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A Closer Look at Health Insurance Exchanges

The Affordable Care Act (ACA) calls for the creation of state public health insurance exchanges by 2014, with the first open enrollment date set for October 1, 2013. These insurance marketplaces are designed to help qualified individuals and small businesses shop for health insurance plans, options, and benefits. Similar to the way travel and shopping websites allow consumers to compare a service or product before purchasing, an exchange will present consumers with many choices related to their health insurance coverage, all in one online marketplace.  
There is still much to be determined about how insurance exchanges will be structured. For example, some exchanges will use a state-run model, while others will use a state-federal partnership model or a federal model. The following FAQs help answer questions about health insurance exchanges and their current development. We will continue to update providers about exchanges and their impact on our day-to-day business with providers as we receive additional guidance from the United States Department of Health and Human Services (HHS) and as exchange marketplaces develop. 
Frequently Asked Questions – Exchanges 
Q: What are health insurance exchanges? 
A: Exchanges are a new marketplace where qualified individuals and small businesses can buy qualified health plans (QHPs).  
Q: What is the purpose of health insurance exchanges? 
A: The primary purpose of health insurance exchanges is to create a more organized and easy-to-compare market for health insurance by offering a choice of plans, establishing common rules about the plans and price of health insurance, and providing information to help consumers better understand the options available to them. 
Q: When must health insurance exchanges be established? 
A: Exchanges must be operational by January 1, 2014, with open enrollment beginning on October 1, 2013.  
Q: Who will operate health insurance exchanges?  
A: Each state will be responsible for creating and running its own exchange. However, if a state chooses not to create one, HHS will run the exchange.  
Q: What functions will health insurance exchanges offer to consumers shopping for a plan? 
A: There are 5 functions that health insurance exchanges offer: 
Consumer assistance – Staff will manage the exchange website and call centers. “Navigators” will help consumers use the exchanges.
Plan management – Consumers will be able to choose QHPs sold on exchanges and see important data for each QHP.
Eligibility – Applicant information is collected and verified to determine eligibility.
Enrollment – Staff help consumers enroll and send information to health plans as well as transmit information related to premium tax credits and cost-sharing reductions.
Financial management – Exchanges will perform several financial functions including handling user fees, risk adjustment, reinsurance and risk corridor programs.
Q: Will health insurance exchanges replace buying private health insurance in the traditional market? 
A: No. The health insurance exchanges are simply a new place to shop and buy health insurance plans.  
Q: How will health insurance exchanges be set up? 
A: States can choose to set up exchanges in one of three ways: 
State-run facilitator model – any health insurance company that meets the minimum state and federal requirements can be in this exchange.
State-run active purchaser model – the state solicits bids from health insurance companies and negotiates the prices as well as the benefits that will be offered on the exchange.
Federally-run model –HHS will run the exchanges in states that choose not to create one.
Q: When will health insurance exchanges start enrolling individuals and small group employers in plans? 
A: It is planned that exchanges will start open enrollment on October 1, 2013 with coverage effective dates beginning January 1, 2014. 
Q: What benefits will be included in the health plans on exchanges? 
A: All plans offered on the health insurance exchange must be considered a Qualified Health Plan (QHP) and include “essential health benefits” (EHBs) as defined by the ACA (or health care reform law). We anticipate additional guidance on EHBs to be released by HHS soon. Plans must include items and services from at least 10 of the following categories of care: 
Ambulatory patient services
Emergency services
Maternity and newborn care
Mental health and substance use disorder services, including behavioral health treatment
Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care
Q: Will the plans offer different levels of coverage to choose from? 
A: Yes. Exchange plans will be offered in a tiered format. The tiers are named after metals, and are based on actuarial value:  
Bronze – 60% coverage
Silver – 70% coverage
Gold – 80% coverage
Platinum – 90% coverage
Each level may have several plans to choose from and will include essential health benefits. Bronze plans will have the lowest monthly premium, but member cost share will be more when health care services are rendered. Platinum plans will have the highest monthly premium, but member cost share will be less when services are rendered.  
Q: What is the “Individual Mandate” and how does it relate to health insurance exchanges? 
A: The individual mandate requires that starting in 2014 all legal U.S. citizens have a minimum amount of health coverage through some type of plan. The exchanges give individuals another place where they can buy coverage in addition to getting it through an employer plan or the traditional market. 
Q: Is there a penalty for individuals that don’t maintain health coverage starting in 2014? 
A: Yes. Individuals that do not maintain health coverage will pay a penalty, unless they qualify for an individual exemption. 
The penalty amount will start at the greater of $95 or 1% of taxable income, and increase over the years with annual adjustments through 2017 and beyond. 
Q: What kind of help will be available to individuals so they are able to purchase plans on the health insurance exchanges? 
A: Subsidies and credits will be available to individuals and families if their income is between 133% and 400% of the federal poverty level –$14, 856 to $44,680 for individuals and $30,656 to $92,200 for families, as of 2012. They must also not have access to minimum essential coverage through their employer or the coverage being offered is not affordable. It is deemed not affordable if their share of the premium is more than 9.5% percent of their income. 
Credits may be applied to any exchange plan, from the bronze plan (which pays about 60% of covered costs) to the platinum plan (which pays about 90% of covered costs). 
Cost-sharing subsidies are available for individuals enrolling in the silver plan (70% coverage) only. Cost-sharing subsidies raise the actuarial value of the plan by lowering out-of-pocket maximums. These subsidies will only be available for those who earn up to 250% of the federal poverty level. 
Disclaimer- This content is provided solely for informational purposes: it is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisors.  
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