The success of the Affordable Care Act depends largely on how much of the nation’s uninsured population get access to affordable, quality health coverage. To ensure this, the law establishes so-called “insurance exchanges” that are slated to roll out in 2014. The concept is an important pillar of the law that will bring millions into the coverage fold. The deadline for states to decide whether they will manage their own insurance exchange is quickly approaching, and there is very little consensus among states.We asked APHA health policy analyst Vanessa Forsberg to explain some of the issues and challenges around the exchange and breakdown some of the complexities of the program for us.
The Affordable Care Act’s health insurance exchanges are meant to be virtual marketplaces where individuals and families can comparison shop for health coverage. There will also be Exchanges for small businesses will also be available. The concept is often compared to websites like Travelocity, where you can compare multiple options according to features and price, then make your purchase.
The exchanges will take effect beginning in 2014. In the interim, each state has to decide whether it will establish its own exchange, step back and let the federal government establish it, or form it in partnership with the federal government.
Individuals and families with incomes between 100 percent and 400 percent of the federal poverty level ($23,050-$92,200 for a family of four in 2012) will receive income-based subsidies to help them afford coverage in these new exchanges, and small businesses will also receive tax credits to help them afford coverage for their employees. By 2022, the Congressional Budget Office estimates that 25 million Americans will have coverage through the exchanges.
Why do we need the exchanges?
The exchanges will be important for those who don’t have employer-based coverage, and who don’t qualify for public programs like Medicaid. They will also be useful for small business owners seeking coverage options for their employees. Currently, the options aren’t very clear for these individuals, families and small businesses. Folks can buy their own coverage in the existing individual market, but it can be difficult to compare health insurance options and prices. Imagine shopping for a flight without using a site like Travelocity or Orbitz: you’d have to look up flight times and prices on each airline’s website, maybe create your own list or spreadsheet, and you wouldn’t even be sure if you were comparing everything out there, comparing truly similar products, and getting the best deal. That’s how the current health insurance market can be, for the 6 percent of Americans who bought their own coverage in 2012, and the 20 percent who remained uninsured.
So, the exchanges are meant to make it easier to compare and buy plans, and the subsidies will help make coverage more affordable. Plus, when insurance companies know that consumers can clearly compare their options, they have an incentive to compete, and offer better value. Not everyone in the U.S. will get their insurance through the exchanges. In 2012, more than half of U.S. consumers below age 65 received private insurance through their employers, and another 13 percent received coverage through “safety net” programs like Medicaid. These individuals will likely have very little, if any, interaction with the exchanges. However, when more of us are insured, all of us benefit.
What happens now?
Now that the election is over, the focus is on getting ready for 2014, when big provisions of the health reform law will go into effect, including the exchanges. Things will move fast: states have until December 14 to submit a letter of intention to the Department of Health and Human Services if they plan to establish their own exchanges. They also have to submit “blueprints” of their plans for creating those exchanges. Then, by January 1st, HHS will review their plans to provide approval or conditional approval.
If states want to establish state-federal partnership exchanges, they have until February 15th to submit their declaration letters and their blueprints. HHS should approve those plans by March 1st. If states don’t submit any letters or plans, or if HHS determines that states aren’t on track with their plans, HHS will step in and establish a federally-facilitated exchange.
One thing to note is that the exchanges really need to be put in place by October 2013 to prepare for the first open enrollment period, a time when the public can choose and purchase their plans ahead of January 1, 2014.
What challenges do the exchanges pose to states, the federal government?
The exchanges present great opportunities for increasing access and affordability of coverage. However, there are a number of challenges to overcome between now and October 2013. One being the scope of the federal government’s involvement in establishing exchanges. I think it’s safe to say that the vision was for most states to establish exchanges, but it’s not yet clear how many will do so, and how many the federal government will have to establish.
There are some other issues that may or may not be challenges in every state, but are certainly important considerations. It will be essential to closely align the exchanges with Medicaid, so that people who don’t know what they qualify for can apply through any door so to speak. Alignment is especially important for those whose incomes will “churn” back and forth between eligibility for Medicaid and for exchange subsidies. Another issue related to the application process is making sure there are numerous and equitable ways for anyone to learn about their options and get assistance, if needed.
How can people learn more about the exchanges and what’s happening in their states?
Great question. Here is a round-up of some useful resources:
- Information and resources on the exchanges are available on APHA’s website.
- Earlier this year, Trust for America’s Health created a memo on potential areas of involvement for public health stakeholders in the exchange establishment process.
- More information on the upcoming deadlines is available from HHS’s Center for Consumer Information and Insurance Oversight: process overview, process FAQs, and FAQs on federal funding available to help states establish exchanges.
- A number of organizations are tracking states’ decisions and progress toward creating exchanges, including the the National Conference of State Legislatures (NCSL), the National Academy for State Health Policy’s State Refor(u)m project, and Kaiser Family Foundation.
- This Health Affairs blog post by Timothy Jost gives an excellent overview of many of them, such as the urgent need by states and insurers for federal guidance on potential federal-state partnerships, essential health benefits, and other insurance reforms that will affect plans offered in the exchanges.