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Ask the Health Insurance Expert

I've been hearing about "health exchanges" since health care reform passed. What are they and how do they work?

The Affordable Care Act calls for federal and state governments to set up health insurance exchanges in every state by 2014. States can set up the exchanges themselves; in states that fail to take action, the federal government will step in to create the exchanges.

The exchanges will serve as one-stop shops for purchasing individual and small-group health insurance policies sold by private health insurers. The policies will have to meet certain federal standards, and they'll be designed so it's easy for consumers to compare prices and benefits.

Each exchange, for instance, must offer at least one plan in each of five levels:

  1. Catastrophic
  2. Bronze
  3. Silver
  4. Gold
  5. Platinum

Out-of-pocket costs, premiums, benefits and other details will vary by state, but each state must use a standard format for describing coverage to minimize confusion.

Another big change coming in 2014 is a prohibition on discrimination by insurers against pre-existing conditions. Today it's tough to get coverage for a health problem you already have when you shop for individual health insurance. In 2014, you'll be able to get insurance, no matter what your health condition is.

You'll also be required to have health insurance in 2014, a provision known as the individual mandate, or you’ll face a stiff tax penalty. Congress included the mandate to provide a large enough risk pool to enable insurers to cover pre-existing conditions and meet other standards of the law.

Health insurance exchanges will be open only to individuals and small businesses at first, but starting in 2017, states will have the option to open them up to large employers as well.

For more, see how health insurance exchanges will work.

Last updated: Mar. 3, 2011