Health Insurance Exchange Explained: Understanding the Basics

Health Insurance Exchange explained

Health Insurance Exchange Explained

Starting in January 1, 2014 every citizen in the United States with the exception of few individuals will be required to have Health Insurance, or pay a Health Insurance Tax. The individuals that are not able to afford to purchase health insurance or meet the new standards that are part of the Medicaid Expansion will be offered subsidies or the chance to enroll in Medicaid based on their states decision. You can also use our Health Insurance Tax calculator to see if you will qualify for a subsidy based on your income level.

One major component of Obamacare will be the establishment of Health Insurance exchanges. These Health Insurance Exchanges will be setup either by the State, or by the federal government. Open enrollment will open on October 2013, and the benefits and new health insurance plans will go into effect on January 1, 2014. The concept of having a private marketplace for health insurance is something that is brand new to the United States. Individuals have always either gotten Health Insurance as part of their employers benefit package, or have had to dole out a superfluous amount of money for COBRA. “What is a Health Insurance Exchange?,” and “What are the guiding principles to create the state exchanges ?”

What is a Health Insurance Exchange?

A Health Insurance Exchange in the case of Obamacare will be a marketplace established to help individuals, and small businesses shop and compare various health insurance products on the basis of plan options, costs to employer, and costs to individuals, service, quality and benefits. The goal of the Health Insurance exchange is to decrease the overall cost of Health Insurance products by creating a pool of individuals to help reduce the risk and costs associated with  Medical and Healthcare. Creating the Health Insurance Exchange pool also decreases overall transaction costs and increases market competition resulting in lower costs to the consumers.

Ultimately a Health Insurance Exchange allows its participants or customers to reap the benefits from the pooled risks, and leverages economy of scales and efficiencies that many large businesses currently enjoy.

Starting in October 2013 when open enrollment begins, The Health Insurance Exchanges will help all participants browse, choose, and select, affordable health insurance plans and packages that fit their health needs and budgets.  The Health Insurance Exchanges will also support individuals that receive subsidies or tax credit from Federal or State health care programs such as Medicare, Medicaid, and CHIP.  The Goal of the Health Insurance Exchange, State run or Federal run is to provide a one source shopping for all state residents with regards to Health Care Plans.


Health Insurance Exchange Efficiency 

According to the HHS Principles and Priorities of exchange establishments; Exchanges must bear in mind the fees that are charged to three group’s individuals, small businesses, and the federal government A working exchange must have the ability to establish rules that will allow fair competition on price and quality of service.  It must have the ability to quickly redesign and modify its business plans to meet any local market conditions that may impact cost and quality of service rendered by insurers, agents, and other business partners. The exchange must have the ability to constantly evolve with the goal of maximizing value for consumers.

Health Insurance Exchange and Adverse Selection.

According to the HHS Principles and Priorities of exchange establishments Successful Exchanges must have the ability to insure there is a homogenous consumer group within the exchange. The consumer group must be a random pool of healthy and the less healthy participants.  The tax credits, which can only be accessed through the Exchanges, and insurance reforms required by the Affordable Care Act will reduce the potential for adverse selection against the Exchange. States should establish proper controls to have the autonomy to regulate such rules inside and outside the Exchange to prevent any sort of exclusion or adverse selection of any participants.

Health Insurance Exchange Streamlined Access.

According to the HHS the government will provide and support the state with funds where necessary to help establish a streamlined enrollment process, this may include additional support in verifying tax eligibility and subsidies. This is in effort to ensure that consumers will experience a seamless access to service for all Health Insurance Exchange Consumers.

Health Insurance Exchange Financial Accountability. 

According to the HHS Section 1313 will help provide efficient  and non-wasteful cost of administration of the Health Insurance Exchanges, A Successful Health Insurance exchange should have the mechanism in place to provide quick and efficient enrollment and minimize expenses; while implementing policies to prevent waste, fraud and abuse;

Health Insurance Exchanges; Will soon be established throughout the United States. This is the time to start learning on how these changes will impact your Health Care. Read more here


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