The Affordable Care Act calls for the creation of new private insurance markets called exchanges. These markets provide individuals and small businesses with a special marketplace where they can shop for coverage. Furthermore, subsidies exist to help people afford coverage on exchanges.
Exchanges will make comparing plans easier by providing side-by-side comparisons of benefits and costs. Under the Affordable Care Act (ACA), exchanges must select which health plans should participate as well as determine eligibility for public programs or premium tax credits in cooperation with state Medicaid and children’s agencies.
1. To make health insurance more affordable
The Affordable Care Act’s (ACA) insurance exchanges provide millions of enrollees with policies tailored to their incomes and needs, certified to ensure they meet minimum standards, and evaluated using an established methodology from Health and Human Services that compares relative actuarial values across plans.
Key challenges lie in making these plans affordable and accessible to individuals without employer coverage. One solution involves creating collaboration strategies between exchanges and safety net providers such as community health centers or public health clinics; another strategy would be ensuring enrollment and benefit designs promote stability of coverage as millions are expected to move between exchange and private insurance sources frequently – known as “churn.”
At its core, the Affordable Care Act grants states considerable flexibility in two key policy areas-how an exchange should select qualifying plans and how it should avoid adverse selection, which could cause spiraling costs and premiums (Jost 2014a). A number of critical issues related to exchange governance will depend on its interaction with state regulation of private insurers and Medicaid operations–this may include whether there will be adverse selection or not (Jost 2014b).
2. To create a competitive private health insurance market
Exchanges aim to make the individual market for health insurance easier to navigate by enabling consumers to quickly compare plans side-by-side and facilitate enrollment into private health plans as well as determine eligibility for public programs such as Medicaid or CHIP as well as federal premium tax subsidies based on household income.
However, the law grants states considerable latitude in creating and operating exchanges. They must decide how selective they will be when choosing which health plans qualify, how to avoid adverse selection (the enrollment of higher risk individuals who result in rising costs and prices), as well as which rules and requirements will apply both inside and outside their exchanges.
International Medical Exchange (IMX), founded in Louisville, Kentucky during the mid-1980s and operating out of Louisville for many years thereafter, pioneered health care exchange services by creating both an electronic marketplace and claims administration system that were modelled after standard stock exchange and banking industry back office systems. Their products were widely utilized by numerous large employers and benefit companies alike.
3. To make health insurance more accessible
Exchanges are designed to make markets for individual and small-business health insurance simpler for consumers to navigate, providing side-by-side comparisons of coverage options and prices, simplify enrollment in participating health plans, and determine eligibility for public programs or federal premium subsidies based on household income eligibility criteria.
The Affordable Care Act prohibits discrimination on the basis of pre-existing conditions. Prior to its implementation, many people with such conditions were denied coverage or overcharged for it; now due to these protections offered by the ACA more Americans – particularly women, LGBTQ individuals, and people of color have gained greater access.
But the Affordable Care Act has also increased costs for millions by mandating most individuals purchase insurance through exchanges and limiting employer-sponsored plans, requiring families to find coverage through exchanges more difficult and raising penalties for individual coverage for 7.5 million Americans who paid penalties in 2014. (Mazur 2015) These increases in cost are anticipated to continue into the future.
4. To make health insurance more affordable for small businesses
While the Affordable Care Act gives states considerable leeway when creating and operating exchanges, a few key decisions will ultimately determine whether these institutions can effectively control healthcare costs for individual consumers. According to the ACA, Exchanges must certify plans meet minimum cost- and quality-standards; implement procedures for enrolling or disenrolling individuals; establish procedures for customer service calls center operations; have relationships with employers as well as policies to determine eligibility for tax credits; as well as have relationships between themselves and employers for customer support and tax credit eligibility determination procedures.
States face competing interests and limited time when making these decisions, which is often why federal planning funds and working groups are sought out to evaluate options. Others take a less direct approach and rely on private and public consultants for advice about setting up exchanges; and still others choose to partner with existing brokers or private companies that are developing technology for health-insurance marketplaces.
