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By 2014, the health insurance market will be flooded with 30 million more Americans purchasing plans through “health insurance exchanges.” Created by the reform law, these online marketplaces will make purchasing a health plan “more like buying plane tickets or a home appliance,” according to Health & Human Services Secretary Kathleen Sebelius. An interesting idea, but what exactly does that mean?
To find out, we spoke with Julie Appleby of Kaiser Health News for a Health Exchange 101 and looked at the exchange experiment already underway in Utah. Then we turned it over to you to ask Sebelius — the top Obama administration official charged with overseeing the implementation of the exchanges — your own questions about the big changes coming to the insurance marketplace.
Our inbox was soon flooded with messages from viewers throughout the nation. Below are the secretary’s answers to a representative sample of your questions:
“therealcost”: I still don’t understand how exchanges will save money. You can already compare plan benefits and costs on Esurance or with an agent. This info is already available. Is it like Orbitz, where I might get a deal? Do the exchanges create a larger pool to spread the costs among?
HHS Secretary Kathleen Sebelius: Exchanges are much more than any health insurance website you have ever seen or used before.
Affordable Insurance Exchanges will offer Americans competition, choice, and clout. Insurance companies will compete for business on a level and transparent playing field, driving down costs. Exchanges will have the same purchasing clout as large businesses and will give consumers a choice of plans to fit their needs and their budgets.
Exchanges will provide consumers with an innovative new online tool that will help you take control of your health care by connecting you to new information and resources that will help you access quality, affordable health care coverage. Exchanges will combine information about public programs, from Medicaid to the Children’s Health Insurance Program (CHIP), with information from private insurance plans. Even better, Exchanges will automatically sort through your options to identify the ones that may be right for you or your small business.
Exchanges build on a number of important changes to the insurance marketplace, changes that will increase competition, bring more healthy people into the insurance risk pool, and assure that health care delivers higher value at an affordable price. The Affordable Care Act ensures that premiums will only be based on age, location, and whether someone is a smoker, making insurance available and affordable to those who need health care. Insurance companies will no longer be able to charge women higher premiums than men simply because of their sex. And people with pre-existing health conditions will no longer be turned away. By expanding insurance pools to include healthier people, too, we will spread the risk of illness among a larger number of people, making coverage affordable for both.
Here are some of the many ways Exchanges will save you money:
Insurers must compete for business on price and quality. New rules make sure that it will no longer be profitable for insurers to cherry pick the healthy and leave others on their own.
Advance premium tax credits. Exchanges will make advanced tax credits available to low- and moderate-income people and families that will dramatically reduce monthly premiums and cost sharing. With premium tax credits, the savings range from $9,900 for a family of four with income of $33,525, to $3,500 for a family with an income of $78,225.
Exchanges will provide better information to help people choose high value plans – including clear information about quality and satisfaction, side by side with information about price.
Exchanges may choose to negotiate directly with health plans about benefit design and premiums, using their market power to reduce costs.
Small employers, the group least likely to offer health benefits to their workers due to the high cost of coverage today, will be able to shop for coverage in state-based Small Business Health Options Program (SHOP). They will be able to offer their employees a choice of insurers and plans like the choices offered by America’s largest companies and state and federal governments. Employees will be able to apply employer contributions toward coverage they choose that meets their family needs and budget.
- And, in 2014, smaller employers with lower average wages who offer health insurance through the SHOP will be eligible for a tax credit of up to 50 percent for their contributions to the cost of coverage, reducing costs to both employer and employee.
These are real savings for families and businesses that struggle to afford insurance today. In fact, the Congressional Budget Office estimates that, excluding tax credits, savings from the Exchange will range from 14 to 20 percent. About half of these savings come from increasing the size of the insurance risk pool and attracting healthier enrollees, while the other half will come from efficiencies and the new rules in the market, such as eliminating insurance underwriting.
“Joe in Denver”: What will be the role of my local insurance agent/broker in relation to the health care exchange? Will they be allowed to generate quotes to individuals and small businesses and bind coverage through the exchange? Does the exchange just mean a larger market for my agent to shop for me through?
HHS Secretary Kathleen Sebelius: Affordable Insurance Exchanges in each state will have flexibility to determine what role agents and brokers will play. An Exchange may allow agents and brokers to assist consumers with applications for advance payments of the premium tax credit and cost-sharing reductions and enroll individuals, employers, and employees in qualified health plans. States will also maintain their current role licensing and overseeing agents and brokers.
Brokers play a particularly important role in the small group market, providing a variety of services and insurance products to employers, helping them and their employees choose plans, and providing ongoing client support.
“Avdm”: How will coverage through a health care Exchange work for the self-employed? What will the lowest federal standard be?
HHS Secretary Kathleen Sebelius: Affordable Insurance Exchanges will allow self-employed people to get coverage through the Exchange. Self-employed people may also be eligible for an advanced premium tax credit to reduce the cost of coverage even further.
In 2014, coverage in both the individual and small group markets will be guaranteed and premiums will be based only on age and family composition (and possibly location and smoking status).
Also, self-employed people who hire at least one person who is not either an immediate family member or another owner will qualify for coverage through the Small business Health Options Program (SHOP), and could also be eligible for the small business health care tax credit.
“Joe Schofield”: When the new exchange environment is implemented, will I simply have a few more coverage options from the same state-by-state “monopoly” insurance companies, or will the exchange actually diversify the providers I am able to choose from?
HHS Secretary Kathleen Sebelius: Affordable Insurance Exchanges will increase competition among insurers and choice of insurance options, ensuring that people in all parts of the United States have a choice of health insurance plans.
In addition to existing plans, Exchanges will include at least two new ‘multi-state’ plans. Eventually, both will be available in every state. That will help increase competition and choice for consumers.
“Daniel from New Orleans”: I am self-employed and have an individual insurance plan. One of my frustrations right now is that plans are good only in a single state or metro area. I lived in three different states in the past year for my work and have left my coverage in the state where I started because of the hassle of changing and the worry that whatever plan I switched to could be worse than what I currently have. Will there be any national plans offered in the new exchanges or did that possibility die with the public option?
HHS Secretary Kathleen Seblius: The health care law requires national plans be offered in each Affordable Insurance Exchange in every state and will be available to both individuals and small employers. Also, other plans in any given Exchange are likely to be offered by insurers with nationwide networks of providers, allowing for coverage outside a given state or metro area. But when a person moves from one state to another, they will need to choose their coverage in the Exchange in their new home state.