What Is a Health Insurance Exchange?

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Comparison shopping for health insurance is just like comparison shopping for other things, only you do it on a health insurance exchange rather than in a brick-and-mortar store. Image © Noel Hendrickson/GettyImages

Definition

A health insurance exchange, otherwise known as a health insurance Marketplace, is a comparison-shopping area for health insurance. Private health insurance companies list their health plans with the exchange, and people comparison shop on the exchange from among the available health plan listings.

The phrase health insurance exchange most commonly refers to public health insurance exchanges developed by the government because of the Affordable Care Act, although private health insurance exchanges do exist. Private health insurance exchanges are usually designed to serve several large employers, so most people will only encounter them when signing up for job-based health insurance. This article focuses on the ACA's public health insurance exchanges.

Public health insurance exchanges are used to buy standardized individual and family health insurance plans known as Obamacare. Small group plans are also available in the public exchanges, although virtually all of the enrollment has been individual market coverage. 

Although the word Marketplace invokes the mental image of a physical place where shoppers wander from stall to stall checking out the vendors' wares, most people access health insurance exchanges via the internet. The largest health insurance exchange, HealthCare.gov, is run by the federal government, serving health insurance shoppers in 39 states. The other 11 states and the District of Columbia each run their own exchanges.

How Many People Have Coverage Through the ACA's Exchanges?

By December 23, 2017, enrollment in 2018 coverage through the exchanges stood at roughly 11.5 million people. By that point open enrollment had ended in most states, but several of the state-run exchanges had extended open enrollment into January, so the numbers were not yet final. 

As of March 2017, effectuated enrollment in the exchanges stood at 10.3 million people. Effectuated enrollment is always lower than the number of people who sign up during open enrollment, as there are invariably some people who don't pay their initial premiums or who cancel their coverage shortly after enrolling.

Small businesses can enroll in plans through the exchanges, but there are fewer than 200,000 people enrolled in small business exchange plans nationwide—the vast majority of the ACA exchange enrollees have coverage in the individual market. 

How Health Insurance Exchanges Work

Exchanges are designed to increase competition and ease comparison shopping. Insurance companies compete for your business using the Marketplace. This direct competition is meant to keep the cost of health insurance premiums down. Marketplaces ease the comparison of plans by using an "apples to apples" approach:

  • All health insurance policies offered through the exchanges provide a minimum set of essential health benefits.
  • All health insurance policies offered must conform to one of four benefit tiers: bronze, silver, gold, and platinum.
  • Standardized plans are available in the exchanges in most states. In California's exchange, all of the plan are standardized.

A policy’s benefit tier describes the percentage of covered healthcare expenses the plan will pay, otherwise known as the actuarial value (AV) of the plan. You can learn more about how these benefit tiers work in, " Bronze, Silver, Gold, and Platinum—Understanding the Metal-tier System."

Exchanges provide subsidies to help pay for health insurance. Health insurance exchanges are the only access point for government subsidies (premium tax credits) that make health insurance more affordable for Americans with modest incomes. You can apply for a government health insurance subsidy through your health insurance exchange, and the subsidy is only good for health insurance bought on the health insurance exchange. Learn more about health insurance subsidies in, "Can I Get Help Paying for Health Insurance?"

In addition to premium subsidies, cost-sharing subsidies (also known as cost-sharing reductions) are also only available through the exchanges. If your income makes you eligible for cost-sharing subsidies and/or premium subsidies, you'll want to enroll through the exchanges (as opposed to enrolling directly through an insurance company) in order to take advantage of the available assistance.

Exchanges issue exemption certificates. Even if you don't want to buy health insurance, you may end up having contact with your health insurance exchange since some health insurance exemption certificates are only issued through health insurance exchanges (some are issued by the IRS instead). If you don't have health insurance, but you want to avoid the tax penalty for being uninsured, you'll need an exemption certificate. Find out if you're eligible for an exemption from the mandate to buy health insurance in "Can I Get a Health Insurance Exemption??"

Finding Your Health Insurance Exchange

Your state may run its own health insurance exchange such as the one run by California, Covered California. Or, your state may have opted not to create a health insurance exchange, or to create an exchange but use the federal enrollment platform. In that case, residents use the federal government's exchange at HealthCare.gov.  Find out how to contact the health insurance exchange in your state, or whether residents of your state use the federal government's exchange.

Enrollment in the exchange (and outside the exchange, for individual market coverage) is limited to annual open enrollment windows and special enrollment periods triggered by qualifying events. Open enrollment for 2019 coverage will being November 1, 2018 in every state. 

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