Sunday, March 17, 2013

ACA and “Insurance Exchanges”: what are they and what do they look like?

There is much discussion of “insurance exchanges” regarding Obamacare. However, precious little is discussed regarding what is an insurance exchange and what does an insurance exchange look like?

The first thing one needs to consider is that of the 37 million uninsured as of 2010, about 14 million will be herded into Medicaid. That is, 14 million have no need for the insurance exchange as they will be 100% subsidized in the form of Medicaid.

Therefore only 23 million, currently, will be concerned with insurance exchanges. The exchange itself will not be a free market exchange, rather a market place with strict government mandated regulation. That is, you will not have the freedom to choose, rather you will have the opportunity to choose from selections of a third party’s choice.

Some shoppers who apply for coverage through the insurance exchange will be heavily subsidized while others will receive no subsidy. Those receiving no subsidy are still free to use the exchange or to look elsewhere. The prototype application is fifteen pages long and requires the calculation of twenty one steps. You can view the application, along with the sixty pages of description of the fifteen page application (No way! Way!) at the link below:

What is not well publicized is the second cohort of subsidies. A second subsidy? Yes, not only is the premium subsidized for many income groups but out of pocket expense under the plan is subsidized. Stated alternatively, once a plan is selected and the premium subsidized, the consequential health-care expenses create out-of-pocket cost sharing between the insurance plan and insured of which the insured’s out-of-pocket expense is subsidized [lowered].
The insurance exchange will offer four plans with a fifth plan available for applicants under the age of 30. The insurance plans are known as bronze, silver, gold and platinum with the fifth plan for those under age 30 known as the special catastrophic insurance plan. The four plans for those 30 years of age and up [bronze through platinum] find their names and associated coverage based upon the percent of medical costs paid on average.

Note: an additional plan can be introduced by each state exchange, at the individual state’s option, what is known as the “basic health plan” for people from 133% to 200% above the federal poverty line.

What does the exchange look like? Two health insurance exchanges already exist: one in Massachusetts and one in Utah. The Utah exchange is more of a free market exchange given current insurance regulation with many insurers participating. Massachusetts, on the other hand, only has five state approved insurers offering coverage.

Since Obamacare is modeled after the Massachusetts plan, that exchange will likely give one a better idea what to expect from Obamacare exchanges. The link below is to the Massachusetts exchange known as the Massachusetts Health Connector:

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