What Is a Health Insurance Exchange?

For the newest installment in my “What is…?” series, I’d like to explore what a health insurance exchange is. Health insurance exchanges, a.k.a. health insurance marketplaces, have been in the news as of late because a couple of programs enacted to help Americans get through the COVID pandemic, the American Rescue Plan Act (ARPA) of 2021 and the Families First Coronavirus Response Act (FFCRA), stand a good chance of expiring toward the end of this year. Since these programs made Patient Protection and Affordable Care Act (ACA) plans more affordable to a wider range of people, their expiration means that fewer people may be able to maintain their insurance payments in 2023.

But I’m getting ahead of myself. What are health insurance exchanges, what do they have to do with the ACA/ARPA/FFCRA, and what can someone at risk of losing their insurance do to make sure they maintain continuity of coverage?

To get a better sense of how these programs work (and will hopefully continue to work into the foreseeable future), and their connection to the ACA and health insurance exchanges, it might help to fill in some of the backstory on the ACA itself. In turn, this should help shed light on the important functions health insurance exchanges serve.

The Affordable Care Act: A (Very) Brief History

Don’t worry, this isn’t a deep dive into how health insurance works in the U.S. That would be like taking a guided tour of a rabbit hole built during the Byzantine Era, and I’m frankly more interested in discussing what folks can do to help maintain a smooth transition between types of coverage. 

So in short I’ll say that the ACA – otherwise known as Obamacare – was signed into law on March 23rd, 2010 with an aim to cover more Americans with health insurance. It also had the goals of expanding Medicaid coverage, improving healthcare quality, encouraging innovation to reduce costs, and putting guardrails on what the insurance industry could and couldn’t do. Although the ACA does a variety of things, it’s perhaps best known for outlawing the practice of insurers denying coverage to people with preexisting conditions.

An article in Health Affairs recounts how preexisting conditions used to be handled in stark detail: before the ACA was passed, says the author, “millions with preexisting conditions faced significant barriers in accessing individual market coverage. Health insurers in the individual market in nearly all states could refuse to issue a policy, charge higher premiums, and exclude coverage for specific illnesses and the body parts and systems they affect.”

Because of this, millions of people were left uninsured or underinsured.

By 2014, however, insurers could no longer raise premiums for “infants or children due to a preexisting health condition or disability.” In addition, adults previously denied coverage because of this type of condition, along with those who’d had a break in insurance for six months or longer, could now get insurance. Another important result of the law was that prenatal care and births became identified as preexisting conditions, and therefore had to be covered. Although the preexisting condition component of the ACA was challenged in 2018 and the case ultimately made its way to the Supreme Court, the ACA was upheld by the Court and remains the law of the land to this day.

Health Insurance Exchanges

Now that we’ve got a firmer understanding of what the ACA is, let’s delve into health insurance exchanges. According to healthcare.gov, exchanges (a.k.a. health insurance marketplaces) is “a service available in every state that helps individuals, families, and small businesses shop for and enroll in affordable medical insurance.” The ACA established the marketplace as a platform for extending coverage to uninsured Americans, and the first open enrollment period lasted from October 1st, 2013 until March 31st, 2014.

Before exchanges existed, it had become obvious to many that U.S. healthcare spending was out of control. According to the AMA Journal of Ethics, “Health care expenditures in the United States reached $2.6 trillion in 2010, comprising 17.6 percent of gross domestic product.” 

I should say here that although I’m a firm believer in insurance exchanges because they expand much-needed coverage to Americans, it’s important to acknowledge that spending on healthcare remains at high levels, to the tune of 19.7% of GDP in 2020. So, although Obamacare is relatively new, it’s not like insurance exchanges have massively mitigated spending. And for those who would chalk this up to COVID, you’re not completely wrong…but spending was still 17.6 percent of GDP in 2019, exactly where it was in 2010.

Anyway, since healthcare spending is the major cause of rising health insurance premiums, in the years preceding 2010, government officials knew something had to be done to curb this upward trajectory in costs.

Enter the marketplace approach. A key part of Obamacare, the marketplace “facilitates competition among private insurers in a central location where people who do not have access to employer-sponsored insurance can find a suitable plan. Individuals can compare and apply for plans via the Marketplace during the open enrollment period.” So rather than forcing uninsured people to continue to pay the full price for prescription drugs, physician visits, or hospital stays, a new model for care delivery began to emerge where tens of millions of people could obtain care with a copayment or coinsurance rate.

Without going into too much detail, there are a few varieties of exchanges. According to healthcare.org, “As of the 2020 plan year, there were 13 state-based marketplaces, six SBE-FPs (state-based exchange on the federal platform), six state-federal partnership marketplaces, and 26 fully federally-run marketplaces.” (Parentheses mine) There have been some other minor adjustments since then, and I won’t go into the jargon of “SBE-FPs” vs. “federally-run marketplaces,” but suffice it to say that each type of marketplace runs slightly differently.

In addition to changing how Americans pay for healthcare, the ACA also included provisions for reforming the healthcare payment structure when it comes to physician reimbursement. According to the Commonwealth Fund, “The law instituted several mandatory national payment reforms through the Medicare program and created the Center for Medicare and Medicaid Innovation (CMMI), which was funded with $10 billion every 10 years to develop, test, and promote innovative payment and delivery models.”

This complex reimbursement scheme, which involves risk-sharing between physicians and insurers, is something I’ve touched on in previous blog posts. If you want to learn more about these payment models, called alternative payment models or APMs, I’d start with perusing the Health Care Payment Learning & Action Network website. Value-based payment models are at the heart of trying to incentivize physicians to provide higher-quality care at a lower cost and, as a result, decelerate overall healthcare spending. As I said earlier, though, the program has had mixed results.

The American Rescue Plan Act 

And now we come to why health insurance exchanges are making news these days: the ARPA and FFCRA. Let’s talk about what these programs are for a minute, then we’ll discuss how, if you find yourself caught up in the confusion of whether or not they’ll expire, you can try to ensure continuous insurance coverage through next year.

First, let’s focus on ARPA. If you’re covered by this program, you already know that, as an article on the Kaiser Family Foundation website puts it, “The American Rescue Plan Act, the COVID-19 relief package that became law on March 11, 2021, contains a number of provisions designed to increase coverage, expand benefits, and adjust federal financing for state Medicaid programs.”

Specifically, ARPA increased financial help to those already eligible for ACA coverage, and also temporarily expanded subsidies to bring in people whose income levels previously made coverage unaffordable. For example, without ARPA, a 60-year-old couple making $70,000 would’ve had to have paid about 32% of their income to insurance versus 8.5% for the same level of coverage in 2022. 

In other words, the program provided the 14 states that hadn’t yet expanded Medicaid under the ACA with a temporary financial incentive to do just that, and made it easier for people to qualify for the ACA insurance marketplace.

As a consequence of this temporary expansion, insurance enrollment jumped from 12 million people in 2021 to 14.5 million people in 2022, a nearly 21% increase. Enrollees also saved approximately $67 per month per person in premiums, equating to overall savings of around $800 per year per person. Put another way, ARPA, FFCRA, and ACA safety-net coverage had a substantial effect on the uninsured population: “the U.S. uninsured rate among people under age 65 fell from a pandemic peak of 12.3 percent in late 2020 to 10.7 percent in the fall of 2021.” If the subsidies should expire, there will not only be a rise in the underlying premium, but inflation will also play a role, increasing out-of-pocket premium payments even more, regardless of the type of exchange.

Although there’s talk that Congress could extend the temporary subsidies into next year, it’s impossible to know for how long the program will endure.

The Families First Coronavirus Response Act

Similar to ARPA, though more narrowly focused on supporting people during potential bouts with COVID, the FFCRA of 2020 functioned to expand the insurance rolls during uncertain times. According to The Commonwealth Fund, the FFCRA “required states to keep people continuously enrolled in Medicaid in exchange for enhanced federal matching funds through the end of the COVID-19 public health emergency (PHE).”

Among other provisions, the FFCRA ensures that employees who work for qualifying employers are given two weeks of paid sick leave if the employee either is quarantined due to COVID, or has COVID symptoms and is in the midst of getting a medical diagnosis. The act additionally covers employees with two weeks of paid sick leave at two-thirds pay if they’re the main caregiver of someone who has been quarantined due to COVID, and up to to 10 weeks of paid family leave for similar caregiving duties. 

In other words, it allows employees to take time off for reasons related to COVID such that they don’t lose their jobs and, in doing so, maintain their insurance coverage. With COVID hopefully entering an endemic stage soon, and with the CDC loosening their language on quarantine standards, barring the emergence of new, more dangerous variants, I suppose it makes sense that this program should wind down by next year. But we’ll see what happens.

What to Do

Although a lot of very smart people are working arduously to ensure people maintain coverage if ARPA and FFCRA expire, if you think you might be vulnerable to a lapse in insurance in the near future, it would be wise to plan ahead. The Princeton University State Health & Value Strategies group has a great breakdown of the infrastructure needed to make this happen. As awesome as it is, though, in my opinion it’s a little inside baseball to be very useful to the layperson. 

What, then, can the average person do in this situation? Your first move will likely be to find a list of health insurance exchanges and find the one, should your current insurance coverage become unaffordable, that works best for you. A good first step would be to visit CMS’ state-based exchange website.

“Since January 1, 2014,” says the website, “consumers and small businesses in every state (including the District of Columbia) have had access to obtain health and/or dental insurance coverage through Individual or Small Business Health Options Program (SHOP) Health Insurance Exchanges, operated by States through State-based Exchanges (SBEs), or operated by the Federal government through the Federally-facilitated Exchange (FFE).”

If you scroll down a bit further on that web page, you’ll find a list of SBEs, along with a few state-based exchanges on the federal platform, which I noted earlier are known as SBE-FPs. If you reside in a state represented on that list, it might make sense to reach out to them and get a better understanding of next steps involved in making a smooth transition from your current coverage onto the ACA exchange.

If you live in an area that doesn’t have an SBE and instead has a federally-run exchange, take a look at this map. Click on your state, and it’ll give you a breakdown of when the open enrollment period is, how to enroll if you’re outside of that time period, which insurance carriers offer coverage in that marketplace, and whether or not that state has expanded Medicaid under the ACA, among other things. If you scroll down, under the map there’s also an “Obamacare Subsidy Calculator” that can help tell you if you’re eligible for ACA premium subsidies, and how much you could save if you qualify. 

And lastly, to check and see if you qualify to enroll outside of the usual enrollment period check here.

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