What Are These Health Care Exchanges All About?

While many politicians in Congress continue to fight against ObamaCare and seek its removal, a key provision of the Affordable Care Act is already underway. A number of online marketplaces, or Health Care Exchanges, that allow patients to purchase health insurance coverage are being set up around the country on a state-by-state basis.  The exchange option for health insurance is not available to employees who choose to receive health care through their employer, those on Medicare or on Medicaid.  We will address the employer options and concerns in a future blog.

The new health care law requires all tax paying US citizens to have health insurance or pay a penalty.  Open enrollment begins on October 1, 2013, with coverage effective January 1, 2014. 
Individuals will be able to purchase insurance online through private companies who will compete for their business in a traditional marketplace. The Department of Health and Human Services (HHS) administers all the requirements for the exchanges and the health plans that can be sold on the exchange. This measure of quality control ensures that any plan bought on the exchange meets minimum requirements, further increasing consumer protection.

Individual states have the option to set up their own exchanges, partner with other states, or have the Federal Government build and run the exchange for them. According to the Commonwealth Fund, 18 states, as of July 2013, will implement their own health care exchanges; 8 states will use the Federal Government marketplace, but will manage the plan themselves, and 4 states will have state-federal partnerships, with the states conducting plan management and consumer assistance. The remaining states having federally facilitated marketplaces.  Here's a state-by-state map of who is doing what.   

http://www.commonwealthfund.org/Maps-and-Data/State-Exchange-Map.aspx#New%20York

Let's take a look at the basic components of these exchanges and how they might directly impact you.  

With all plans offered in the Exchanges, coverage cannot be denied because of a preexisting condition. In addition, the premiums for men and women cannot differ for the same benefit package. The essential benefits for all plans include: 

•      Ambulatory/outpatient care   
•      Emergency services
•      Hospitalization
•      Maternity and newborn care 
•      Mental health and substance use disorders 
•      Prescription drugs 
•      Rehabilitative services and durable medical equipment
•      Laboratory services 
•      Preventive and wellness services and chronic disease management 
•      Pediatric services

The benefit designs must conform to one of four tiers: Bronze, Silver, Gold and Platinum.  

These 4 plans will differ in costs and provider networks.

With the Bronze package, subscribers will pay more for their out of pocket costs than in the Platinum plan. In terms of deductibles, co-payments and other charges, the Bronze plan covers 60% of a patient's health costs, the Silver 70%, the Gold 80% and the Platinum 90%.  

Those with more limited and restrictive networks such as HMOs (Health Maintenance Organizations) will probably have lower premiums than those with less restrictive networks such as PPOs (Preferred Provider Organizations).

Depending on your income level, you may be eligible for financial subsidies toward purchasing health insurance. You qualify for this subsidy if your income is less than 400 percent of the federal poverty level, which is about $46,000 for an individual and $94,000 for a family of four in 2013. The subsidy represents the difference between the amount you're expected to contribute based on your income and the cost of the benchmark plan for someone your age in your state.   

For example, if your adjusted gross income is $70,650 for a family of four, you're expected to pay 9.5 percent of your income for the benchmark plan's premiums. According to Families USA if your family's premiums for the benchmark plan are $12,500, you'd be expected to pay $6,711 of the premium, and would get a tax credit worth about $5,790. The subsidy remains the same regardless of the level of plan you buy (Bronze, Silver etc).  Note, you can only get the subsidy if you purchase insurance through the exchange and not through your employer. The subsidy is sent directly to your insurance company and applied to your premium.  The Baltimore Sun explains how the subsidies work in more detail.

http://www.baltimoresun.com/health/sc-health-0814-affordable-health-care-subsidy-20130814,0,4053938.story?track=rss

The premium costs will vary from state to state, and within the various benefits tiers. Anna Wilde Mathews of the Wall Street Journal summarized the diverse range of premiums for a healthy non-smoker 40 year old male in various states.  

"The least-expensive plan available to a 40-year-old nonsmoker in Richmond, Va., will be $193. 

In Ohio, carriers whose filings are available are proposing monthly premiums starting at $211 for a  40-year-old nonsmoker living in Columbus for a plan that covers 60% of costs. 

In Atlanta, Georgia, the least-expensive bid for such a plan is $212. 

In Olympia, Wash., a carrier has proposed charging $220.

In Hartford, Conn. early filings show such a plan could start at $242. 

....In Washington, D.C., the cheapest premium for a 40-year-old nonsmoker’s plan covering 60% of costs is $166, and...... in Nashville, Tenn., a plan is set to be available for $149 a month."

http://blogs.wsj.com/corporate-intelligence/2013/07/14/how-will-health-insurance-exchanges-work/

The differing state to state premiums above seem to be inconsistent with the notion of a Federal program requiring a set of minimum benefits.  Should there be consistent premiums throughout all states? Apparently not. In part, the state options may very well have been a political compromise.  One of the goals of the program that affects all states is to encourage competition amongst insurers in the free market economy. Contrary to many people's belief that the Affordable Care Act is socialized medicine; it is anything but that. This is not a single payor system.  It is like the Part D Medicare program - a Federal program with minimum benefits administered by private insurance companies. There are some variations and differences, but the Affordable Care Act is set up to encourage competition, which hopefully will ultimately be reflected in lower premiums. Premiums will continue to vary from state to state simply because the demographics vary in each state, and premiums are generally based on the expected utilization of the groups to be enrolled. 

While it is the intent of the exchanges to encourage more competition, we will not fully know the answer until after January 1, 2014.  And whether or not this change in the marketplace translates to more affordable insurance premiums and cheaper health care is something that will take some time to see.  Regardless, change is desperately needed in the health insurance industry. For now, The Affordable Care Act is a step in the right direction. 

Stay Positive. Stay Informed. Stay Healthy.
- The Patient's Advocate