Cleaveland: Explaining insurance exchanges

Cleaveland: Explaining insurance exchanges

January 10th, 2013 by By Dr. Clif Cleaveland in Life Entertainment

Dr. Clif Cleaveland

Dr. Clif Cleaveland

Signed into law in 2010, the Accountable Care Act ("Obamacare") continues to unfold. All provisions of the act will be in effect by 2018.

State-based health insurance exchanges represent the next major change under the ACA. Exchanges must be operational by January 2014.

The Federal Employee Health Benefit Plan, in operation for more than 40 years, serves as one model for the exchanges. Other exchanges already in existence across the country have offered coverage to coalitions of small businesses, union members and state employees, so the concept has been extensively tested.

An exchange serves as a clearinghouse for information on different plans, allowing consumers to make comparisons of costs and coverage more easily. An exchange also functions as a supervised marketplace for health insurance purchases by persons not covered by group insurance plans.

Under the ACA, an exchange will offer four levels of coverage: a basic plan which must cover at least 10 essential services and three plans (bronze, silver, gold) with varying coverage, options, co-payments and deductibles.

Individuals and small businesses with 100 or fewer employees will be able to purchase health insurance through their state's exchange.

Seventeen states, including Kentucky and Mississippi, and the District of Columbia met a December 2012 deadline to design and to establish their own exchanges. Six states plan to participate in a joint state-federal partnership with the option of assuming full control of the exchange at a later date.

The remaining states -- including Tennessee, Alabama, and Georgia -- have deferred to the federal government for design and operation of the exchanges within their boundaries.

Within each state, the exchange may be operated by a semi-independent, governmental agency or a non-profit, independent organization. Each exchange will evaluate, certify and monitor insurance plans offered by companies. Approved health plans must present their products in concise, clear language. Plans must abide by identical rules. Plans will compete on price, efficiency and customer satisfaction.

Potential customers will access information on health plans within an exchange via the Internet or a toll-free telephone number. Individuals obtaining health coverage through an exchange will be eligible for assistance in paying premiums. A sliding scale of tax credits will extend up to 400 per cent of the federal poverty level. In 2012, the poverty level for an individual was $11,170 and was $23,050 for a family of four. Full premium support will be provided for individuals earning less than 150 per cent of poverty level.

While not replacing a state's Medicaid program, an exchange may administer Medicaid, making the transitions from public to private programs smoother.

The Massachusetts Health Plan, launched in 2006 under the governorship of former GOP presidential nominee Mitt Romney, represents a statewide effort to provide health insurance coverage for almost all citizens of the state. An individual mandate to obtain health insurance is included in the law. To date, 98 percent of all adults and almost all children in the state have health insurance coverage.

In Massachusetts, the insurance exchange component is called the Health Connector. A board appointed by the governor and the attorney general oversees the operation of the connector.

Initially, the Connector served individuals shopping for standardized health plans which were offered by private companies. In 2008, though, small businesses employing up to 50 workers were permitted to purchase health insurance through the Connector. Further amendments to the law permit the Connector to offer coverage for dental, visual and catastrophic illness and injury.

Federal regulations for exchanges are quite daunting, so states may be pardoned for opting out of designing their own, unique programs. I believe the best option for a state is participation in a federal-state partnership so the state can gradually assume responsibility for operation once the exchange is functioning.

In any scenario, exchanges will provide consumers with clear and readily accessible information for selecting health insurance plans in a structured market.

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