Should you look outside the ACA’s exchanges?

How your individual health coverage differs – and how it doesn't – when you shop for insurance outside Obamacare's marketplaces

  • By
  • contributor
  • August 15, 2016

One of the primary provisions of the ACA was to overhaul the individual health insurance market. The law did away with medical underwriting, gender-based premiums, and skimpy policies with exorbitant out-of-pocket exposure, and it narrowed the premium gap between younger and older insureds. Annual and lifetime benefit maximums have been eliminated for all essential health benefits.

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

But they’re not the only option. Although much of the media attention on individual health insurance is often focused on the exchanges, individual health insurance policies are also available off-exchange in every state (but not in the District of Columbia), and may be a good choice for some consumers.

An off-exchange plan is just a health insurance policy that is purchased directly from the carrier or through an agent or broker, outside of the state health insurance exchange. Enrollment data for off-exchange plans is not tracked as closely as exchange enrollment data, but the Congressional Budget Office expected 9 million people to enroll in off-exchange health insurance plans in 2016.

It’s important to note that off-exchange plans are not available in the District of Columbia. Regulators there determined that coverage would only be available through the exchange. In Vermont, off-exchange plans were not available in 2014 or 2015, but “full-cost individual direct enrollment” (ie, off-exchange) became available in Vermont in 2016.

On-exchange vs. off-exchange

The consumer protections under Obamacare apply to all individual policies, regardless of whether the coverage is sold in the exchange. In addition to the basic requirements to which all policies must now adhere, 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. The exchanges can set QHP requirements that exceed the basic guidelines of the ACA. (Pages 33-38 of this HHS brief are helpful in understanding this.)

Although all of the plans sold in the individual market – on or off the exchange – must meet the ACA’s requirements, QHPs can be required to comply with additional standards that vary from one state to another. QHPs in all states must offer at least one Gold plan, one Silver plan and one child-only plan.

QHPs can also be sold off-exchange. Some carriers are choosing to sell their certified QHPs both on and off exchange (with all enrollees in the same pool for risk-sharing purposes) – but policies sold off exchange do not have to be certified as QHPs.

They are still good quality plans though – 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.

To enroll … or not … in an ACA exchange

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.

It’s also important to note that 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.

But what if you don’t qualify for a subsidy (and are fairly certain that will continue to be the case all year), or would just prefer to skip the exchange? Whatever the reason, if you want to get coverage outside of the exchange, you still have access to ACA-qualified health insurance policies.

Plan design, pricing may differ

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. For those plans, the premium will not vary, regardless of whether it’s purchase on-exchange or off-exchange (of course, if you qualify for a subsidy, the after-subsidy price will be lower in the exchange).

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 – although all of the carrier’s enrollees will be in a single risk-pool.

Some carriers are only offering plans outside the exchange, so you’ll need to shop off-exchange in order to see their plans. 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 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 want to shop off-exchange, you can purchase a policy directly from a health insurance carrier, or from an agent or broker; 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.

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. Be aware that the open enrollment window for individual health insurance applies both both on- and off-exchange. For 2017 coverage, the open enrollment window runs from November 1, 2016 to January 31, 2017. After that, you’ll have to wait until 2018 to have coverage, unless you have a qualifying event.

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.