Chapter 6: The New Health Insurance Exchanges

One of the biggest changes you’ll see in the next few years is a new kind of forum, to be set up in every state, where you’ll be able to get health coverage more easily than you could in the past. They will be a series of virtual marketplaces that offer a collection of health plans. The plans will all be under new rules and grouped together into categories, so people and small businesses can compare and apply for the one that fits their needs.

You’ll deal with these exchanges mostly through their Web sites,which will let you compare health plans and apply online for the one you like best. Think of this as an Expedia for health care, and you’ll get the idea. But the exchanges will do more than just provide information. They’ll also set the rules for the health plans and put you into a larger “pool” of people so the cost of one illness doesn’t triple the price of your coverage. These exchanges are the centerpiece of the new law’s changes to private insurance, because the success of the reform’s many moving parts — covering people with little or no health insurance, getting businesses to cover their workers, and giving people the protections they need — depends on how well the exchanges work.

In the past, if you didn’t get your health insurance through the workplace or through a government program such as Medicare or Medicaid, you had just about no chance of getting good, stable health coverage. There were too many different kinds of health plans for individuals, lots of gaps in coverage, few rules, no good way to compare the plans and make an informed decision, and no way to spread your own health care costs among a broader group of people. Small businesses weren’t able to do very well for themselves, either, largely because they couldn’t spread their costs. Unless you were part of a large group, there wasn’t much hope of making health insurance work for you.

The answer, smart people decided over the years, was to create a place where people and small businesses could become part of a larger group — and where there could be tighter rules so the health insurance plans didn’t have as many ways to deny coverage to sick people. So the goals of the new health insurance exchanges are to give people a central place to shop for a health plan, set rules on what the plans have to cover and whom they have to accept, group all of the plans into a few standard categories based on how generous their coverage is, give everyone enough information so they can make an informed choice, and make it as easy as possible for people to apply.

There’s already a real-world example of this: the Massachusetts health exchange, called Health Connector. Created under the state’s 2006 health care reform law, it lets Massachusetts residents compare and apply for plans under set categories. They can get a gold, silver, or bronze plan, depending on how generous they want their coverage to be. There’s also a young adult category, which has the narrowest benefits and the lowest premiums. Health Connector also helps people find out if they might be exempt from the rule that all state residents must get health insurance.

When President Obama was putting his health care proposal together for his presidential campaign, his advisers studied the Massachusetts system as a model for how a health insurance exchange could work. They decided to build his proposal around an exchange that would do the same kinds of things for the rest of the country. And while Congress made changes to his proposal, the law still keeps the exchange as a central focus of the big reforms. By 2019, as many as twenty-nine million Americans could be getting their health insurance through an exchange, according to the Congressional Budget Office, which tries to predict the impact of the bills Congress passes.

It will take a while to set up the exchanges. They’re not supposed to begin until 2014, and that assumes the Department of Health and Human Services and the states can get all of the complicated preparation work done in time. There are still ways that people could get tripped up in shopping for health insurance, because the categories of health plans are broad enough that there can be a lot of important differences between the same kinds of plans. But if the exchanges work, they could make health insurance less of a nightmare than it was before.

Who’s Eligible

The exchanges are intended for small businesses and for people who don’t have another source of insurance. This means people who can’t get health insurance through the workplace, aren’t eligible for Medicare or Medicaid, aren’t federal employees (who get health coverage through the Federal Employees Health Benefi ts Program), and aren’t active military officers (who get coverage through TRICARE) or veterans (who get it through the Veterans Administration).

But there are exceptions. Remember that, as mentioned in Chapter 5, you can also go through the exchanges if the coverage offered by your employer is too expensive or doesn’t cover enough of the health care costs. If you would have to pay more than 9.5 percent of your annual income for your employer’s health coverage, or if the plan covers less than 60 percent of your costs, you can use your state’s exchange instead. And if your employer’s coverage would cost you between 8.0 and 9.8 percent of your annual income, you can get a tax-free voucher, worth the amount your employer would have paid toward your health insurance, and use it at the exchange instead.

Over time, the exchanges may become open to larger businesses as well. They’re meant for businesses with one hundred workers or fewer, but starting in 2017, states will be able to open them up to companies with more than one hundred workers. And, yes, members of Congress and their staff will now have to go through the exchanges to get health insurance. They got tired of all the questions about whether they’d be willing to join the same health plans they were creating for the public.

How the Exchanges Work

The exchanges will be run by the states, under guidelines set by the Department of Health and Human Services. They will act like marketplaces where people can compare health plans on a Web site or get help with their research by calling a toll- free number. You would sign up using a standard enrollment form, either online or on paper. And when you join an individual or small business health plan, the exchanges have to add you to an insurance “pool” with other people in the same plan. This would likely make your premiums a lot more stable than in the current system, where one bad illness for you or a family member can send your premiums shooting into the stratosphere.

The exchanges will have a large role in setting the rules of the road for health insurers. They will certify insurers to offer their coverage (and kick them out if they break the rules), rate the plans, describe the different plans in a standard format that makes it easy to compare them, and allow people to use an online calculator to figure out how much they’d actually pay for a plan if they got the subsidies. Exchanges will also be the place where people can apply for an exemption from the requirement to get health insurance if it would be too much of a burden for them.

The states are supposed to run their own exchanges, but if they refuse to set one up, the Department of Health and Human Services has the authority to do it for them. The new law also requires that the states set up special exchanges for small businesses, called the Small Business Health Options Program, or SHOP. They can be either separate or part of the same exchange everyone else uses. One word of warning: each exchange is supposed to be able to pay for itself starting in 2015, at which point it will be able to charge user fees.

The exchanges will not be the only way you will be able to get health insurance. Health insurance companies are allowed to offer plans outside the exchanges, and you will be able to look for coverage on your own if you want to. But the exchanges are likely to become the dominant place for most people to get their insurance, other than the workplace, since health insurance companies can get so much business by participating in them. And if you don’t get coverage through the workplace, you’re likely to find that your benefits and protections will be better — and your premiums will be more stable — if you get health insurance through an exchange rather than on your own.

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