Health insurance exchange
Encyclopedia
A health insurance exchange is a set of state-regulated and standardized health care
plans in the United States
, from which individuals may purchase health insurance that is eligible for Federal subsidies. All exchanges must be fully certified and operational by January 1, 2014 under federal law.
as a governmental or quasi-governmental entity to help insurers comply with consumer protection
s, and to compete in cost-efficient ways, and to facilitate the expansion of insurance
coverage to more people. Exchanges are not themselves insurers, so they do not bear risk themselves, but determine which insurance companies are allowed to participate in them. Ideally, a well-designed exchange will promote insurance transparency and accountability, facilitate increased enrollment and the delivery of subsidies
, while also playing roles in "spreading risk", i.e., ensuring that the costs associated with those with high medical needs are shared more broadly across large groups rather than spread across just a few beneficiaries. This is what has occurred in the state-run Health Connector exchange in Massachusetts. Some hope that insurance exchanges also will help to contain overall health costs.
and California
in their failed exchanges.
One of these factors – “cherry-picking” of customers – will not be possible in the state-run exchanges mandated by the PPACA, because all insurance plans will be guaranteed issue
in 2014. Furthermore, the law will bring millions of new enrollees into the marketplace by way of the “individual mandate” requirement for all citizens to purchase health insurance – helping to reduce the issue of small market size.
On the date of enactment of the Patient Protection and Affordable Care Act of 2010, only a few health insurance exchanges across the country were up and running. Among them were the Massachusetts Connector, the Utah Health Exchange, and HealthPass, a New York-based, non-profit exchange. Advocates claim that these exchanges make these "markets" more efficient, providing oversight and structure. Supporters argue that this is because current health insurance markets in the United States are not well organized and have to deal with wide variations in coverages and requirements among different companies, employers, and policies.
There was a long struggle between Obama's advocates and free-market health care advocates over the question of a "public option", which would have created a federal public-benefit corporation subsidized to compete with the private companies in the exchange. Republicans and their allies eventually defeated this "public option" idea by arguing that the public nature of such a company would give an unfair edge over the private organizations in the exchange and would "unfairly out-compete" the private insurers. After a group of moderate Senate Democrats
and Joseph Lieberman joined Republicans in their objections to the public option, the PPACA was passed without a public option included, ensuring the insurance exchange would be inevitably composed purely of the private health insurers.
There are many other privately operated Health Benefits Exchanges in various states, including surprisingly in Massachusetts. These private exchanges, sometimes called marketplaces or intermediaries, work directly with insurance carriers effectively act as an extension of the particular carriers. Health Services Administrators (HSAInsurance.com) operates one of the largest benefits marketplaces in the nation,and is in direct competition with the comparable state's exchange in selling insurance to individuals and small groups. HSA has operated its insurance marketplace for over 40 years, significantly longer than the comparable state operated program, and does not use taxpayer funding to support its operation.
One of largest private health insurance exchanges in existence today is eHealthInsurance.com, created by eHealth, Inc (Nasdaq: EHTH), a company that was founded in 1998 and has insured well over 2 million people. The company offers over 10,000 health insurance products from over 180 insurance carriers nationwide. In 2010 eHealth, Inc. launched a government systems business to license its software to states and quickly won contracts in the state of Florida and Massachusetts in 2011.
An example of a large private exchange is Extend Health, Inc., which created the first private Medicare Exchange (MEHIX) in 2006. It offers 3500 plans from 70 carriers.
However, the public health insurance option was ultimately dropped from the reform legislation; the insurance sold on the health insurance exchange in the United States will therefore now be exclusively from the private insurers.
Health care
Health care is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans. Health care is delivered by practitioners in medicine, chiropractic, dentistry, nursing, pharmacy, allied health, and other care providers...
plans in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, from which individuals may purchase health insurance that is eligible for Federal subsidies. All exchanges must be fully certified and operational by January 1, 2014 under federal law.
Acronym
HIX (Health Insurance Exchange) is emerging as the defacto acronym across state and federal government stakeholders, and the private sector technology and service providers that are helping states build their exchanges. The acronym HIX differentiates this topic from Health Information Exchange, which has been designated HIE.Scope
Exchanges of this type were intended by the administration of President Barack ObamaBarack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
as a governmental or quasi-governmental entity to help insurers comply with consumer protection
Consumer protection
Consumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
s, and to compete in cost-efficient ways, and to facilitate the expansion of insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
coverage to more people. Exchanges are not themselves insurers, so they do not bear risk themselves, but determine which insurance companies are allowed to participate in them. Ideally, a well-designed exchange will promote insurance transparency and accountability, facilitate increased enrollment and the delivery of subsidies
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...
, while also playing roles in "spreading risk", i.e., ensuring that the costs associated with those with high medical needs are shared more broadly across large groups rather than spread across just a few beneficiaries. This is what has occurred in the state-run Health Connector exchange in Massachusetts. Some hope that insurance exchanges also will help to contain overall health costs.
Background
The private health insurance industry fears that restricted eligibility and a too-small market size could result in higher premiums, encourage "cherry-picking" of customers by insurers, and force a clearance of the exchange. This is what some believe happened in TexasTexas
Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...
and California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
in their failed exchanges.
One of these factors – “cherry-picking” of customers – will not be possible in the state-run exchanges mandated by the PPACA, because all insurance plans will be guaranteed issue
Guaranteed issue
Guaranteed issue is a term used in health insurance to describe a situation where a policy is offered to all applicants, regardless of the health status of the applicant...
in 2014. Furthermore, the law will bring millions of new enrollees into the marketplace by way of the “individual mandate” requirement for all citizens to purchase health insurance – helping to reduce the issue of small market size.
History
Although the House of Representatives had sought a single national exchange, when the Patient Protection and Affordable Care Act was passed, it split exchanges by state, in line with the bill that passed the U.S. Senate. States may choose to join together to run multi-state exchanges, or they may opt out of running their own exchange – in which case the federal government will step in to create an exchange for use by their citizens.On the date of enactment of the Patient Protection and Affordable Care Act of 2010, only a few health insurance exchanges across the country were up and running. Among them were the Massachusetts Connector, the Utah Health Exchange, and HealthPass, a New York-based, non-profit exchange. Advocates claim that these exchanges make these "markets" more efficient, providing oversight and structure. Supporters argue that this is because current health insurance markets in the United States are not well organized and have to deal with wide variations in coverages and requirements among different companies, employers, and policies.
There was a long struggle between Obama's advocates and free-market health care advocates over the question of a "public option", which would have created a federal public-benefit corporation subsidized to compete with the private companies in the exchange. Republicans and their allies eventually defeated this "public option" idea by arguing that the public nature of such a company would give an unfair edge over the private organizations in the exchange and would "unfairly out-compete" the private insurers. After a group of moderate Senate Democrats
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
and Joseph Lieberman joined Republicans in their objections to the public option, the PPACA was passed without a public option included, ensuring the insurance exchange would be inevitably composed purely of the private health insurers.
Private HIX
A private health insurance exchange is an exchange run by a private sector company or private nonprofit corporation. Health plans and carriers in a private exchange must meet certain criteria defined by the exchange management. Private exchanges combine technology and human advocacy, include online eligibility verification, and mechanisms for allowing employers who connect their employees or retirees with exchanges to offer subsidies. Private exchanges are designed to help purchasers find the best possible plan value personalized to their specific health conditions and doctor/hospital networks.There are many other privately operated Health Benefits Exchanges in various states, including surprisingly in Massachusetts. These private exchanges, sometimes called marketplaces or intermediaries, work directly with insurance carriers effectively act as an extension of the particular carriers. Health Services Administrators (HSAInsurance.com) operates one of the largest benefits marketplaces in the nation,and is in direct competition with the comparable state's exchange in selling insurance to individuals and small groups. HSA has operated its insurance marketplace for over 40 years, significantly longer than the comparable state operated program, and does not use taxpayer funding to support its operation.
One of largest private health insurance exchanges in existence today is eHealthInsurance.com, created by eHealth, Inc (Nasdaq: EHTH), a company that was founded in 1998 and has insured well over 2 million people. The company offers over 10,000 health insurance products from over 180 insurance carriers nationwide. In 2010 eHealth, Inc. launched a government systems business to license its software to states and quickly won contracts in the state of Florida and Massachusetts in 2011.
An example of a large private exchange is Extend Health, Inc., which created the first private Medicare Exchange (MEHIX) in 2006. It offers 3500 plans from 70 carriers.
President Obama's plan
President Obama promoted the concept of a health insurance exchange as a key component of his health reform initiative. Obama stated that it should be;-
- "...a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that's best for them, in the same way that Members of Congress and their families can. None of these plans should deny coverage on the basis of a preexisting condition, and all of these plans should include an affordable basic benefit package that includes prevention, and protection against catastrophic costs. I strongly believe that Americans should have the choice of a public health insurance optionPublic health insurance optionThe public health insurance option is a proposed government-run health insurance agency which competes with other health insurance companies. It is not the same as Publicly-funded health care. Called the public insurance option or public option, for short, it was a proposed health insurance plan...
operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest."
- "...a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that's best for them, in the same way that Members of Congress and their families can. None of these plans should deny coverage on the basis of a preexisting condition, and all of these plans should include an affordable basic benefit package that includes prevention, and protection against catastrophic costs. I strongly believe that Americans should have the choice of a public health insurance option
However, the public health insurance option was ultimately dropped from the reform legislation; the insurance sold on the health insurance exchange in the United States will therefore now be exclusively from the private insurers.
See also
- Health care reform in the United StatesHealth care reform in the United StatesHealth care reform in the United States has a long history, of which the most recent results were two federal statutes enacted in 2010: the Patient Protection and Affordable Care Act , signed March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 , which amended the PPACA and...
- Health care compared - tabular comparisons of the US, Canada, and other countries not shown above.