Understanding the Health Insurance Exchange

Posted in Health Care , Health Insurance

July 15th, 2010

There have been a number of changes resulting from health care reform. One immediate change has been extending adult children’s health insurance coverage under a parent’s policy until their 26th birthday. Another major change is that no one can being turned down for health insurance due to pre-existing conditions.

One of the changes that actually helps uninsured acquire coverage is making its way from state to state: the health insurance exchange. To get a better understanding of how it could affect you, let’s take a closer look at what it is.

What is a Health Insurance Exchange?

Health insurance exchanges are places where consumers can go to compare various policy options and select the one that is best for them. These exchanges are meant to lower insurance costs for consumers who are self-employed or don’t have coverage available to them via an employer with discounts through group coverage. By pooling insurer plans together in a similar way, consumers will have access to group-like rates.

The federal government has given states the option of establishing their own state-run health insurance exchange, or to go with a regional creation. Technically, the health insurance exchanges are not supposed to form until 2014, but many states have taken it upon themselves to start sooner.

What Types of Coverage Will Health Insurance Exchanges Offer?

The health insurance exchanges are expected to offer the same or similar types of coverage options as employers, meaning that you may have PPO, HMO or POS options to choose from. Depending on the plan you choose, you could have specific co-pays, deductibles or coinsurance options available as well. The idea of the exchange is to open up the number of affordable options for those who currently struggle to obtain coverage, but the options within each exchange are likely to be similar.

Who Will Qualify?

The exchanges will first be available to people who work for small businesses with fewer than 100 employees and don’t have access to coverage through the employer. For instance, if you work for a company that does not currently offer coverage, the exchange could help you find insurance at an affordable rate. Also, the exchanges will be available to those who are self-employed and don’t have access to group plans.

Those who work for larger companies will be given access to the exchanges. However, they will only qualify for coverage if their employer’s coverage doesn’t meet new standards for cost or comprehensiveness. Also, those who have been offered coverage through high-risk pools for pre-existing conditions will have access to coverage only six months after discontinuing their coverage with the pool.

Are There Any States Currently Offering Health Insurance Exchanges?

Currently, only Utah and Massachusetts run health insurance exchanges. Utah’s exchange is a website that consists mostly of links to various websites where consumers can acquire insurance information. However, Massachusetts’ site offers health insurance quotes right on the site to help consumers find affordable coverage.

West Virginia is another state that plans to participate in health insurance exchanges. While its exchange is not up and running, the insurance commissioner plans to have it ready for launch sometime in 2011. The reason the state was able to get an early start was because it received a $37 million federal grant to help implement health care reform during the next five years.

Health insurance exchanges are expected to lower the cost of health insurance across the board, making it more affordable for everyone. With the mandate that Americans will need to acquire some form of coverage by 2014, a cost reduction will indeed be the order of the day.