Health insurance marketplace

Health care reform in the United States
Health care in the United States Debate over reform History Latest enacted legislation Patient Protection and Affordable Care Act (Senate bill - H.R. 3590) Health Care and Education Reconciliation Act of 2010 (H.R. 4872) preceding legislation Social Security Amendments of 1965 Emergency Medical Treatment and Active Labor Act (1986) Health Insurance Portability and Accountability Act (1996) Medicare Prescription Drug, Improvement, and Modernization Act (2003) Patient Safety and Quality Improvement Act (2005) More information Health care reforms in US Recent legislative proposals Public opinion Reform advocacy groups Rationing Insurance coverage Systems Free-market health care Health insurance exchange National health insurance Publicly-funded health care Single-payer health care Canadian vs. American health care systems Two-tier health care Universal health care Third-party payment models Capitation Fee-for-service Global payment Other legislation Superseded Affordable Health Care for America Act (House bill - H.R. 3962) America's Affordable Health Choices Act of 2009 (H.R. 3200) America's Healthy Future Act (Baucus bill - S. 1796) Healthy Americans Act (Wyden-Bennett Bill - S. 391) Proposed United States National Health Care Act (2009, H.R. 676) Health Security Act (1993, H.R. 3600) Health care in the United States This box: view talk edit

In the United States, health insurance marketplaces,^[3] also called health exchanges, are organizations set up to facilitate the purchase of health insurance in each state in accordance with Patient Protection and Affordable Care Act (known colloquially, and sometimes pejoratively, as "Obamacare"). Marketplaces provide a set of government-regulated and standardized health care plans from which individuals may purchase health insurance policies eligible for federal subsidies.

All health exchanges were to be fully certified and operational by January 1, 2014, under federal law.^[4] Enrollment in the marketplaces started on October 1, 2013, and will continue for six months.

As of January 3, 2014, more than 2 million people had selected a health plan through the health insurance marketplaces.^[5]

Background

Health insurance exchanges in the United States are intended to help insurers comply with consumer protection laws, compete in cost-efficient ways, and expand insurance coverage to more people. Exchanges are not themselves insurers, so they do not bear risk themselves, but they do determine the insurance companies that are allowed to participate. An ideal exchange promotes insurance transparency and accountability, facilitates increased enrollment and delivery of subsidies, and helps spread risk to ensure that the costs associated with expensive medical treatments are shared more broadly across large groups of people, rather than spread across just a few beneficiaries.

History

President Barack Obama promoted the concept of a health insurance exchange as a key component of his health care reform initiative. Obama stated that it should be "...a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that's best for them, in the same way that Members of Congress and their families can. None of these plans should deny coverage on the basis of a pre-existing condition, and all of these plans should include an affordable basic benefit package that includes prevention, and protection against catastrophic costs. There are those who strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. The belief is that it will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest."^[6] Although the House of Representatives had sought a single national exchange as well as a public option, the Patient Protection and Affordable Care Act (ACA) as passed used state-based exchanges, and the public option was ultimately dropped from the bill after it did not win filibuster-proof support in the Senate.^[7] States may choose to join together to run multi-state exchanges, or they may opt out of running their own exchange, in which case the federal government will step in to create an exchange for use by their citizens.^[7]

The Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010. The Law required that health insurance exchanges commence operation in every state on October 1, 2013.^[8] In the first year of operation, open enrollment on the exchanges runs from October 1, 2013 to March 31, 2014, and insurance plans purchased by December 15, 2013, began coverage on January 1, 2014.^{[9][10][11][12]} In subsequent years, open enrollment will start on October 15 and end on December 7.^[13][14][15]

Implementation of the individual exchanges changed the practice of insuring individuals. The expansion of this market is a major focus of President Obama's Patient Protection and Affordable Care Act.^[16]

Patient Protection and Affordable Care Act regulations

• Insurers are prohibited from discriminating against or charging higher rates for any individual based on pre-existing medical conditions or gender.^[17]
• Insurers are prohibited from establishing annual spending caps of dollar amounts on essential health benefits.^[18]
• All private health insurance plans offered in the Marketplace must offer the following essential health benefits: ambulatory care, emergency services, hospitalization (such as surgery), maternity and newborn care, mental health and substance abuse services, prescription drugs, rehabilitative and habilitative services (services to help people with injuries, disabilities, or chronic conditions to recover), laboratory services, preventive and wellness services, and pediatric services.^[19]
• Under the individual mandate provision (sometimes called a "shared responsibility requirement" or "mandatory minimum coverage requirement"^[20]), individuals who are not covered by an acceptable health insurance policy will be charged an annual tax penalty of $95, or up to 1% of income over the filing minimum,^[21] whichever is greater; this will rise to a minimum of $695 ($2,085 for families),^[22] or 2.5% of income over the filing minimum,^[21] by 2016.^[23][24] The penalty is prorated, meaning that if a person or family has coverage for part of the year they won't be liable if they lack coverage for less than a three-month period during the year.^[25] Exemptions are permitted for religious reasons, for members of health care sharing ministries, or for those for whom the least expensive policy would exceed 8% of their income.^[26] Also exempted are U.S. citizens who qualify as residents of a foreign country under the IRS foreign earned income exclusion rule.^[27] In 2010, the Commissioner speculated that insurance providers would supply a form confirming essential coverage to both individuals and the IRS; individuals would attach this form to their Federal tax return. Those who aren't covered will be assessed the penalty on their Federal tax return. In the wording of the law, a taxpayer who fails to pay the penalty "shall not be subject to any criminal prosecution or penalty" and cannot have liens or levies placed on their property, but the IRS will be able to withhold future tax refunds from them.^[28]

United States Department of Health and Human Services (HHS) federal poverty level in 2013^[29]

Persons in Family Unit	48 Contiguous States and D.C.	Alaska	Hawaii
1	$11,490	$14,350	$13,230
2	$15,510	$19,380	$17,850
3	$19,530	$24,410	$22,470
4	$23,550	$29,440	$27,090
5	$27,570	$34,470	$31,710
6	$31,590	$39,500	$36,330
7	$35,610	$44,530	$40,950
8	$39,630	$49,560	$45,570
Each additional person adds	$4,020	$5,030	$4,620

• In participating states, Medicaid eligibility is expanded; all individuals with income up to 133% of the poverty line qualify for coverage, including adults without dependent children.^[23][30] The law also provides for a 5% "income disregard", making the effective income eligibility limit 138% of the poverty line.^[31] States may choose to increase the income eligibility limit beyond this minimum requirement.^[31] As written, the ACA withheld all Medicaid funding from states declining to participate in the expansion. However, the Supreme Court ruled in National Federation of Independent Business v. Sebelius (2012) that this withdrawal of funding was unconstitutionally coercive and that individual states had the right to opt out of the Medicaid expansion without losing pre-existing Medicaid funding from the federal government. For states that do expand Medicaid, the law provides that the federal government will pay for 100% of the expansion for the first three years, then gradually reduce its subsidy to 90% by 2020.^[32][33] As of April 25, 2013, fifteen states—Alaska, Alabama, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Nebraska, North Carolina, Oklahoma, South Carolina, Texas, Wisconsin, and Virginia—were not participating in the Medicaid expansion, with ten more—Kansas, Maine, Michigan, Montana, Missouri, Ohio, Pennsylvania, South Dakota, Utah, and Wyoming—leaning towards not participating.^[34] (See further: State rejections of Medicaid expansion).
• The Patient Protection and Affordable Care Act eliminates lifetime and annual limits from plans in the individual health benefits exchanges. This effectively eliminates the ceiling on financial risk for individuals in the individual exchanges.^[35]

Subsidies

The subsidies for insurance premiums are given to individuals who buy a plan from an exchange and have a household income between 133% and 400% of the poverty line.^{[30][36][37][38]} Section 1401(36B) of PPACA explains that each subsidy will be provided as an advanceable, refundable tax credit^[39] and gives a formula for its calculation:^[40]

Except as provided in clause (ii), the applicable percentage with respect to any taxpayer for any taxable year is equal to 2.8 percent, increased by the number of percentage points (not greater than 7) which bears the same ratio to 7 percentage points as the taxpayer's household income for the taxable year in excess of 100 percent of the poverty line for a family of the size involved, bears to an amount equal to 200 percent of the poverty line for a family of the size involved. *(ii) SPECIAL RULE FOR TAXPAYERS UNDER 133 PERCENT OF POVERTY LINE- If a taxpayer's household income for the taxable year is in excess of 100 percent, but not more than 133 percent, of the poverty line for a family of the size involved, the taxpayer's applicable percentage shall be 2 percent.

-- Patient Protection and Affordable Care Act: Title I: Subtitle E: Part I: Subpart A: Premium Calculation^[40]

A refundable tax credit is a way to provide government benefits to individuals who may have no tax liability^[41] (such as the earned income tax credit). The formula was changed in the amendments (HR 4872) passed March 23, 2010, in section 1001. To qualify for the subsidy, the beneficiaries cannot be eligible for other acceptable coverage. The U.S. Department of Health and Human Services (HHS) and Internal Revenue Service (IRS) on May 23, 2012, issued joint final rules regarding implementation of the new state-based health insurance exchanges to cover how the exchanges will determine eligibility for uninsured individuals and employees of small businesses seeking to buy insurance on the exchanges, as well as how the exchanges will handle eligibility determinations for low-income individuals applying for newly expanded Medicaid benefits.^[42][43] Premium caps have been delayed for a year on group plans, to give employers time to arrange new accounting systems, but the caps are still planned to take effect on schedule for insurance plans on the exchanges;^{[44][45][46][47]} the HHS and the Congressional Research Service calculated what the income-based premium caps for a "silver" healthcare plan for a family of four would be in 2014:

Health Insurance Premiums and Cost Sharing under PPACA for Average Family of 4^{[43][48][49][50][51]}

Income % of federal poverty level	Premium Cap as a Share of Income	Income $ (family of 4)a	Max Annual Out-of-Pocket Premium	Premium Savingsb	Additional Cost-Sharing Subsidy
133%	3% of income	$31,900	$992	$10,345	$5,040
150%	4% of income	$33,075	$1,323	$9,918	$5,040
200%	6.3% of income	$44,100	$2,778	$8,366	$4,000
250%	8.05% of income	$55,125	$4,438	$6,597	$1,930
300%	9.5% of income	$66,150	$6,284	$4,628	$1,480
350%	9.5% of income	$77,175	$7,332	$3,512	$1,480
400%	9.5% of income	$88,200	$8,379	$2,395	$1,480
a.^ Note: In 2014, the FPL is projected to equal about $11,800 for a single person and about $24,000 for a family of four.[52][53] See Subsidy Calculator for specific dollar amount.[54] b.^ DHHS and CBO estimate the average annual premium cost in 2014 would be $11,328 for a family of 4 without the reform.[49]

Guaranteed issue

In the individual market, sometimes thought of as the "residual market" of insurance, insurers have generally used a process called underwriting to ensure that each individual paid for his or her actuarial value or to deny coverage altogether.^[55] The House Committee on Energy and Commerce found that, between 2007 and 2009, the four largest for-profit insurance companies refused insurance to 651,000 people for previous medical conditions, a number that increased significantly each year^[56], with a 49% increase in that time period.^[57] The same memorandum said that 212,800 claims had been refused payment due to pre-existing conditions and that insurance firms had business plans to limit money paid based on these pre-existing conditions. These persons who might not have received insurance under previous industry practices are guaranteed insurance coverage under the ACA. Hence, the insurance exchanges will shift a greater amount of financial risk to the insurers, but will help to share the cost of that risk among a larger pool of insured individuals. The ACA's prohibition on denying coverage for pre-existing conditions began on January 1, 2014. Previously, the ACA provided funds for state-run high-risk pools for those with previously existing conditions.^[58]

State-based exchanges

Arkansas Health Connector	Access Health CT
Covered California	District of Columbia (Health Link)
Connect for Health Colorado	Hawaii Health Connector
Idaho Health Insurance Exchange	Kentucky Health Benefit Exchange (Kynect)
Maryland Health Benefit Exchange	Massachusetts Health Insurance Connector
MNsure (Minnesota)	Cover Oregon
Nevada Health Link	NY State of Health
HealthSource RI	Vermont Health Connect
Washington Healthplanfinder

Limit to price variation

Pricing Factors Allowed in the exchange under the ACA:^[59]

• Age: 3:1
• Smoking status: 1.5:1

Pricing variation will be allowed by area (within a state) and family composition ("tier") as well.

Comparable tiers of plans

Within the exchanges, insurance plans are offered in four tiers designated from lowest premium to highest premium: bronze, silver, gold, and platinum. The plans cover ranges from 60% to 90% of bills in increments of 10% for each plan. For those under 30 (and those with a hardship exemption), a fifth "catastrophic" tier is also available, with very high deductibles.^[60]

Insurance companies select the doctors and hospitals that are "in-network".^[61]

Proponents of health care reform believe that allowing comparable plans to compete for consumer business in one convenient location will drive prices down. Having a centralized location increases consumer knowledge of the market and allows for greater conformation to perfect competition. Each of these plans will also cap liabilities for consumers with out-of-pocket expenses at $6,350 for individuals and $12,700 for families.^[35]

Economics of health insurance exchanges: the individual mandate

The health insurance advocacy group America's Health Insurance Plans was willing to accept these constraints on pricing, capping, and enrollment because of the individual mandate: The individual mandate requires that all individuals purchase health insurance.^[62][63] This requirement of the ACA allows insurers to spread the financial risk of newly insured people with pre-existing conditions among a larger pool of individuals.

Additionally, a study done by Pauly and Herring estimates that individuals with pre-existing conditions in the 99th percentile of financial risk represented 3.95 times the average risk (mean).^[55] Figures from the House Committee on Energy and Commerce would indicate that approximately 1 million high-risk individuals will pursue insurance in the Health Benefits Exchanges.^[56] Congress has estimated that 22 million people will be newly insured in the Health Benefits Exchanges.^[64] Thus the high-risk individuals do not number in high enough quantities to increase the net risk per person from previous practice. It is thus theoretically profitable to accept the individual mandate in exchange for the requirements presented in the ACA.

Acronym

HIX (Health Insurance Exchange) is emerging as the de facto acronym across state and federal government stakeholders, and the private sector technology and service providers that are helping states build their exchanges.^{[citation needed]} The acronym HIX differentiates this topic from health information exchange, or HIE.^[65][66]

The de facto acronym of HIX will be replaced in the soon (March 2013) to be released 3rd Edition of the HIMSS Dictionary of Healthcare Information Technology Terms, Acronyms and Organizations with HIEx. See more information on the HIMSS Dictionary at 2nd Edition of the HIMSS Dictionary of Healthcare Information Technology Terms, Acronyms and Organizations.^{[citation needed]}

Criticism and controversy

Technical "glitches"

• The system does not have a way for the user to see and re-print his/her previously filled or incomplete application.
• The website uses age instead of date of birth when showing rates. This often results in inaccurate estimates.
• Some users are unable to reset their lost or forgotten usernames/passwords for the usernames created during the first week of operation.
• The system often does not give meaningful error messages and sometimes there are no error messages when an error does occur.
• There were reports that some applications completed during the first week of operation are missing important data, so they are unable to be processed.^[67] Users are confused whether they need to remove the old application and fill a new application, or not.
• The system sends users to the Kaiser Family Foundation's subsidy calculator to estimate the Marketplace health insurance costs and savings after the subsidies.^[68]

First week of operation

"Please try again later" was the message that greeted many people who tried to view information on marketplace websites across the United States during the first week of operation. Websites were reported to have either crashed or offer very sluggish response times. There was disagreement on whether the high volume of views (8.6 million people) was at the bottom of the problem or whether there were deeper technical issues involved.^{[citation needed]}

Todd Park, U.S. chief technology officer, said that the glitches were caused by unexpected high volume at the federal health exchange (healthcare.gov) when the site drew 250 thousand visitors instead of the 50-60 thousand expected. He claimed that the site would have worked with less visitors. More than 8.1 million people visited the site from October 1–4, 2013. ^[69]

On the date of enactment of the Patient Protection and Affordable Care Act of 2010, only a few health insurance exchanges across the country were up and running. Among them were the Massachusetts Connector, the Utah Health Exchange, and HealthPass, a New York-based, non-profit exchange.^[70] Advocates claim that these exchanges make these "markets" more efficient, providing oversight and structure. Supporters argue that this is because current health insurance markets in the United States are not well-organized and have to deal with wide variations in coverages and requirements among different companies, employers, and policies.^[71]

It was unknown how many people in total successfully enrolled in the first week. The federal marketplace website was scheduled for maintenance on the weekend. ^[72][73] Some reporters have nicknamed the program "Slowbamacare". ^[74]

CGI Group came under media scrutiny as a developer behind several marketplace websites^[75] after numerous issues^[76] surfaced with the federal health insurance marketplace, Healthcare.gov.

On October 1, 2013 the state-run marketplaces also opened to the public, and some of them reported first statistics. During the first week of enrollment:

• 28,699 people enrolled in the California health plan marketplace^[74]
• 17,300 people enrolled in the Kentucky health plan marketplace^[74]
• More than 40,000 people enrolled in the New York health plan marketplace^[74]
• On October 8, 2013, the Seattle Times reported that more than 9,400 people enrolled in the Washington health plan marketplace.^[74] However in a later report it was clarified that many of those who enrolled were Medicaid enrollees. By October 21, 2013, only 4,500 Washington residents had enrolled in private insurance through the state marketplace.^[77]

Postponement of tax penalty

On October 23, 2013, the Washington Post reported that Americans with no health insurance would have an additional six weeks before they are penalized.^[78]

Primary concerns

• Many lower-income individuals excluded: NPR reported that large numbers of low income people were excluded in states that did not offer Medicaid expansion to 133% of the poverty line.^[79][80]
• Moral and ethical concerns: Many varieties of libertarian ethical and political philosophy hold that it is wrong to require individuals to subsidize coverage of risks qualitatively different from and/or qualitatively greater than those that they impose; in other words, these schools of thought object to the governmentally mandated shift from risk-based pricing to community rating.^{[citation needed]}
• Expansion of and increase in moral hazard: Economists are concerned that the prohibition of preexisting-condition exclusion increases uninsured individuals' incentive to engage in risky behavior by removing the future unavailability of insurance as an ex ante incentive discouraging behavior that increases risks of developing those conditions. This moral hazard is independent of and in addition to the incentive toward risky behavior already existing among already-insured individuals.^{[citation needed]}
• Premium cost too high for some people: There was some speculation that for single people between the ages of 18-35 costs of insurance would rise.^[81]
• Data security: Minnesota's healthcare exchange was reported to have accidentally e-mailed personal information of more than 2,400 insurance agents to an insurance broker, according to the Minnesota Star Tribune.^[82]
• Employers dropping insurance for part-timers: According to NPR, some employers such as Trader Joe's and Home Depot have decided to terminate health insurance for their part-time workers.^[83]
• Scams: Scams were expected because of confusion over enrollment.^[84][85]
• Restricted networks: Some exchanges have been criticized for offering health plans that necessitate too many out-of-network claims. On October 5, 2013, Seattle Children's hospital filed a lawsuit for "failure to ensure adequate network coverage" when only two insurers included Children's in their marketplace plan.^[86]
• "Cherry-picking" concern: The private health insurance industry fears that restricted eligibility and a market size that is too small could result in higher premiums, encourage "cherry-picking" of customers by insurers, and force a clearance of the exchange. That is what some believe will happen in Texas and California in their failed exchanges.^[87] One of these factors, "cherry-picking" of customers, will not be possible in the state-run exchanges mandated by the ACA, because all insurance plans will be "guaranteed issue" in 2014. Furthermore, the law will bring millions of new enrollees into the marketplace by way of the individual mandate requirement for all citizens to purchase health insurance and increase market size.^{[citation needed]}
• Some marketplace web sites require enrollment as the first step to looking up any information.^[88]

Congressional reaction

On October 29, 2013, Rep. Lee Terry (R, NE-2) introduced the Exchange Information Disclosure Act (H.R. 3362; 113th Congress).^[89] The bill would require the United States Department of Health and Human Services to submit weekly reports to Congress about the how many people are using Healthcare.gov and signing up for health insurance.^[90] These reports would be due every Monday until March 31, 2015, and would be available to the public.^[91] The bill would "require weekly updates on the number of unique website visitors, new accounts, and new enrollments in a qualified health plan, as well as the level of coverage," separating the data by state.^[90] The bill would also require reports on efforts to fix the broken portions of the website.^[90] The House was scheduled to vote on it on January 10, 2014.^[92]

Private health insurance exchanges

A private health insurance exchange is an exchange run by a private sector company or nonprofit. Health plans and insurance carriers in a private exchange must meet certain criteria defined by the exchange management. Private exchanges combine technology and human advocacy, and include online eligibility verification and mechanisms for allowing employers who connect their employees or retirees with exchanges to offer subsidies. They are designed to help consumers find plans personalized to their specific health conditions, preferred doctor/hospital networks, and budget. These exchanges are sometimes called marketplaces or intermediaries, and work directly with insurance carriers, effectively acting extensions of the carrier.

The idea of a health care exchange is not new. One example of an early health care exchange is International Medical Exchange (IMX), a company venture financed in Louisville, Kentucky, by Standard Telephones and Cables, a large British technology company (now Nortel), to develop the exchange concept in the U.S. using on-line technology. The product was created in the mid-1980s. IMX developed an eligibility verification system, a claims management system, and a bank-based payments administration system that would manage payments between the patient, the employer, and the insurance carrier. Like proposed exchanges today, it focused on standards of care, utilization review by a third party, private insurer participation, and cost reduction for the health care system through product simplification. The focus was on creating local or regional exchanges that offered a series of standardized health care plans that reduced the complexity and cost of acquiring or understanding health care insurance, while simplifying claims administration. The system was modeled after the standardized stock exchange and banking industry back office processes. The major difference was that IMX health care exchanges would provide their products through a national network of existing commercial banks rather than setting up a duplicate payment and administration systems network as proposed today. The IMX product rights were acquired by Anthem (then Blue Cross and Blue Shield of Kentucky). The exchange product became the basis for inter-carrier claims settlement between commercial insurance carriers and Blue Cross organizations. The founders of IMX were from top management at Humana, and top management of First Tennessee National Corp (now First Horizon).

See also

• Health care reform in the United States
• Health system
• Universal health coverage by country

References

External links

• https://www.healthcare.gov
• Status of Federal Funding for State Implementation of Health Insurance Exchanges Congressional Research Service
• C-SPAN Video Library: Search Health Insurance Exchange

See "Clips" tab then "Clips Timeline" drop-down for abstracts of edited clips from the following videos:

• Health Care Law Exchanges Apr 22, 2013 Jenny Gold, Kaiser Health News correspondent, Interview
• Report Video Issue Health Insurance Exchanges Jul 25, 2013 Politico Pro Health Care Breakfast Briefing
• Update on the Health Care Law Jul 1, 2013 Julie Rovner, National Public Radio health policy correspondent, Interview

• PrivateHealthCareExchanges.com, the only online guide to private health insurance exchanges
• HealthInsurance.org's guide to U.S. state health exchanges.

v t e Patient Protection and Affordable Care Act Key articles Affordable Care Act (Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act) Provisions of the Patient Protection and Affordable Care Act Health insurance marketplace Contraceptives mandate Executive Order 13535 Constitutional challenges Constitutional challenges to the Patient Protection and Affordable Care Act National Federation of Independent Business v. Sebelius Coons v. Geithner State and district insurance exchanges AR (Arkansas Health Connector) CA (Covered California) CO (Connect for Health Colorado) CT (Access Health CT) DC (DC Health Link) HI (Hawaiʻi Health Connector) ID (Get Covered Idaho) IL (Illinois Health Matters) KY (Kynect) MD (Maryland Health Connection) MA (Health Insurance Connector) MN (MNsure) NV (Nevada Health Link) NM (BeWellNM) NY (NY State of Health) OR (Cover Oregon) RI (HealthSource RI) VT (Vermont Health Connect) WA (Washington Healthplanfinder) Federal insurance exchange Healthcare.gov Other reform proposals from the 111th Congress Affordable Health Care for America Act America's Affordable Health Choices Act of 2009 America's Healthy Future Act Healthy Americans Act United States National Health Care Act See also Health care reform in the United States Medicaid Medicare SCHIP