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Do I have to enroll through an exchange?

No. You don’t have to buy your health coverage through an exchange, but if you don’t, you be may missing out on significant cost savings.

On-exchange vs. off-exchange plans:

One of the primary provisions of the Affordable Care Act was to overhaul the individual health insurance market. The law eliminated medical underwriting, gender-based premiums, and skimpy policies with exorbitant out-of-pocket exposure, and it’s narrowed the premium gap between younger and older insureds. Lifetime and annual benefit maximums have also been eliminated.

Buying a policy in the individual market is now a realistic option for a lot more people. And the health insurance exchanges in each state are the mechanism that makes it easy to compare policies, enroll in a plan and receive a subsidy (if you’re eligible).

But they’re not the only way to enroll. Although much of the media attention on individual health insurance has focused on the exchanges, individual health insurance policies are also available off-exchange and may be a good choice for some consumers.

An off-exchange plan is simply a health insurance policy that is purchased directly from the carrier or through an agent or broker, outside of the state health insurance exchange. In addition to the roughly 12.2 million people who enrolled in individual coverage through the exchanges for 2017, another 5.4 million enrolled in coverage outside the exchanges.

Off-exchange plans have identical protections.

The consumer protections in the ACA apply to all individual major medical policies, regardless of whether the coverage is sold in the exchange. In other words, if you want to get coverage outside of the exchange, you still have access to ACA-compliant health insurance policies.

In addition to the basic requirements to which all policies must now adhere in order to be deemed ACA-compliant, plans that are sold in the exchanges must also be certified as qualified health plans (QHPs).

QHP certification is granted by the exchanges, and can vary from one state to another. Exchanges can, in fact, set QHP requirements that exceed the basic guidelines of the ACA. (Pages 33-38 of this HHS brief explain why.) So although all of the major medical plans sold in the individual market have to meet ACA requirements, QHPs may need to comply with additional standards that vary from one state to another. QHP issuers in all states must offer at least one Gold plan and one Silver plan.

But that doesn’t mean QHPs can’t also be sold off-exchange. Some carriers are selling their certified QHPs both on and off-exchange, with all enrollees in the same pool for risk-sharing purposes). The single risk pool provision applies to all of an insurer’s ACA-compliant individual market coverage in a state, regardless of whether it’s sold on-exchange or off-exchange, or whether different plans are offered on and off-exchange; in Vermont and Massachusetts, the single-risk pool also includes the ACA-compliant small group market).

But individual major medical policies sold off-exchange don’t have to be certified as QHPs. They are still good quality plans, though, and fully-compliant with the individual market. The days of Swiss-cheese coverage are over, regardless of how policies are purchased. And off-exchange plans are guaranteed issue regardless of medical history, just like policies in the exchanges (a limited open enrollment period applies in the off-exchange market, just as it does in the exchange).

Protections only apply to ACA-compliant plans.

It’s important to understand however, that these consumer protections only apply to major medical health insurance plans. On or off-exchange, those plans (with effective dates of January 2014 or later) are all ACA-compliant. But there are other plans that are sold outside the exchange that are not major medical coverage, and are not a substitute for real health insurance.

This includes things like short-term health insurance, limited benefit plans, fixed indemnity plans, accident supplements, dental/vision coverage, and critical illness coverage. For the most part, these plans are designed to supplement real health insurance, and are absolutely not adequate as stand-alone coverage (with the exception of short-term coverage, if you only need to fill a gap of under three months between other plans). These plans are not considered minimum essential coverage, and having them does not fulfill the ACA’s individual mandate. They’re considered “excepted benefits” as they are not subject to the ACA’s regulations. When we refer to “off-exchange” coverage here, we’re talking about major medical health insurance, rather than excepted benefits.

Your best option if you qualify for subsidies

  • The exchange is the best option for people who qualify for premium subsidies and cost-sharing subsidies, as subsidies are only available for plans purchased in the exchanges.
  • If you begin the year with an income that isn’t subsidy eligible and then your income drops during the year to a level that would make you eligible for a subsidy, you would only be able to start getting a subsidy at that point if you were already enrolled in an exchange plan.
  • If you opt for an off-exchange plan during open enrollment, you won’t be able to switch to a subsidy-eligible exchange plan until the next open enrollment, regardless of any mid-year changes in your income.
  • If you have a qualifying event that triggers a special enrollment period, you’ll be able to switch to an exchange plan. But again, a change in income is not a qualifying event, unless you’re already enrolled in an exchange plan and the income change makes you newly eligible or newly ineligible for subsidies. And a few qualifying events only apply to people who are already enrolled in a plan through the exchange (ie, those folks would have an opportunity to switch to a different exchange plan, but people enrolled in off-exchange plans wouldn’t have any leeway to switch plans if they experience a qualifying event that only applies to people already enrolled in the exchange).

Pediatric dental: standard with off-exchange plans

Pediatric dental – one of the ACA’s essential health benefits – could also play a role in your decision. In most states, you can purchase coverage in the exchange that does not include pediatric dental, as long as the exchange offers stand-alone dental plans.

There are some exceptions: some states require pediatric dental to be embedded in all health plans; in some cases, carriers have simply opted to embed pediatric dental; and in some states, pediatric dental is sold as stand-alone coverage but cannot be waived – the specifics vary considerably from one state to another).

But off-exchange, you cannot avoid purchasing pediatric dental (although you should be able to get a zero-premium pediatric dental plan if you don’t have children). For some enrollees, this is a compelling reason to shop in the exchange.

The best plans? It depends on your state.

If the same policy is sold on and off-exchange, the price will be the same. Some carriers opt to sell identical plans both inside the exchange and outside the exchange. And some carriers are only offering plans outside the exchange, so you’ll need to shop off-exchange in order to see their plans.

But carriers can choose to offer different plan designs or networks for their on-exchange plans and their off-exchange plans. If a carrier is offering plans outside the exchange that are different from the plans they offer inside the exchange, the pricing will be different, too.

This pricing difference could prove to be a significant factor in 2018, as states and insurers have had to grapple with the uncertainty surrounding federal funding for cost-sharing reductions (CSR), and the Trump Administration’s last-minute decision to officially cut off CSR funding. The cost of providing CSR is being added to premiums in nearly every state, and the most common strategy is to add it to the price of silver plans, since CSR only applies to silver plans.

If the same silver plans are sold on and off-exchange, the extra premium would have to be spread across all of them. But some insurers are creating separate silver plans that they’re only selling off-exchange, and those don’t have to have the additional cost of CSR built into the premiums.

For people who don’t qualify for premium subsidies and who currently have an on-exchange silver plan, it will be worthwhile to also look at the available off-exchange silver plans during open enrollment (as well as the bronze and gold plans, both on and off-exchange), as they may end up providing a better value depending on the approach to CSR defunding that the state and insurer have taken.

In some states, the “best” coverage is off-exchange; in others, it’s on the exchange. In some states, the cheapest plan is off-exchange, and in others, it is on the exchange. There’s no one answer that applies everywhere in terms of whether it’s better to get an exchange plan or an off-exchange plan.

If you buy an off-exchange plan, you have options.

If you want to shop off-exchange, you can purchase a policy directly from a health insurance carrier, or from an agent or broker. Again, the price will be the same either way. Even if you know that you won’t qualify for subsidies in the exchange, you’ll want to consider exchange options as well as off-exchange plans to find the policy that best meets your needs — this is especially true if you have a silver plan, due to the uncertainty surrounding CSR funding, described above.

Brokers who are certified to sell exchange policies should be able to provide you with both on- and off-exchange options, all in one place. (You can call one of healthinsurance.org’s partners at 1-844-608-2739 to talk with a licensed, exchange-certified brokers who can enroll you in an ACA-compliant plan.)

Be aware that the open enrollment window for individual health insurance applies both on- and off-exchange, so either way, you’ll need to purchase a policy between November 1, 2017 and December 15, 2017. (Some state-based exchanges have extended the open enrollment period, but December 15 will be the final day to enroll in most states). Otherwise, you’ll have to wait until open enrollment begins again in November 2018, unless you have a qualifying event during the year.

In the District of Columbia, there are no off-exchange plans. All individual and small group plans in DC have to be purchased through DC Health Link. In 2014 and 2015, Vermont also mandated that all plans had to be purchased through Vermont Health Connect, but direct-to-carrier enrollment (ie, off-exchange enrollment) became available in Vermont in 2016.

Decisions, decisions

If you qualify for a subsidy, stick with the exchange. But if you don’t, take your time, compare all of the options, and then apply for the policy that makes the most sense for your situation. Disregard politically motivated advice from people who have a vested interest in directing you either onto the exchange or away from it.

The ACA has improved the quality of coverage in the individual market and has also expanded the options that are available for many people, thanks to guaranteed issue coverage and subsidies. Even though the exchanges are a heavily publicized part of the ACA, the improvements from the law extend to off-exchange plans as well. Consumers can feel confident regardless of which option they choose.