Ever since the ACA was signed into law in 2010, “exchange” has been a buzz word in health care reform. But there’s still plenty of confusion over what they are, how they’ll work, who’s running them and who will be using them.
The CBO estimates that over the next decade, 24 million Americans – a small fraction of the 316 million people in the United States – will obtain health insurance through the exchanges. A large majority of the country will continue to get their health insurance from employer-sponsored plans, Medicare and Medicaid.
The exchanges were designed to serve people who buy individual health insurance and people who are currently uninsured. They will also be a place where small businesses can shop for plans, but from an individual consumer perspective, the only people who will be shopping in the exchanges are those who do not have coverage from an employer or a government plan.
Exchanges will operate in all states – some will be run by state governments, some by the federal government, and others will be a partnership between the two. But for consumers, the enrollment process will be relatively uniform from one state to another.
Because of the high volume of enrollees expected, the exchanges will have a six-month initial open enrollment window, from October 1, 2013 to March 31, 2014. Going forward, the open enrollment window will be shorter, from October 15th until December 7th each year (for 2015 plans, open enrollment has been changed to November 15, 2014 through January 15, 2015). People will also be able to enroll outside of the standard window if they experience a qualifying event (birth, adoption, marriage, divorce or loss of other coverage).
Nobody is required to purchase health insurance via the exchanges. However, for people who qualify for premium subsidies, policies must be purchased via an exchange in order to get the subsidy. For those who do not qualify for subsidies, there will also be plans available outside of the exchanges, all of which will still have to comply with ACA requirements but may include additional carriers and plan designs.
To enroll in a plan through the exchange, you can contact your state’s exchange directly or you may utilize a broker approved by your state’s exchange. Applications will be available online starting October 1, 2013 and policy effective dates will begin January 1, 2014 (you must enroll by December 23, 2013 in order to get a January 1, 2014 effective date). The exchange will function as a marketplace and a conduit for subsidies, but coverage will be obtained from a private carrier, likely one that you already recognize from the existing health insurance market.
Enrollment in an exchange plan will include questions about income, household size and access to employer-sponsored health insurance to determine eligibility for a premium subsidy. If you do not qualify for a subsidy, you can continue the enrollment process in the exchange, or you can choose to shop outside of the exchange. If you do qualify for a subsidy, you may select any plan in your state’s exchange and apply your subsidy to the premium.
You can opt to receive your subsidy as a standard tax credit when you file your taxes the following year (which would mean that you’d be paying the full premiums to your health insurance carrier each month), but most people who qualify for a subsidy will likely find it easier to have the subsidy paid directly to the health insurance carrier in order to reduce the premiums that must be paid each month.
It’s important to be as accurate as possible when completing the income portion of the application, as subsidies will be reported to the IRS by the exchanges. If your income changes and the subsidy was overpaid (or underpaid), you’ll reconcile with the IRS when you file your taxes.
Regardless of whether you get your policy via an exchange, your health insurance carrier will send you and the IRS a tax form each year (starting in 2015) to document that you had coverage during the previous year (similar to the W-2s, 1099s, 1098s, etc. that are mailed out by employers and banks each January). If you receive a subsidy, you and the IRS will also receive a tax form from the exchange with your subsidy information. You’ll report data from both forms when you file your taxes.
Overall the exchanges are likely to make it easier for people to purchase individual health insurance, and since almost half of the population that currently buys individual health insurance will qualify for a subsidy, the exchanges will also be financially valuable to a lot of people.