Know your health insurance exchanges

The differences between ACA's public health insurance exchange, the small-business (SHOP) exchange, and private exchanges

The ACA-created health insurance exchanges will be up and running in days, and while anticipation is running high, so is confusion. If you’ve been paying attention to health reform news over the last few years, you’ve no doubt heard about the health insurance exchanges. You’ve probably also heard about the Small Business Health Options (SHOP) exchange, and might have heard about “private exchanges” too. What does it all mean?

‘Public’ health insurance exchanges

The ACA included a provision for every state to have a public health insurance exchange. Each state has an exchange (although only 17 states are running their own exchanges – most of the exchanges will be run by HHS or a partnership between the state and HHS).

These exchanges will be a marketplace for both individual and small-group health insurance. Although they are called public exchanges, their health plans are offered by private health insurance carriers, including many of the big-name carriers that you’ve known about for years.

For individual health insurance coverage, people will be able to shop within their state’s exchange and choose from a variety of qualified health plans. The exchanges will be the place where applicants can compare plans, enroll in coverage, and receive premium and cost-sharing subsidies if they are eligible.

SHOP exchanges for small businesses

Small business owners will also be using the exchanges, via the SHOP portal.  The SHOP exchanges are part of “the exchange” in each state. This will just be a separate page on the same exchange web site (except in Utah and possibly Mississippi, where HHS will operate the individual exchange and the state will operate the SHOP exchange).

For 2014, small businesses with up to 50 employees will be able to use the SHOP exchanges to select a plan and receive tax credits to help cover premiums if they are eligible. (They must have fewer than 25 employees earning an average salary of less than $50,000 each.)  As of 2016, businesses with up 1o 100 FTE employees will be able to use SHOP exchanges.

Starting in 2014, the small business health insurance tax credits will only be available via the SHOP exchanges. These credits have already been available since 2010, but once the SHOP exchanges open, employers who qualify to get the credits must obtain their health plan via their state’s SHOP exchange.

In almost all cases, the states that are running their own individual exchanges are also running their own SHOP exchanges.  In states where HHS is running the individual exchange, it’s also running the SHOP exchange (state-by-state info available here).

Starting in 2015, the SHOP exchanges will be enhanced to allow employers to select several health insurance carriers and designate a defined contribution that they will pay towards their employees’ coverage.  Then the employees will be able to use the SHOP portal to choose their own coverage from among the choices available.

Private exchanges not part of the ACA

Private exchanges are not new and are not part of the ACA. They are what brokers, insurance companies and benefits consultants have been operating for years. Web sites that offer consumers a range of health insurance options, facilitate enrollment and initial premium payment, and provide customer support along the way are private exchanges. They can operate in the individual market or the group market, and will continue to do so after the public exchanges open for business.

In most states, the operators of private exchanges will be allowed to receive training and certification so that they may facilitate enrollment in coverage offered through the public exchanges. (You may still be able to use the broker you’ve always used, even if you’re getting subsidized health insurance through your state’s exchange.)

The public exchanges will offer coverage for individuals and small businesses, eventually providing policy options for employers with up to 100 employees. But there are no public exchanges for large employers, so private exchanges run by brokers and benefit coordinators will continue to be their best option.

Be aware that each state only has one public exchange (with the aforementioned exception of Utah and Mississippi). Individuals and small businesses who qualify for tax credits to help pay premiums need to make sure that they’re either dealing directly with their state’s exchange, or working with a broker who is certified by the exchange and can help them enroll in an exchange plan. No ACA subsidies are available outside of the public exchanges.

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