Insurance Technology Featured Article

Health Insurance Exchanges: The Goal is to Simplify Health Insurance and Make it Affordable, but We'll Wait and See

January 28, 2013

Health insurance is one of the biggest disputes in American politics, and no matter what side of the issue you stand on, we all agree something has to be done.

We spend 17.6 percent of the GDP on healthcare, which comes out to around $8,233 per year for each citizen. That’s the highest healthcare expenditure of all the developed countries. At almost $3 trillion, it is an outrageous sum that has to be brought down to a manageable size so the average person and business can afford medical care without going bankrupt.

The health insurance exchange being implemented under the Obama healthcare reform is designed to make insurance affordable and easy to purchase. The plan will be rolled out in October 1, 2013, and with only 10 months to D-Day, the question is: Will the nearly 49 million uninsured Americans finally be able to get affordable health insurance, and how will it affect those who are currently insured?

The exchange is based on three different options, and while some states have made their decisions, others are still weighing all their options. This map shows each state and the choices they have made so far:

The State-Based Exchange plan leaves the exchange-related undertaking, which includes contracting the health plans, IT-related infrastructure and providing assistance and outreach to the consumer to the states.

The states have the option of using some federal services, and to date, 17 states and the District of Columbia have chosen to implement the state-based exchange.

The state-federal partnership exchange is designed for states that are not ready to implement the system on their own by the implementation date of January 1, 2014. With this partnership, the state may in the future move to a full state-based exchange once they have implemented the system with the assistance of the federal government.

Only six states – Arkansas, Delaware, Illinois, Michigan, North Carolina and Ohio – have opted for this option. Illinois has indicated it will move to the state-based exchange by 2015, and the governors of Michigan and Arkansas have also said they prefer the state option and they are moving toward that model.

The federal-exchange system will have The Department of Health and Human Services (HHS) operate the exchange. Currently, 17 states have chosen this model and have declared their desire to remain a federally-facilitated exchange.

The exchange is supposed to make the purchase of health insurance as easy as going on Priceline to book a hotel or rent a car. If you’ve purchased health insurance in the past, you know it’s not an easy task.

With this plan, whether the state, federal government or a partnership runs the exchange, the benefit is meant to be the same for the consumer.

Just like booking sites like Priceline, you will have many different options, and when you choose the private health insurance company of your choice, the federal government will help most people pay for the premium.

The program is based on how much you earn, so the more money you make, the less assistance you’ll receive from the government. The assistance is in the form of a tax credit which gets paid directly to the insurance company, so don’t expect a check.

You can find out how much you will have to pay using the Health Reform Subsidiary Calculator from the Kaiser Family Foundation (KFF).

There will be four levels of coverage starting with bronze at 60 percent coverage, silver at 70 percent, gold at 80 percent and platinum at 90 percent. Depending on which plan you choose, you will be responsible for paying the remainder out of your own pocket. That means someone with a platinum coverage will pay 10 percent out of pocket.

The beauty about this plan, though, is that insurers cannot turn away sick patients or charge them more based on those conditions and that alone should make everyone happy – but if you’re a smoker, for instance, insurers can penalize you.

This program is supposed to be implemented by January 1, 2014, and while we all appreciate the government’s optimism, we all know it is the government and there may be some growing pains before it starts working as it was intended.

It is also important to note this is still health insurance and you will still have to know your deductible, copayments, premiums and any of the regulations that apply to your earning bracket and other qualifications that will improve your insurance status.

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Edited by Braden Becker

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