The “Insurance Exchanges” are a key feature of the Affordable Care Act (a/k/a Obamacare). Exchanges will enable consumers to compare comprehensive health insurance coverage options from several different carriers. Consumers whose household income falls below a certain amount will also quality for sliding-scale subsidies that should make those comprehensive products more affordable than they would otherwise be.
The hope of the law’s architects is that the Exchanges will provide a user-friendly way for consumers to compare comprehensive insurance choices:
- Multiple health insurers will offer standardized plans on the Exchanges, enabling consumers to make “apples to apples” comparisons.
- All plans will offer “essential health benefits” (see below)
- Those insurers offering insurance on the Exchanges will be, in theory, competing against each other – and completion can often bring prices down.
Obamacare provided Governors and state legislatures with several options on how to construct their state’s exchange: they could build a “state-based” exchange on their own, they could let the federal government build it for them, or they could adopt a “hybrid” approach and partner with the federal government on design and construction. When the dust settled, only 18 states opted to build their own state-based exchange. Seven opted for a “hybrid” partnership exchange with federal government. That left the federal government responsible for operating the Exchanges in 26 states.
The Federal Exchange (now re-named the “Marketplace”) and the State Exchanges are scheduled to begin enrollment on October 1, 2013. That’s when consumers can contact the Exchanges and find out about the insurance options and potential subsidies available to them. You will no doubt hear a lot of advertising from the government about these Exchanges, which will be having “open enrollment” from October 2013 until March 2014. For the most part, you will be limited to buying Exchange products during these open enrollment periods (in other words, the Exchanges will NOT be taking applications year-round).
The Exchanges will sell comprehensive “Major Medical” health insurance, but not “first dollar” indemnity products or temporary coverage. Each insurance company offering products on the Exchanges will break down their products into four tiers: Platinum, Gold, Silver and Bronze. Platinum-level coverage will have higher monthly premiums but lower co-pays and deductibles for consumers, whereas Bronze-level coverage will cost less per month, but with higher co-pays and deductibles. The Silver and Gold levels will fall somewhere in between.
These products will carry a price tag that is expected to be as high as, or higher than, current rates for comprehensive insurance. Why? In large part it is because of several mandates within Obamacare that, despite the best intentions, have the potential to increase insurance costs:
- Guaranteed Issue: Insurers will not be permitted to refuse coverage to those with a pre-existing health issue, such as a chronic condition like diabetes.
- Price variations: Insurers will be prohibited from charging older customers more than three times what they charge younger customers. Many experts believe this could dramatically increase insurance costs for young, healthy consumers.
- All plans will be required to carry “Essential Health Benefits” mandated by the government. This includes coverage for ambulatory care, emergency care, hospitalization, maternity and newborn care, mental health and substance abuse, prescription drugs, rehabilitative services and devices, lab services, wellness services (including chronic disease management), and pediatric services.
- Lifetime and annual limits on health coverage are eliminated.
- Various taxes and fees, including fees to help cover the costs of operating the Exchange.
With the understanding that insurance offered through the Exchanges will be comprehensive but expensive, it is important to stress that many Americans will also be able to apply for a subsidy that will presumably make that coverage more affordable.
How those subsidies work, and who will qualify for them, is a topic that will be addressed in a upcoming articles. But to give you a sense of whether you might qualify for a subsidy, you need to know your household income and whether or not that income is at or below 400% of the Federal Poverty Level (FPL). Below 400% FPL qualifies for a subsidy, while above 400% FPL means that you are responsible for the full cost of the insurance you buy on the Exchange.
Here are the 2012 Federal Poverty Levels for the 48 continental states and DC (Alaska and Hawaii have their own slightly higher numbers):
| # of people in family | 100% FPL | 400% FPL |
| 1 | $11,170 | $44,680 |
| 2 | $15,130 | $60,250 |
| 3 | $19,090 | $76,360 |
| 4 | $23,050 | $92,200 |
So, by way of example, 400% of the FPL for an individual is $44,680 – meaning a single person earning less than that amount would qualify for a sliding-scaled subsidy. On the other hand, a single person making $48,000 would not qualify for a subsidy.
Likewise, 400% of the FPL for a married couple is $92,200 – so a family of four with household income below that amount would qualify for a subsidy. A family of four with household income of $96,000 would not.
Sounds easy, right? Well, not so fast. Keep in mind these are SLIDING SCALE subsidies, which means that people close to 400% FPL receive very modest (that is, small) subsidies, while people closer to 100% FPL receive the most generous subsidies.
In future postings, we will take a more detailed look at how these subsidies might affect individuals and families with different incomes. We’ll also try to give you a better understanding of how the process for applying for Exchange subsidies might work.
