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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

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 were 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 official ACA-created health insurance exchange. Enrollment data for off-exchange plans is not tracked as closely as exchange enrollment data, but an analysis by Mark Farrah Associates estimated in July 2017 that off-exchange enrollment stood at about 5.4 million people.

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.

If your off-exchange plan is ending, you have a special enrollment period

Loss of minimum essential coverage is a qualifying event that triggers a special enrollment period. For each of the last few years, there have been some insurers that exit the individual market (on or off-exchange, or both), while others join — it’s been a market in flux as insurers adjust to the ACA. At the end of 2017, there are at least 19 insurers exiting various exchanges around the country, and most of them are also exiting some or all of the off-exchange market.

If you’re in an on-exchange plan and your insurer is exiting the market in your area, the exchange likely will map you to a similar plan from a different insurer if you didn’t select your own new plan during open enrollment (note that Maryland’s exchange is not doing this). This prevents you from being uninsured as of January 1, although you still have a special enrollment period during which you can pick your own replacement plan.

But if you have off-exchange coverage and your insurer will no longer offer plans in your area in 2018, it’s essential that you pick your own new plan before the end of the year. If you don’t, you’ll be uninsured as of January 1, as there’s no entity available to automatically enroll you in a replacement plan.

In most states, open enrollment for 2017 coverage ended on December 15, 2017 (although there are lots of exceptions to that). But if your health plan is being discontinued at the end of 2017, you have a special enrollment period that continues until March 1, 2018. And if you sign up for a new plan by December 31, it will take effect January 1. If you wait until after the end of December to enroll, however, you’ll have a gap in coverage before your new plan takes effect.

On-exchange vs. off-exchange

The consumer protections under Obamacare apply to all individual major medical 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 (for 2018, this rule has been tightened up, requiring QHP issuers to offer at least one Gold plan and one Silver plan in each area where they offer exchange coverage; they will not be allowed, for instance, to offer a Silver plan and a Gold plan in limited areas within a state, and then offer only Bronze plans in other areas of the state)

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. The same open enrollment dates apply outside the exchange, and most of the special enrollment period rules also apply to plans purchased outside the exchange.

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. In October 2016, HHS estimated that there were 2.5 million people with off-exchange coverage who would be eligible for subsidies if they switched to the exchange instead. Some of those people might be aware of the subsidies in the exchange but may have opted for off-exchange plans for reasons other than cost. But it’s also likely that a good number of those folks aren’t aware of how much less they could be paying in premiums if they switched to the exchange.

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 renew your off-exchange plan, or 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 (a qualifying event would allow you to switch plans, but a change in income is not a qualifying event if you’re not already enrolled in the exchange).

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.

“Proxy Direct Enrollment” is on-exchange enrollment

Starting with enrollment for 2018, HHS has established a “proxy direct enrollment pathway” that allows third parties (ie, online insurance brokerages) to guide consumers through the HealthCare.gov enrollment process via the third party website, without having to go back and forth to HealthCare.gov during the enrollment. The new process is an enhancement of the current direct enrollment pathway, and Tim Jost describes it here in more detail.

If you’re working with a web broker who uses the proxy direct enrollment pathway, you’ll need to first create your own account on HealthCare.gov; your web broker cannot do that on your behalf. But then you’ll be able to complete the enrollment process on your web broker’s site, including the eligibility determination for premium subsidies and cost-sharing subsidies.

This type of enrollment is still considered “on-exchange” as the information you provide on the web broker’s site will be transmitted to HealthCare.gov (the system that HHS has created is only applicable to the states that use HealthCare.gov; state-run exchanges that use their own enrollment platforms would have to establish their own direct enrollment pathways if they wished to do so). 

If you’re working with a web broker and you’re not sure how your enrollment is being processed, ask questions. If you’re not creating an account with the exchange and being asked if you want to determine your eligibility for premium subsidies, you’re likely enrolling off-exchange. But if you’re creating a HealthCare.gov account and going through the premium subsidy eligibility determination process, your web broker is likely using the proxy direct enrollment pathway for 2018, and your enrollment will be on-exchange.

So using a broker does not mean that you’re going off-exchange. Brokers can assist you with the process of enrolling directly via the exchange, or they can help you complete your exchange enrollment (in a HealthCare.gov state) using the proxy direct enrollment pathway. If you call one of healthinsurance.org’s partners at 1-855-367-0132, you’ll be connected with a licensed, exchange-certified broker who can enroll you in an ACA-compliant plan, on or off-exchange — the choice is yours. 

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.

For 2018, pricing is different from prior years in most states, because the majority of insurers have added the cost of cost-sharing reductions (CSR) to their premiums. In most cases, the cost has been added to silver plan premiums, and many states allowed insurers to only add the cost to on-exchange silver plan premiums. In general, that involved making slight changes to the off-exchange versions of the plans so that they could be offered with lower premiums (that don’t include the cost of CSR) — California was the first state to roll out this protocol, and numerous states and insurers ultimately followed suit. But it’s also possible that a plan with no discernable differences might be available on and off-exchange in your area with different prices, due to the CSR load being added to on-exchange plans.

If you’re not eligible for premium subsidies and you want a silver plan, an off-exchange version might be a better option for 2018. Comparison shopping is more important than ever, and comparison shopping for people not eligible for premium subsidies should include both on and off-exchange plans.

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 on- and off-exchange. For 2018 coverage, the open enrollment window ended on December 15, 2017 in most states, but special enrollment periods and extension apply for millions of consumers. After those end, however, people will only be able to apply for coverage — including outside the exchange in all states but Nevada — if they 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.

Plans that aren’t major medical coverage are not regulated by the ACA

Since some types of coverage are not regulated under the ACA, a caveat is necessary here.

All major medical health insurance plans with effective dates of January 1, 2014 or later are required to be ACA-compliant. This is true whether they’re sold in the exchange or off-exchange.

But there are a variety of coverage types that are not regulated by the ACA. They include limited-benefit plans, short-term coverage, discount plans, accident supplements, and critical illness plans.

These plans are sold outside the exchanges, but they’re not what we’re talking about when we say “off-exchange plans.” They are not what people think of as “real” health insurance, and they do not conform to the regulations laid out in the ACA. In general (with the exception of short-term health insurance to bridge a short gap in coverage), they’re not designed to serve as stand-alone coverage. And in most cases, relying solely on them for your health coverage will leave you not only sorely underinsured, but also facing a penalty when you file your taxes.