can compare and buy health insurance plans. The number of private exchanges – established by benefit companies and health insurance carriers – has grown in recent years. However, the exchanges you’re hearing about are most likely the state health insurance exchanges that were established as part of the Affordable Care Act (ACA) – that’s what’s described here.
State health insurance exchanges are a platform that allows individuals and small businesses to compare numerous health insurance plans side-by-side, and purchase the coverage that best fits their needs.
Under the ACA, all individual and small group plans must conform to the same new regulations, regardless of whether they’re sold through the exchange or off-exchange. All individual and small group plans effective January 2014 or later must cover ten essential health benefits including emergency services, hospitalization, preventive services and more; these requirements apply both on and off the exchange.
But consumers are only eligible to receive premium subsidies and cost-sharing reductions if they purchase their coverage through the exchange. Open enrollment periods are the same on or off the exchange, and you can’t switch from having an off-exchange plan to having an on-exchange plan outside of open enrollment, unless you have a qualifying event. It’s important to note that a drop in income or a job loss does not count as a qualifying event. So although premium subsidies are available to people who qualify for them based on income, they’re only available if you’ve purchased your plan through the exchange. (if you’re already enrolled in the exchange and your income changes to make you newly-eligible or newly-ineligible for premium subsidies or cost-sharing subsidies, you’ll have an opportunity to switch plans. And if your job loss results in loss of your employer-sponsored health insurance, you’ll be able to pick a new plan in the individual market as a result)
Since income and job status can change throughout the year, buying a plan through the exchange is generally a wise idea, even if you don’t qualify for premium subsidies at the time you purchase your coverage. If you experience a drop in income later in the year and become eligible for subsidies, you can begin receiving them at that point, or you can claim them on your tax return. But if you purchased your plan outside the exchange, you’ll have no recourse for getting premium subsidies later in the year if you find yourself with a lower-than-expected income.
There are currently 38 states that use Healthcare.gov as their exchange portal; the remaining 12 states and DC have their own state-run exchanges and enrollment systems. For 2017, 39 states will be using Healthcare.gov, as Kentucky will transition to the Healthcare.gov enrollment system (it will still be a state-based exchange however, just like Hawaii, Nevada, Oregon, and New Mexico)