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How health insurance exchanges will work

health insurance exchangesPeople who don't receive health insurance coverage through a large employer will have a new range of options when states start operating health insurance exchanges.

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The purpose of the exchanges is to provide access to affordable health insurance to those who don't get medical benefits at work. All Americans will be required to obtain health insurance coverage starting in 2014.

Right now, it's very difficult for patients with chronic conditions to buy coverage on the individual market because insurers can refuse to cover them or charge such a high rate that the coverage is unaffordable. The exchanges are intended to solve that problem.

Under the health care reform law, the Patient Protection and Affordable Care Act, each state must establish a health insurance exchange by 2014. If a state declines to do so, the federal government will set one up for that state.

"You can look at it like a shopping mall for insurance," says Ron Goldstein, president of CHOICE Administrators, the administrative arm of the CaliforniaChoice Exchange, based in Orange, Calif. You’ll be able to view details for the carriers and health plans available in your state.

Health insurance plan levels

Each exchange will have several health insurance plans to choose from with a range of benefit levels and prices. The plans must meet certain benefit and cost standards. For example, each exchange must offer at least one plan in each of five levels: catastrophic, bronze, silver, gold and platinum. The exact out-of-pocket costs, premiums, benefits and other details will vary by state. To make it less confusing for consumers, each exchange must use a standard format for describing coverage.

"Each state is at a different starting point," observes Martha Saenz, a policy associate at the National Conference of State Legislatures. But while each state will govern its own exchange, they will have to work within federal guidelines.

Individuals and small employers (up to 100 employees) can use the exchanges. You can choose the health plan that meets your needs by using the exchange’s website or calling a help line. An insurance agent can also help you choose coverage within an exchange and enroll you in the plan.

In addition to the selection of health plans, exchanges with educational services will help consumers understand their options. The health insurance companies that sell coverage within the exchanges must justify premium increases and post this justification on their websites. Dental, vision and life insurance will not be available on the exchanges, although limited pediatric dental plans will be available.

Goldstein points out that there will be no denials of coverage within the exchanges. In addition, pricing won’t be based on your health status. States will be required to review requests for rate increases, too. In other words, health insurance companies operating within exchanges will be on a tight leash.

If you already have group health insurance through an employer, that coverage will continue as before, and you don't have to use an exchange.

You will also be able to buy individual health plans outside of the exchanges, says Goldstein, if you’re looking for value-added services and benefits that aren’t in the pre-defined plans.

Health insurance subsidies

Individuals who meet a certain income threshold (133 percent to 400 percent of the federal poverty level) will qualify for a premium subsidy through the exchanges if they aren't receiving coverage through an employer, Medicare or Medicaid. You can't get a premium subsidy if you enter the exchange as part of a small-employer group, even if your income is low enough.

As the states develop their programs, more details about how the exchanges will work will be released in the next few years.

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