State exchanges can be thought of as state-run marketplaces for insurance plans. In an online community, plans are compared based on pricing, coverage, quality, etc. Under a state exchange, enrollees are pooled together, similar to an employer group in the traditional insurance model. Because of these large pools of enrollees, the insurers can spread risk and administrative costs and therefore can offer plans at a lower rate to individuals.
Insurance companies that choose to sell their products through an exchange will be required to comply with consumer protections in the Affordable Care Act, such as offering insurance to every qualified applicant. Exchanges will contract with the insurance companies, who will in turn make their products available for purchase. Exchanges will direct people to appropriate Qualified Health Plan products that fit their financial requirements or will direct them to the Medicaid product for which they may be eligible. To make exchange coverage more affordable, certain individuals will receive premium assistance in the form of federal tax credits. In addition, some recipients may also receive subsidies toward cost-sharing expenses.
An exchange can help small businesses provide affordable coverage choices to their workers and allow employees to choose the plan that is best for themselves and their families. Employees will be able to use contributions from one or more employers to purchase coverage. They may retain their coverage if they become self-employed, lose their job or change jobs. An exchange can also simplify the administration of health insurance for small businesses and allow them to focus on growing their business instead of managing health insurance.
Functions of State Exchanges
The Affordable Care Act requires that state exchanges:
- Operate a toll-free hotline and website for providing information;
- Ensure that health insurance plans meet certain standards (for example, related to marketing, access to health care providers, and reporting on quality of care);
- Provide information in a standard format to help consumers compare insurance companies and benefit plans;
- Determine eligibility for individual premium tax credits, cost-sharing assistance and coverage requirement exemptions;
- Determine eligibility for Medical Assistance;
- Determine eligibility for small business premium tax credits;
- Provide real-time enrollment in health benefit plans;
- Make an electronic calculator available to display the cost of coverage;
- Communicate with employers regarding employee tax credit eligibility, cancellation of coverage, etc;
- Establish a Navigator program that connects applicants to an individual or organization who assists consumers and businesses to navigate an exchange.
An exchange will be available to individual consumers and small businesses with up to 100 employees when it opens for enrollment effective January 1, 2014. Exchanges may limit small business eligibility to those with less than 50 employees prior to 2016. Large employers may be allowed to participate in 2017.
Types of Exchanges
A state-based exchange will be responsible for establishing and operating the exchange, certifying qualified health plans, developing electronic, streamlined, and coordinated eligibility and enrollment systems, conducting consumer outreach, and ensuring the financial sustainability of the exchange.
A partnership exchange allows the state and federal government to assume responsibility for a defined set of activities within the exchange. States entering into a state-federal partnership exchange may administer plan management functions, in-person consumer assistance functions, or both, and HHS will perform the remaining exchange functions.
Federally-facilitated exchange - HHS will perform all exchange functions.
What is the difference between a federal insurance exchange and a state-run health insurance exchange?
In general, federal and state exchanges should work the same way. Consumers shopping in either type of exchange will choose among insurance plans. However, differences between federal and state exchanges are likely to be subtle, but important to some consumers.
States that establish their own exchanges, for example, can decide which insurers participate and whether to require benefits beyond those set under federal law. They can accept all insurers whose policies meet the law's requirements, for instance, or limit participation by requiring that insurers meet specific quality or pricing guidelines.
California, for example, has chosen to limit the number of insurers, which they say allows them to choose the highest value plans, while Colorado's model will accept all plans that meet the requirements. The federal exchanges will accept all qualifying plans.
States that build their own exchanges can also decide whether to be more proactive in selecting insurers that offer benefits targeted to a state's particular needs. For example, a state with a high rate of diabetes might select insurers with special programs to combat diabetes.
Some exchanges and state insurance commissioners will be able to recommend whether specific insurers should be allowed to sell in the exchange, partly based on their patterns of rate increases.
In response to the Affordable Care Act, 23 states and the District of Columbia have plans to operate state-based exchanges. Seven of the exchanges will be in partnership with the federal government. The remaining 27 states plan to default to federally facilitated exchanges. View the map below to see which states will operate state-based exchanges:
View Map of State Exchanges
State Exchange Websites
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico*, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah*, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming
*In New Mexico and Utah, the federal government runs the exchange for individuals while the state will run the small business, or SHOP exchange.