Health insurance marketplaces at a glance:
- The Affordable Care Act called for the creation of an exchange in each state, but implementation varies by state.
- A one-time COVID-related enrollment window runs through May 15 in most states.
- States can take action to protect (or harm) their exchanges in the face of changing federal regulations
- Exchange models include the state-based exchange (SBE), federally facilitated exchange (FFE) — including the state partnership model and the marketplace plan management model — bifurcated exchanges, and supported state-based exchanges.
- Ten states were ‘early adopters,’ including, California – the first state to pass legislation authorizing an exchange.
- Among other states, there were some ‘passive resisters’ and ‘active resisters.
- For 2021, there are 15 state-based exchanges, 6 federally supported exchanges, 6 state-partnership exchanges and 24 federally facilitated exchanges.
- Some states have changed their exchange models over the years. For 2021, there were changes in Pennsylvania, New Jersey, Virginia, and Maine.
The term “health insurance exchange” (also known as a “health insurance marketplace”) has become part of the mainstream conversation about health insurance and healthcare reform over the last several years. The Affordable Care Act (ACA), enacted in March 2010, called for the creation of an exchange in each state, but the practical implementation of those exchanges varies considerably from one state to another.
As a result, questions about what the exchanges are, what they offer, and how they work, are still widespread. And as with most aspects of the ACA, health insurance marketplaces became yet another battleground in the political fight over the ACA.
Twenty-seven states joined a federal lawsuit in 2010/2011 trying to overturn the ACA, but in 2012 the Supreme Court upheld all but one of the challenged provisions. (The ruling in that case allowed ACA implementation to move forward, but made Medicaid expansion optional for each state, effectively creating the Medicaid coverage gap that still exists in 13 states. (The coverage gaps in Missouri and Oklahoma will close by mid-2021, as both states will expand Medicaid as a result of voter-approved ballot initiatives.)
Although the Supreme Court ruled that the bulk of Obamacare was constitutional, many states continued to resist the ACA by refusing to act on health insurance marketplaces. And some states simply felt that creating their own exchanges would be too costly or administratively burdensome, and opted to leave the heavy lifting to the federal government, despite their overall support for the ACA. There have also been technical issues over the last few years that have caused some states to adjust their exchange model for logistical – rather than political – reasons.
In the early years of ACA implementation, there were a few states that switched from having their own enrollment platforms to using HealthCare.gov. But we’re now seeing a trend in the other direction, with several states opting to leave HealthCare.gov and establish their own health insurance exchange platforms. Nevada transitioned to a fully state-run marketplace as of the fall of 2019; New Jersey and Pennsylvania followed suit as of the fall of 2020. New Mexico and Kentucky plan to have fully state-run exchanges by the fall of 2021, for the 2022 plan year. Virginia plans to have a fully state-run exchange in place by the fall of 2022, and Maine is also working towards a fully state-run exchange.
And despite GOP efforts to unravel the ACA, and uncertainty surrounding the fate of the law under Texas v. U.S./Azar (California v. Texas), the law remains mostly intact as of early 2021. The Tax Cuts and Jobs Act, enacted in December 2017, repealed the ACA’s individual mandate penalty as of January 2019, but with the exception of some taxes and a few programs that never really got off the ground (IPAB, CLASS Act, etc.) the rest of the ACA, including premium subsidies and cost-sharing reductions (CSR), remains unchanged. Federal funding is no longer provided for CSR, but that has simply resulted in larger premium subsidies in most states, as insurers have added the cost of CSR to silver plan premiums; CSR benefits remain fully available to eligible enrollees.
Nationwide COVID-related enrollment opportunity in 2021
To address the ongoing COVID pandemic, the Biden administration has opened a one-time special enrollment period on HealthCare.gov (used in 36 states). The other 14 states and DC have also opted to offer similar enrollment windows, allowing uninsured residents another opportunity to sign up for 2021 health coverage (in most states, including those that use HealthCare.gov, the COVID-related enrollment window is also an opportunity for people who already have marketplace coverage to switch to a different plan if they choose to do so).
A qualifying event is not necessary in order to enroll in a health plan during the COVID-related enrollment window. In most states, it continues through May 15, 2021, and coverage will take effect the first of the month following enrollment.
The impact of states’ regulatory actions on health insurance marketplaces
Although GOP lawmakers and the Trump Administration were unsuccessful in their efforts to repeal the ACA, there are ongoing threats to the stability of the individual health insurance markets. This includes the Texas v. U.S./Azar (California v. Texas) lawsuit (a Supreme Court ruling on that case is expected in the spring of 2021; oral arguments were heard in November 2020), but it also includes the elimination of the individual mandate penalty in 2019, the expansion of short-term plans, and the reduced federal funding for enrollment assistance and exchange marketing under the Trump administration.
Although premium increases were modest for 2019 and essentially flat for 2020, average rates would have decreased nationwide in 2019 if not for the aforementioned factors that drove premiums higher. And enrollment in the exchanges nationwide ended up about 2.6 percent lower in 2019 than it had been in 2018, with another slight reduction (0.3 percent) from 2019 to 2020. If we look at effectuated enrollment, however, it was higher in early 2020 than it had been in early 2019.
Several states are implementing or considering various actions designed to stabilize their insurance markets, while others are taking actions that could lead to further instability in the ACA-compliant markets (with a focus on making coverage for healthy people less expensive, at the expense of the ACA-compliant market). You can click on a state in the map above to see more details, but here’s an overview of the changes states have made or are considering:
The ACA included a temporary reinsurance program that lasted through the end of 2016, but numerous states — 14 as of 2021 — are creating their own reinsurance programs in order to stabilize their individual insurance markets. Reinsurance just means that a separate entity (ie, the reinsurance program) covers a portion of the risk that the insurance companies would otherwise have to cover. That results in smaller premiums, which means more people (who don’t get premium subsidies) are able to afford coverage.
Alaska, Oregon, Minnesota, Wisconsin, Maine, Maryland, and New Jersey had all implemented reinsurance programs by 2019. North Dakota, Montana, Delaware, Colorado, and Rhode Island joined them in 2020. Pennsylvania and New Hamshire joined them as of 2021.
States are using 1332 waivers to secure federal “pass-through” funding to cover a large portion of the cost of their reinsurance programs. Because premiums are lower with the reinsurance program in place, premium subsidies are also smaller. The 1332 waiver allows the state to keep the savings and use the money to fund the reinsurance program, instead of having the federal government keep the savings.
Depending on how the program is designed, reinsurance kicks in when enrollees have certain high-cost conditions, or when a claim reaches a certain dollar amount ($50,000 is a common level, but it varies considerably from one state to another), and then the reinsurance program covers a portion of the claim until another threshold is reached (typically in the range of $250,000 to $1 million; the more of the claim the reinsurance program covers, the more it will reduce premiums).
Reinsurance tends to have bipartisan support and is proving itself as a means of lowering premiums and stabilizing the individual market. But lawmakers in several states have been unable to come to a consensus on reinsurance legislation, generally because of disagreements over how the state’s portion of the cost should be funded (federal pass-through funding is covering the majority of the cost in most states that have implemented reinsurance programs, but the states still have some financial responsibility).
For example, reinsurance bills have failed in Connecticut, Hawaii, Missouri, Washington, Wyoming, and Louisiana. Louisiana officials had already posted a draft 1332 waiver proposal for public comment during the 2018 legislative session, but because the legislation failed, it wasn’t submitted to CMS. Oklahoma and Iowa both submitted reinsurance waivers to CMS in 2017, but later withdrew them when it became apparent that they wouldn’t be approved in time to affect 2018 premiums (Iowa’s waiver proposal included reinsurance, but was also much more complex). Oklahoma enacted legislation in 2018 that allowed the state to seek a 1332 waiver for reinsurance, but the state has not pursued the waiver as of 2019.
The ACA’s individual mandate penalty was eliminated after the end of 2018. People who are uninsured in 2019 and beyond are no longer subject to a federal penalty when they file their taxes. That’s welcome news for people who would otherwise have to pay the penalty, but it is one of the factors that drove premiums higher in the individual market (an average of 10 percent higher, according to the CBO), and will continue to result in higher premiums in future years, making coverage less affordable for people who don’t qualify for premium subsidies. So some states have considered or implemented their own individual mandates:
- Massachusetts (mandate has been in effect since 2006).
- District of Columbia (mandate effective as of January 2019).
- New Jersey (mandate effective as of January 2019).
- Rhode Island (mandate effective as of January 2020)
- California (mandate effective as of January 2020)
- Vermont (legislation enacted; mandate took effect in 2020 but without a penalty for non-compliance)
Hawaii and Connecticut have considered legislation to create state-based individual mandates, but the bills did not pass. Maryland also considered mandate legislation, but amended it to create a less punitive approach.
Open enrollment schedule
One of the reasons nationwide enrollment was lower in 2018 than it had been in prior years was the shorter enrollment period that was implemented in the fall of 2017. States that use HealthCare.gov have no way to change their open enrollment dates — their enrollment window runs from November 1 to December 15 (although that can be changed by the federal government, and the Biden administration may opt to do so for the enrollment window that starts in the fall of 2021).
But fully state-run exchanges have some flexibility on their enrollment schedules.
There are twelve other states with fully state-run exchanges, and nearly all of them extended open enrollment for 2021 coverage — including Pennsylvania and New Jersey, both of which had just transitioned to having their own exchange platforms in the fall of 2020, and thus had their first opportunity to offer a longer enrollment window.
Allowing non-compliant plans to be sold (by decreeing that they are not insurance and thus not subject to insurance regulations)
Some states have worked to expand access to non-ACA-compliant health plans. The idea is that these plans will provide a cheaper alternative for healthy people who can’t afford ACA-compliant coverage. But this can end up being short-sighted and perpetuating a vicious cycle: When healthy people can leave the ACA-compliant market and purchase sub-par insurance, the ACA-compliant market is left with a sicker risk pool, leading to more rate increases and less stability in the market.
Tennessee has allowed non-ACA-compliant Farm Bureau plans to be sold from the beginning, to the detriment of the ACA-compliant market in the state. Iowa enacted legislation in April 2018 to allow similar Farm Bureau plans to be sold in Iowa as well (they became available for purchase as of November 2018, with coverage effective January 2019). Kansas did the same thing, with non-compliant plans available for purchase as of the fall of 2019, and Indiana followed suit with Farm Bureau plans available as of late 2020. In all four states, the state doesn’t consider these plans to be insurance, so they aren’t regulated under insurance laws — despite the fact that people are certainly using them as insurance and purchasing them in place of ACA-compliant coverage. And South Dakota may soon join them.
Idaho issued regulations allowing non-compliant plans to be sold in 2018, but CMS stepped in to prevent Idaho’s proposal from taking effect. Instead, Idaho opted to allow for the creation of “enhanced” short-term plans, which are viewed by some as an alternative to ACA-compliant coverage in the state, despite the fact that they can impose pre-existing condition waiting periods.
When it comes to non-ACA-compliant plans, states have also taken a variety of different approaches to short-term health insurance plans. Some states allow them to be sold in line with the flexible rules that the Trump administration implemented, while other states regulate them much more strictly — and some states simply don’t allow them at all. Click on a state on this map to see how short-term health insurance is regulated.
States’ options for health insurance marketplace structure
Initially, there were only two options from which states could pick: A state could run its own exchange (state-based exchange, or SBE) or it could opt to have the federal government run the exchange (federally-facilitate exchange, or FFE). Note that these are sometimes called SBM and FFM — marketplace instead of exchange: SBE and SBM mean the same thing; FFE and FFM mean the same thing.
Then in the summer of 2011, HHS added a state partnership exchange model as a variation of the federally-run exchange. In a partnership exchange, enrollment is conducted through Healthcare.gov, and the state uses the federal call center, but the state can retain functions like outreach and education, as well as oversight of participating plans.
In early 2013, HHS also allowed for a marketplace plan management exchange, which is another variation of the federally-run exchange. States utilizing this option are generally categorized together with the states that have left the entire process to the federal government, but they retain plan management functions, which includes certification of plans that are sold in the exchange, as well as monitoring and regulatory control over the plans that are sold (similar regulatory processes were already undertaken by insurance commissioners in many states prior to the implementation of the ACA).
In June 2013, HHS also outlined provisions for a state to operate a bifurcated exchange, with the state running the small business (SHOP) exchange, and the federal government running the individual exchange. Initially, only Utah took this approach, but Mississippi started running its own SHOP exchange in May 2014, and Arkansas began running its own SHOP exchange in November 2015. But all three states eventually switched to the federally-run SHOP exchange (and the federally-run SHOP exchange is now conducted directly via insurers and brokers, instead of using an exchange-style platform).
For states that want to run their own exchange but also rely on the economies of scale and technological success of Healthcare.gov, another option is a supported state-based exchange, which is considered a variation of the state-run exchange model. In a supported exchange, the state is in charge of its own exchange, but enrollment is done through the Healthcare.gov platform (the current terminology used by HHS to describe these exchanges is “state-based exchange on the federal platform,” or SBE-FP).
This option was created once it became obvious that Idaho and New Mexico — both of which had received conditional approval to run their own exchanges — wouldn’t have their own enrollment platforms ready to go by October 2013. And the SBE-FP model has subsequently been adopted by states that struggled to efficiently run their own enrollment platforms. Starting in 2017, HHS began charging a fee (initially 1.5 percent of premiums, increasing to 2 percent in 2018 and 3 percent in 2019, but dropping to 2.5 percent in 2020 and staying at 2.5 percent in 2021) for SBE-FPs’ use of HealthCare.gov. Prior to 2017, state-run exchanges that used HealthCare.gov did not have to pay for the enrollment platform service.
How states approached the health insurance marketplace decision
Early adopters – A handful of states jumped into exchange planning shortly after the ACA passed. California was the first state to pass legislation authorizing an exchange – doing so in September 2010. Colorado, Connecticut, Hawaii, Maryland, Oregon, Vermont, and Washington all authorized state-run exchanges in 2011. Massachusetts and Utah were operating exchanges prior to ACA, and both began moving ahead on changes needed to comply with ACA requirements (Utah ultimately ended up with a federally-run exchange for individuals, but kept their state-run exchange for small businesses until 2018, when the state opted to defer to the federal small business exchange as well).
In general, it was blue states that moved quickly to establish state-run exchanges in time for the first open enrollment period that began in October 2013, and many of the early adopters had Democratic governors.
Pragmatists – A number of states took a pragmatic approach. Despite the uncertainty about the ACA in general and exchange requirements in particular, the pragmatists did enough work to keep their options open.
In some cases, legislatures failed to authorize exchanges, yet federal grants were accepted and spent as executive branches authorized significant planning work to proceed. Minnesota is a good example. While the Republican-controlled legislature failed to authorize an exchange in 2011 or 2012, Democratic Gov. Mark Dayton’s administration made quiet, extensive progress on an exchange.
Dayton used an executive order to appoint a task force that began working in October 2011, and Minnesota was awarded about $75 million in federal grants. In November 2012, Minnesota submitted a letter of intent and blueprint for a state-run exchange. The November elections returned both the House and the Senate to Democrats, who passed exchange legislation in March 2013, and MNsure was operational when open enrollment began in the fall of 2013 (albeit with considerable technical problems, as was the case for many exchanges).
Some states remained opposed to the ACA, but took the position that if the state must have a health insurance exchange, it would better for the state — as opposed to the federal government — to have control over it. Idaho is an example. Republican former Gov. Butch Otter was on record opposing the ACA. However, shortly after the Supreme Court upheld most ACA provisions in 2012, Otter established workgroups to consider a state-run exchange and expansion of the Medicaid program. Otter announced in December 2012 that Idaho would run its own exchange, although the state used the federal enrollment platform in 2014 and didn’t launch its own enrollment platform until the second open enrollment period.
Passive resisters – A few Republican-controlled states took the approach opposite to that of Idaho: they were opposed to the ACA and did little or nothing to establish an exchange. States in this category include Pennsylvania, South Dakota and Wyoming. All three eventually opted for federally run exchanges.
Active resisters – A number of states – mostly led by Republican governors adamantly opposed to the ACA – said early and often that they would not implement state-run health insurance exchanges. Alaska, Florida, Louisiana, South Carolina, and Texas are all examples.
Alaska and Louisiana have since elected Democratic Governors who have expanded Medicaid, but with HealthCare.gov running smoothly and efficiently by mid-2014, and with the significant financial costs involved, there was no longer much incentive for states to establish their own exchanges. Indeed, Medicaid expansion is a much more important aspect of state-based ACA implementation at this point, since HealthCare.gov provides the same private plan options and subsidies that enrollees would have under a state-run exchange, while states’ continued rejection of federal funding for Medicaid expansion means that 2.2 million people have no realistic access to coverage.
The active resister states turned down and returned federal grant money for exchange planning. Some have passed laws and constitutional amendments banning a state-run exchange. Oklahoma fought bitterly against the ACA in the court system, with former Attorney General Scott Pruitt arguing (unsuccessfully) that the employer mandate and the ACA’s premium subsidies are both prohibited in states — like Oklahoma — that have a federally-run exchange.
States’ evolving exchange platforms, and the current tally
For 2014, 16 states and Washington D.C. opted for state-run health insurance exchanges, seven states established state-federal partnerships, and 27 states opted for the federal exchange. Although most states are still following the same model they used in 2014, there have been a few changes in the ensuing three years. See what type of exchange your state currently has.
By November 2015, two years after the exchanges launched, four state-run exchanges were functioning as SBE-FPs: New Mexico (which has used the federal platform from the beginning), Nevada and Oregon (both of which made the transition for 2015), and Hawaii (switched to the federal enrollment platform for 2016).
New Mexico had intended to use the supported model for 2014 only, but in early 2015, the exchange board decided that temporarily continuing to use HealthCare.gov’s enrollment platform was in the exchange’s best interest. But New Mexico is working to build its own enrollment platform and plans to transition to a fully state-run exchange by the fall of 2021, for coverage effective in 2022.
Nevada and Oregon both struggled with serious technological problems in 2014, and HealthCare.gov allowed their enrollment and re-enrollment process to go much more smoothly in 2015. Hawaii maintained their own exchange enrollment platform in 2014 and 2015, but ultimately opted to become an SBE-FP due to funding problems. So for 2016, there were only 13 states that ran all aspects of their own exchanges. But Idaho — which had a supported state-based exchange model in 2014 — was among them, and has been running its own enrollment platform since the second open enrollment began in the fall of 2014.
For 2017, there were some additional changes that took effect when open enrollment began on November 1, 2016:
- Arkansas became an SBE-FP, after having a partnership exchange for the individual market during the first three years of exchange enrollment.
- Kentucky became an SBE-FP, after three years of running a successful exchange that was fully state-based. Kentucky elected a new governor who took office in early 2016, and he campaigned on an anti-Obamacare platform. After taking office, Governor Bevin took steps to roll back ACA implementation in the state, including the switch to using the HealthCare.gov enrollment platform. [Bevin lost his reelection bid in 2019; new Governor Andy Beshear may be open to the idea of reviving the fully state-run exchange.]
- Hawaii switched to a fully federally-run exchange, although the state has retained some plan management functions. For 2014 and 2015, Hawaii had a state-run exchange. For 2016, they had an SBE-FP. But as of 2017, they have a fully federally-run exchange.
In 2017, there were six partnership exchanges and 28 federally-run exchanges. Among the states that have a federally-run exchange, eight had marketplace plan management exchanges: Hawaii, Kansas, Maine, Montana, Nebraska, Ohio, South Dakota, and Virginia.
But there were some additional changes heading into 2020:
- Nevada has a fully state-run exchange, after having an SBE-FP since 2015.
- New Jersey has an SBE-FP, after having a federally-run marketplace since 2014.
- Pennsylvania has transitioned from a federally-run exchange to an SBE-FP.
And there were more changes for 2021:
- Pennsylvania opened a fully state-run exchange, called Pennie (residents no longer use HealthCare.gov).
- New Jersey opened a fully state-run exchange at GetCoveredNJ (residents no longer use HealthCare.gov).
- Virginia has an SBE-FP (residents continue to use HealthCare.gov for enrollment).
- Maine notified CMS that they planned to transition the state to an SBM-FP by the fall of 2020 (and possibly to a fully state-run exchange by the fall of 2021), although they were still awaiting federal approval for this as of late September 2020.
Oregon is considering the possibility of switching back to a state-run exchange in a future year, and Virginia plans to do so by the fall of 2022. New Mexico plans to have its own exchange platform up and running by the fall of 2021.
King v. Burwell: Some states considered SBEs before subsidies were ruled valid in every state
For the first half of 2015, there was significant concern about the King v. Burwell lawsuit among states with federally-run exchanges and partnership exchanges. The lawsuit hinged on the argument that the ACA only allows for subsidies to be provided by exchanges “established by the state.” Since subsidies are a cornerstone of every state’s exchange, the prospect of losing those subsidies was alarming; several states considered the possibility of building their own exchanges if subsidies were to be eliminated. But on June 25, 2015, the Supreme Court ruled 6 – 3 that subsidies are legal in every state, regardless of whether the state or federal government runs the exchange.
Arkansas, Pennsylvania, and Delaware had received conditional approval from HHS to create state-run exchanges in the lead-up to the King v. Burwell ruling. Pennsylvania and Delaware dropped those plans once the Supreme Court ruled that subsidies could continue to be provided via the federally-run exchange. But Arkansas moved forward with their plan to operate an SBE-FP, implementing it in time for the 2017 coverage year.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.