What is the Health Insurance Marketplace – Overview
The U.S. health insurance marketplaces are also called “health exchanges.” These are organizations in individual states where people can buy health insurance plans. The health insurance marketplace provides a platform for people to buy health insurance that complies with the ACA (Patient Protection and Affordable Care Act), also known as “Obamacare,” at designated ACA health exchanges. Here, people can choose from various standard government-regulated health insurance policies from insurers who are part of the health exchange.
Every ACA health insurance marketplace was launched on 1 January 2014, certified and operated under federal law. By April 2014, more than 8 million people had registered through the health insurance marketplaces. In addition, around 4.8 million also joined Medicaid under this plan. By April 2020, over 11.5 million people had signed up via the health insurance marketplaces.
How Do Health Insurance Marketplaces Work?
Health insurance marketplaces in the US have helped to expand insurance coverage and simultaneously allow insurers to compete in cost-effective ways. Additionally, it has also worked to safeguard consumer protection laws too.
As health exchanges are not run and operated by insurance companies, they do not bear the risk. However, they do regulate which insurance provider can become part of the health insurance marketplace.
Ideally, a health insurance marketplace promotes accountability and transparency in the insurance process. It also facilitates improved enrolment, besides ensuring that all subsidies are delivered effectively. This is an effective way to spread the risk, which helps to share the overall costs associated with expensive medical treatments rather than among just a few beneficiaries.
Health insurance marketplaces use EDI (Electronic Data Interchange) to share the required information between different health exchanges and trading partners (insurance carriers).
Important Aspects of Health Insurance Marketplaces
Under the Patient Protection and Affordable Care Act, new regulations were applied to the health exchanges, namely:
Health insurance providers are prohibited from discriminating against any individual based on the gender of pre-existing medical conditions and charging higher rates.
Insurance providers cannot set annual spending caps on essential health benefits.
Mandatory Health Benefits
Any insurance provider participating in health insurance marketplaces must offer the following essential health benefits:
- Emergency services
- Ambulatory services
- Hospitalization (for surgery, etc.)
- Maternity and newborn care
- Substance abuse services
- Mental health services
- Rehabilitative services
- Prescription drugs
- Laboratory services
- Pediatric services
- Preventive services
- Wellness services
Under the Individual Mandate provision, individuals with no acceptable health insurance coverage are charged USD 95 (or up to 1% income over filing minimum) in the form of an annual tax penalty. This amount may rise to around USD 695 for individuals and around USD 2,085 for families. This penalty is prorated which means that if an individual/family has insurance coverage for part of the year, they will not be liable without insurance coverage for less than 3 months during the said year.
However, there are exemptions for religious reasons. For instance, it facilitates health care sharing ministries, and also, for those with the least expensive policy would be more than 8% of their annual income.
Expanding Medicaid Eligibility
Medicaid eligibility has been expanded in participating states under the ACA. Every individual with an income of 133% above the federal poverty line qualifies for insurance coverage. This includes adults and their dependent children.
In addition, this law also provides a 5% “income disregard,” which makes the effective income eligibility limit up to 138% over the federal poverty line. Still, states have the authority to increase the income eligibility limit over this minimum requirement.
The subsidies for insurance premiums are provided to individuals who purchase health insurance plans from a health insurance marketplace. These individuals must have an annual household income between 133% and 400% of the federal poverty line. Under this regulation, each subsidy is provided as a refund tax credit in advance, with a specific formula for calculating it.
The government provides refundable tax credit benefits to individuals who may have no tax liability, such as earned income tax credit.
State-based Health Insurance Marketplaces
A state-based marketplace (SBM) is a specific online marketplace run by individual states where American citizens and legal residents can browse, compare, buy, apply, and enroll in subsidized health insurance plans through a government agency.
It is created and maintained by each state and is also called state-based exchange (SBE). These health insurance marketplaces work to prevent consumer confusion by standardizing information on insurance plan benefits and making it easier to compare the cost and quality of multiple insurance policies.
States with SBMs offer various forms of aid to buyers searching for the perfect and most affordable health insurance coverage. For instance, consumers can call toll-free hotlines for help with plan selection. These SBMS also help consumers by conducting outreach to educate consumers on available options and assisting in deciding eligibility for Medicaid and other federal subsidies.
Health insurance coverage is a must-have for every person living in the United States. To ensure this, Obamacare introduced certain regulations and a platform for consumers to search, select and buy the most affordable and efficient health insurance policy for individuals and families. Around 15 states in the US also run their state-specific health insurance marketplaces.
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