Public vs. Private Exchanges: What’s the Difference?
Health insurance is certainly a hot topic right now isn’t it? Rightly so; everyone must have coverage by March 31, 2014 to avoid a penalty. For those of you looking to get covered, you have several options – an employer, parent, broker, exchange, etc. If you’re looking to purchase your own health insurance on an exchange, you have a couple more options there, too.
An “exchange”, sometimes called a marketplace, is simply a website that allows you to shop for and compare health insurance plans for you and your family. There are two types of exchanges you, as an individual, can shop – public exchanges and private exchanges. In many ways, they are the same, but there are some key differences that you should be aware of.
Here are the 4 main things you need to know:
There are public and private exchanges.
Public exchanges can be run by either the state or federal government. The incentive for shopping on a public exchange is that you could qualify for a subsidy.
Private exchanges are run by private companies instead of by the government. You can shop for all different types of plans from different insurance companies. You can’t get a subsidy on a private exchange.
Recently, insurance companies like Cigna have set up their own “private exchange” which sells only their products. This isn’t a true exchange because it’s only selling their own company’s product.
Healthcare.gov is the most well-known example of a “public” exchange. Sometimes you’ll hear this called a health insurance marketplace – they’re the same thing. This website, launched Oct. 1, 2013, was built and is controlled by the federal government. It should be your starting point if you want to purchase insurance on a government-run exchange as opposed to a private exchange.
Two Types of Public Exchanges: State vs. Federal
Each of the fifty states had the option to set up their own exchange, partner with the federal government on an exchange, or not set up a state exchange at all. If your state chose not to set up their own exchange, you will use the federal one (healthcare.gov). If your state did set up its own exchange, like California for example, you will use the exchange for your state (www.coveredca.com). Both are run by the government, but one is run by the federal government as opposed to the state government.
These exchanges (both federal and state) were created as part of the Affordable Care Act. They allow consumers to shop for their own health insurance plans in a relatively easy way. These sites have had their fair share of glitches and controversies, but they’re trying to address many of those issues now.
Incentive to Shop Healthcare.gov
The Affordable Care Act not only seeks to make health insurance more broadly available, but also affordable. In an effort to do that, if you shop on a public exchange, you may qualify for a lower-cost premium (the amount you pay up front monthly to have coverage). This will be done through a subsidy.
Your qualification will be determined based on your family size and income level. Find out if you qualify. The government will verify your income to determine if you are eligible for a subsidy. If you think you may qualify for a subsidy, check healthcare.gov.
Maybe you’re not too fond of shopping on a government-run website for your health insurance and you won’t qualify for a subsidy. In that case, you would probably prefer what is called a private exchange. These are run by private companies and offer plans from the same brand-name companies as the federal exchanges. All plans on any exchange must provide certain levels of coverage and must cover the 10 essential health benefits. Some examples of private exchanges are esurance.com, gohealthinsurance.com, and myhealthcarequotes.com.*
Now, some insurance companies like Cigna, are creating their own private exchanges with only their own insurance products. If they’re only offering their own products, it’s not truly an exchange. You’re not really shopping around at that point; you’re only searching one company’s offering. It’s still an option to consider though.
Each type of health insurance exchange (public and private) provides access to health insurance coverage for individuals and families. Where you shop depends on your personal preference. If you think you may qualify for a subsidy, try Healthcare.gov first. Remember, you won’t be able to get a subsidy on a private exchange.
See a side-by-side comparison of the differences between public & private exchanges: