A Basic Explanation

You may have heard the term “health insurance marketplace” or “health insurance exchange” in the news lately. It’s a key element of the Affordable Care Act (ACA) — the big health reform laws that started rolling out in winter 2013-2014.Since these terms get used in a lot of places, we thought it might be helpful to explain what they mean.

Expert Advice About Government Marketplaces

First off, know that “exchange” and “marketplace” mean exactly the same thing. When the law was first drafted, officials used the word “exchange.” As the new health insurance law is marketed to the general public, you’re more likely to hear the term “marketplace.”Health insurance marketplaces — a big part of the health reform law — rolled out on October 1, 2013. Marketplaces are meant to make health insurance shopping much, much easier.

There are three places to shop for health insurance:

  • State Marketplaces
    For 2015, 14 states plus the District of Columbia are operating a state-based marketplace (SBM) for consumers and/or small businesses.
  • Federal Marketplace
    Currently, the other states are relying on the federally-facilitated marketplace (FFM). This means that the federal government is operating the marketplace. The FFM website is called healthcare.gov.
  • Web Brokers
    Web brokers are private companies that help you shop for health insurance. Some web brokers (like GetInsured) have an agreement with the government and can help you access federal tax credits to save you money on your health insurance.

Many states are promoting education and outreach programs. Yet questions remain. Here are five things you need to know about health insurance marketplaces:

  1. They are pro-consumer:
    Shopping on the open market for insurance can get pretty overwhelming; benefits and costs vary so widely that it’s hard to choose wisely. The main idea behind the marketplaces is to try to even out those variations by gathering your options (based on your area) and making it straightforward to compare and contrast by price, benefits offered, and other features. That standardization puts you, the consumer, in the driver’s seat, explains Timothy Jost, health-law professor at Washington & Lee University in Lexington, Virginia. “You can look for your doctors, or the prescriptions you need, and see what plans have that covered, for example,” he explains. Another consumer-friendly aspect built into the system, he notes: “Qualified plans in the marketplaces have to be accredited, which means that if you’re looking at a plan, you know it’s a good one,” and that you’re not going to get ripped off.
  2. Marketplaces increase competition… and (hopefully) decrease premium rates.
    Once marketplaces are established in a state, insurance companies will be spurred to compete with each other. “It’s presumed that competition will happen on price,” says Jost, benefiting the consumer. In fact, according to a recent report by the U.S. Department of Health & Human Services (HHS), insurance premiums in the marketplace will be nearly 20 percent lower in 2014 than previously expected.
  3. You’ll be able to apply for financial help easily.
    The first thing that happens when you go online to seek insurance through a marketplace: You’ll be asked if you need financial help to afford it. If you say yes, you’ll be directed to a series of questions designed to calculate what you can afford to spend, and how much of a tax credit you might be eligible for to cover the rest (the law provides subsidies in the form of tax credits, which may in some cases be paid directly to the insurance company so you are not out of pocket). You may also find out that you’re eligible for Medicaid or CHIP (the Child Health Insurance Program).
  4. Your choices vary dramatically by state.
    Marketplaces were intended to be run by the individual states, but as it stands not all states will have marketplaces. If you live in a state that will not run its own Marketplace, you can still buy a plan through a federally-run Marketplace. Even in states with their own systems, your plan choices will vary depending on where you live. According to Jost, some states may only have one company operating within its borders. On the other hand, he adds, some states with very active marketplaces are negotiating with insurance companies to provide even more cost benefit for consumers.
  5. There are no “wrong doors.”
    Applying for insurance can be done online, by mail, or by phone. But one thing you can be assured of is that if you start out at the “wrong” place (say, you go on a government website to buy insurance thinking you’re not eligible for financial assistance), you’ll be directed to the correct place, which is by design; the whole process is taken care of with one application. “You will get into the program that’s right for you,” says Jost.