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), or “Obamacare,” at designated ACA health exchanges. Here, people can choose various standard government-regulated health insurance policies from insurers in the health exchange.
The ACA health insurance marketplaces officially opened for enrollment on October 1, 2013, with coverage starting on January 1, 2014. By the end of the first open enrollment period in April 2014, around 8 million people had signed up for health insurance through the 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 expand insurance coverage and simultaneously allow insurers to compete cost-effectively. Additionally, it has also worked to safeguard consumer protection laws.
Health exchanges are not run and operated by insurance companies, so they do not bear the risk. However, they do regulate which insurance providers 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 and ensures that all subsidies are delivered effectively. This is an effective way to spread 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:
Non-discrimination
Health insurance providers are prohibited from discriminating against any individual based on gender or pre-existing medical conditions and from charging higher rates based on these factors.
No-cap limits
Insurance providers cannot set annual spending caps on essential health benefits.
Mandatory Health Benefits
Health Insurance Marketplace – 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
The Individual Mandate provision initially required individuals without acceptable health insurance coverage to pay a tax penalty, but the penalty was reduced to $0 at the federal level starting in 2019. 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 or 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 for those with the least expensive policy, it would be more than 8% of their annual income.
Expanding Medicaid Eligibility
Under the ACA, Medicaid eligibility was expanded in participating states to include individuals with incomes up to 138% of the federal poverty level after accounting for a 5% income disregard. This includes adults and their dependent children.
In addition, this law also provides a 5% “income disregard,” which increases the effective income eligibility limit to 138% over the federal poverty line. Still, states have the authority to increase the income eligibility limit above this minimum requirement.
Subsidies
Subsidies for insurance premiums are available to individuals and families purchasing health insurance through the marketplace, with household incomes between 100% and 400% of the federal poverty level. 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, such as earned income tax credits, to individuals who may have no tax liability.
State-based Health Insurance Marketplaces
A State-Based Marketplace (SBM) is an online platform run by individual states for residents to compare, purchase, and enroll in health insurance plans with potential eligibility for federal subsidies. Each state creates and maintains it, which is also called a state-based exchange (SBE). These health insurance marketplaces 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 them on available options and assist them in deciding eligibility for Medicaid and other federal subsidies.
Conclusion
Health insurance coverage is a must-have for everyone 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.
See Also
How to Get Health Insurance Without a Job
Can Employer Terminate Health Insurance Without Notice
Medical Insurance for Self Employed
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