Health Insurance Exchanges 101

December 27, 2012

in Health Care Reform

(Photo by Robin Kanouse via Flickr)

Everyone is talking about the health insurance exchanges and what they will mean to you.  Starting January 1st, 2014, the Affordable Care Act requires every state to create health insurance exchanges for businesses, employees, and individuals.  If states do not establish an exchange in time, the Federal government will step in and create one.

So, what exactly is a health insurance exchange?

A health insurance exchange is an organized marketplace for individual, families, and small business to shop for and purchase health insurance based on quality and price.   Basically, they are a store specializing in health insurance merchandise.

How is this all going to work?

In Colorado, the Health Benefit Exchange will be an online marketplace; a website where Coloradans can shop for and purchase health plans. Two will be set up: one for individuals, and one for small groups. This website will interface with various government databases to determine a consumer’s eligibility for tax credits and public insurance.

Small employers will also be able to purchase plans for their employees, using tax credits.

Insurance brokers will need to be certified to sell plans through the exchanges; they will be able to help individuals and small groups navigate the exchanges.

Who is eligible to participate?  

An exchange would be available to be used by individual consumers who do not have access to a group plan and small businesses with up to 50 employees when it opens for enrollment beginning October 2013. Large employers may be allowed to participate in 2017.

Will the Colorado Health Benefit Exchange offer every health plan that is currently offered on the market?

No. The exchange will offer health plans that have been determined to offer adequate levels of coverage and comply with new regulations to protect consumers. These plans will have ratings and will fall into four tiers: bronze, silver, gold and platinum. The bronze plans will offer the basic coverage required by law and will be the most affordable. The platinum plans will offer the highest level of coverage and will be the most costly. Silver and gold plans will offer coverage with monthly premiums in the middle of that spectrum.

Are there any tax credits for going through the exchange?

For small group employers, the tax credit that you receive now will only be available if you purchase your plan through the exchange. An enhanced version of the credit will be effective beginning January 1, 2014. In general, on January 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.

Advance tax credits are available to individuals and families with incomes between the federal poverty level and up to 4 times that amount to help reduce the cost of purchasing health insurance. That means an individual making up to $43,320 a year and a family of four making up to $88,200 a year will be eligible for this financial assistance. The amount of assistance will be determined on a sliding scale, which means the higher your income, the lower the amount of aid.

Can you provide an example of how the tax credit will work?

Here are three examples provided by the Internal Revenue Service in August 2011 to explain how the tax credits will work:

1. Family of Four with Income of $50,000, Purchases Benchmark Plan

  • Premium Cost for Plan Family Chooses: $9,000
  • Tax Credit: $5,430
  • What Family Pays: $3,570

2. Family of Four with Income of $50,000, Purchases Less Expensive Plan

  • Premium Cost for Plan Family Chooses: $7,500
  • Tax Credit: $5,430
  • What Family Pays: $2,070

3. Family of Four with Income of $50,000, Parents are between ages 55 and 64,
Purchases Benchmark Plan

  • Premium Cost for Plan Family Chooses: $14,000
  • Tax Credit: $10,430
  • What Family Pays: $3,570

I have a pre-existing condition. Am I eligible to buy insurance in the exchange?

Yes. Beginning in 2014, pre-existing conditions will be a thing of the past. No insurer can deny anyone health insurance based on health status, inside or outside the exchange.

Shirazi Benefits can help you navigate through all of this. 

 

Resource: Colorado Health Benefit Exchange.

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