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What Is a Health Insurance Exchange?

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Updated September 05, 2013

Definition:

A health insurance exchange, otherwise known as a health insurance marketplace, is a shopping area for health insurance. Although private health insurance exchanges do exist, the phrase most commonly refers to public health insurance exchanges developed within each state as part of health care reform.

Background:

Mandated by the Affordable Care Act to be running in every state by October, 2013, the intent is to provide individuals and small businesses somewhere to shop for affordable health insurance that meets the requirements of the Affordable Care Act.

How Health Insurance Exchanges Work:

Insurance companies compete for your business using the marketplace. This competition is meant to keep the cost of health insurance premiums down.

Another consumer-friendly aspect of health insurance marketplaces is the ease of comparing apples to apples. The exchanges allow direct comparison of competing health insurance policies in two ways. First, all health insurance policies offered through the exchanges must provide a minimum set of essential health benefits. Second, all health insurance policies offered must conform to one of four benefit tiers: bronze, silver, gold, and platinum.

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

Health insurance exchanges are the access point for government subsidies that make health insurance more affordable for low income Americans. The only place you can apply for a government health insurance subsidy is your state's health insurance exchange. The subsidy is only good for health insurance bought on the health insurance exchange. You can learn more about these subsidies in, "Can I Get Help Paying for Health Insurance?"

Even if you don't want to buy health insurance, you may end up having contact with your state's health insurance exchange since health insurance exemption certificates are only issued through health insurance exchanges. If you don't have health insurance, don't want to get health insurance, and want to avoid a tax penalty, you'll need an exemption certificate. find out if you're eligible in, "Can I Get a Health Insurance Exemption??"

Health insurance marketplaces are state based, and their health plan offerings will vary from state to state. A state may run its own exchange, or choose to have the Federal Government run its exchange. Find out how to contact the health insurance exchange in your state, as well as whether it's run by your state or by the federal government.

Health insurance marketplaces begin enrolling people in October 2013 for benefit coverage starting January 1, 2014. This coincides with the Affordable Care Act’s individual mandate, which also goes into effect January 1, 2014, requiring all citizens and legal residents of the United States to have health insurance.

Also Known As: Health Insurance Marketplaces

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