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What Exactly Is a Health Insurance Exchange?

We’ve talked a lot about Obamacare and how it will impact you. As we get closer to Oct. 1, 2013, you’ll start hearing a lot more about “exchanges” or “marketplaces.”

What Is An Exchange?

An exchange is an online marketplace where consumers will be able to compare health insurance plans and buy a plan that works for them.

What Kinds of Exchanges Can I Choose From?

Each state will have at least one government-run exchange and most likely several private exchanges that consumers will be able to choose from starting Oct. 1, 2013.

About Government-Run Exchanges

Eighteen states will have a state-based exchange, 7 states are planning for a Partnership Exchange (state and federal with partner to run the exchange), and 26 states will default to the Federal Exchange. See the full chart from Kaiser.

What Kinds of Healthcare Plans Can I Choose From?

Government-run exchanges will offer each of the following types of plans:

  1. Bronze (you pay 40%, plan pays 60%)

  2. Silver (you pay 30%, plan pays 70%)

  3. Gold (you pay 20%, plan pays 90%)

  4. Platinum (you pay 10%, plan pays 90%)

If you have low out-of-pocket costs, your premium will be higher, meaning the bronze plan has the least expensive premium, and platinum has the most expensive premium.

If you’d rather have a non-government plan, you can choose a private exchange, run by healthcare companies around the country. They will also offer several plan options ranging from 3-5 plan levels.

Your rates will be based only on age, location, family size, and smoking status. People with incomes between 138% and 400% of the Federal Poverty Level will be subsidized.

All plans, no matter where they are sold, must meet certain criteria, and must cover the 10 essential health benefits.

Why Do We Need Health Insurance Exchanges?

As part of the Affordable Care Act (Obamacare), all states are required to offer a health insurance exchange. It’s said that the health insurance exchange is estimated to provide up to 23 million people with affordable health insurance.

This is good news for uninsured Americans because starting in 2014, everyone (with a few exceptions) is required to have healthcare coverage, or pay a penalty.

How Does An Exchange Work?

The application process for private exchanges will work slightly differently, but all government exchanges will work the same.

There are still six months until the exchanges open, so this could change, but here’s what the government-run exchange application process looks like now:

  1. You will go online to the exchange website and answer a series of questions.

  2. The exchange website will connect to a Hub of various government sites to verify your date of birth, income, employment, and citizenship.

  3. The Hub connects to a rating engine that calculates quotes from each insurer on the Exchange.

  4. If you’re eligible for a subsidy, the Hub will calculate that and show you your net price.

Now, let’s look at Franny’s family as an example. She is looking for healthcare coverage for herself and her family.

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