HEALTH Insurance Exchanges

Health insurance exchanges are marketplaces that facilitate the comparison and purchase of health insurance coverage for individuals and businesses. Established in the United States primarily through the Patient Protection and Affordable Care Act (ACA) in 2010, these exchanges aim to enhance consumer choice and decrease insurance costs through competition among providers. By allowing consumers to review multiple options, the exchanges encourage insurers to improve their offerings, which may include government-supported plans and fully private policies.

The concept of health insurance exchanges has historical roots dating back to the 1970s, with various proposals emerging over the decades, culminating in the ACA's establishment of regulated exchanges. Other states, like Massachusetts and California, have successfully implemented their own exchange models prior to the ACA, demonstrating how such systems can assist residents in navigating their health coverage needs.

Despite the intended benefits, health insurance exchanges have sparked considerable debate, particularly regarding their regulation, accessibility, and impact on insurance costs. Critics question the legality of federal mandates for health insurance exchanges, while supporters assert their necessity in providing transparent and equitable access to healthcare. Ultimately, health insurance exchanges represent a significant development in the ongoing dialogue about healthcare accessibility and consumer rights in the United States and beyond.

Published in: 2021

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Subject Terms

HEALTH Insurance Exchanges

Abstract

Health insurance exchanges are marketplaces in which companies and individuals can compare and purchase healthcare insurance coverage. In the United States, the Patient Protection and Affordable Care Act, signed in 2010, established new or supported existing healthcare exchanges in each state. Some of the health insurance policies featured on the exchanges are supported by government funding while others are fully private. When citizens search a healthcare exchange they are given information regarding other government funded healthcare programs such as Medicaid. The existence of local and national healthcare exchanges is a frequently debated political topic.

Overview

Health insurance exchanges exist to help consumers find and compare health insurance options. They are designed on the premise that if consumers are able to examine multiple options, then insurers will have to offer superior coverage or risk losing their customers. Additionally, it is hoped that health insurance exchanges are able to decrease the cost of insurance through competition, driving companies to compete to provide the best prices to consumers (Dafny, Gruber & Ody, 2015). While debate is primarily centered on the health insurance exchanges mandated by the Patient Protection and Affordable Care Act (ACA), the concept of a health care exchange goes back to the 1970s when scholars began to consider new ways to provide health insurance. Many proposals were created at this time, though legislation seldom was taken up in either house of Congress.

The Clinton health care plan was proposed in 1993 during Bill Clinton's presidency. This plan was designed to provide universal health care to all citizens of the United States. Despite much debate, this policy was rejected. Yet, politicians continued to discuss the theory behind health insurance exchanges. These debates were fueled by the desire to ensure that citizens had access to high quality health care while maintaining the ability for consumers to choose their own health coverage. Debates were also affected by the reality that many citizens receive their insurance through their employers, which means that in many places it is the employers, not the individuals who are making health care decisions. Further, consumers who did not have employer-provided health insurance were generally priced out of the insurance market or relied on very minimal coverage.

Other solutions have been proposed on a local or state level. For example, in California, the California Public Employees Retirement System has long offered a health insurance exchange. This program, frequently abbreviated as CalPERS provides insurance coverage for state employees as well as those who work for public schools and associated agencies. Health insurance provided by CalPERS has undergone many changes since it was first designed in 1961. Contemporary users of CalPERS can access the program's webpage and search for both private health insurance and Medicare information. Providing information for both public and private health insurance has been used as a model for larger health insurance exchange programs, such as those required by the ACA.

Another state level program is the Massachusetts Connector health care exchange, one of the most successful exchanges. This exchange was established in 2006 as part of a larger health care reform program, which required that all citizens of Massachusetts purchase health care, and that all citizens who earned less than 150 percent of the federal poverty level be provided with free health insurance. The Massachusetts Connector helped these citizens, both those that were paying full price for health insurance and those that were receiving government subsidized health insurance, to find and sign up for their insurance plans (Politi et al., 2014).

Nationally, some Medicare plans are similar to the health insurance exchange mandated by the ACA. Members search through a variety of health care options, and pricing for those options is typically favorable because it is offered at rates negotiated by the government. Additionally, many exchanges created by the ACA provide information about Medicare and Medicaid. However, the ACA regulation also prohibits listing or selling Medicare supplements through health insurance exchanges.

The United States is not the only country to offer health care exchanges. They are also common in Belgium, the Czech Republic, Germany, the Netherlands, and Switzerland. The Swiss exchange requires that health care providers offer their policies at a set rate, which means that everyone is charged the same amount for health coverage. Swiss plans are affordable to many citizens, but are limited and do not offer additional coverage such as dental insurance, which means that citizens must buy additional coverage for some services (van Ginneken, Swartz & Van der Wees, 2013). The Swiss, partially because of their health insurance exchange, have one of the best ranked health care systems in Europe.

Many health insurance exchanges include educational outreach programs, advertisement schemes, and other efforts to get citizens to use the exchange and sign up for health care. This is particularly important for poorer or underserved communities in which many people have never had health insurance. These citizens are frequently at a disadvantage because they are required by law to purchase coverage, but they do not know where or how to purchase it. Additionally, health insurance exchange pages can be confusing, dense with information, and hard to navigate; many exchange shoppers need help to understand the presented information. Scholars studying why individuals do not have coverage have found that some of these underserved individuals do not understand the terms used when presenting health care coverage (Politi, 2014). Others have found that while insurance exchanges work for many demographic groups, there is still work to be done in meeting the needs of the poorest users of health insurance exchanges (Stone, 2017).

Further Insights

Health insurance exchanges are organized by government offices, which regulate what companies are able to offer coverage. Often the government sets a minimum level of coverage that is acceptable and will not agree to list any plans that offer less than that standard level. In some cases, companies have changed the medical services that are covered so that they are eligible to be listed on the health insurance exchange. For example, insurers may be required to offer both behavioral and medical coverage, or the exchange may allow behavioral coverage to be listed separately so that consumers can compare plans by focusing on what aspects of health care insurance they need (Barry, Huskamp, Goldman & Barry, 2015).

Critics argue that health insurance exchanges are an unfair regulation of the private insurance market. The Massachusetts Connector exchange allows only "high-value" insurers. This means that citizens purchasing coverage through the exchange are guaranteed to be buying coverage which meets a basic level of care. For the insurance companies that are listed, this gives an extra amount of advertisement—the company can prove its value because it has been approved by the government. However, companies that are not approved by the government risk losing customers who use the exchange to find new health coverage that offers better care and services.

Some health insurance exchanges are open to anyone living in a state or country. Others are open only to members of a specific group, such as employees of small businesses, members of a union, or a demographic group such as students under thirty. Health insurance exchanges frequently work hard to enroll younger citizens in health insurance schemes. The reason for wanting their enrollment is that younger citizens are typically healthier—they typically pay into a health insurance scheme without demanding many services in return.

Insurance providers refer to the probability of an insured person using medical services—and thereby accessing the benefits of a policy—as a "risk." Younger customers are considered to pose a lower risk to insurers than older customers, and some companies charge younger customers less for their coverage because of their lower risk. Historically, insurance companies generally have refused to cover customers who are considered high risk; those insurers who would cover high-risk clients charged them extra. The ACA requirement that all citizens have health care coverage, and the provision in many health insurance exchanges that such coverage be of high quality changes these coverage of these policies and also changes the ways that health insurance companies assess risk.

The effects of the ACA exchanges on insurer participation in some states has been mixed, with some companies withdrawing from the competition. Some companies have changed their policies so that they can keep customers, who are now able to use the exchange to assess their other coverage options. Other companies have changed their policies so that they will attract new customers who are using a health insurance exchange to purchase coverage for the first time (Weiner, Trish, Abrams & Kemke, 2012).

Issues

Insurance exchanges have a large effect on the health insurance economy. Some of these benefits are positive. For example, health insurance becomes more transparent when it is regulated by a health insurance exchange because consumers are able to understand exactly what is and what is not covered by their policies. This understanding is particularly necessary for consumers with specific health needs. Many insurance plans, especially the lowest priced plans, do not cover cancer services, rehabilitation, psychiatry, or counseling for substance abuse. If a consumer needs these services, then they also need to be able to access detailed information outlining which plans make these services available (McGuire et al., 2014).

Additionally, consumers are able to understand more easily how a health insurance company should collect information, process payments, and make changes to a patients' coverage. Insurance exchanges also are designed to increase the number of citizens who have health insurance by making it easier for consumers to find policies that meet their needs. Some legislation that mandates health insurance exchanges also requires that all citizens purchase a minimum amount of health care coverage. This requirement boosts health care sales. Additionally, changes to health care requirements for coverage listed in exchanges are designed to save the government money by encouraging citizens to seek preemptive care through well-visits rather than wait to get care until they must be seen in an emergency room, at which point care is much more expensive and is often borne by hospitals (which distribute the cost among patients who are able to pay, thus driving up the costs of hospital care) and local taxpayers.

Much of the debate regarding health insurance exchanges has focused on the effects of these marketplaces on consumers and insurance companies. However, some politicians and scholars have debated if federal government mandated health insurance exchanges are legal, or if they are even a good idea (Rigby & Haselswerdt, 2013). These debaters point to the regulation set forward by the federal government and ask if the federal government has the right to make such legislation. In doing so, they are using the idea of federalism. In this political theory, the federal government has limited powers, each of which is outlined in the Constitution. All other rights and responsibilities—such as mandating and regulating health care—are presumed to have been left to the states to regulate.

Critics reject health care exchanges not necessarily because they think that they are bad but because they believe that the federal government does not have the power to pass laws regarding health care. Other scholars argue that the founders of the United States were not able to predict all modern questions and needs, such as those about health care. As such, it is not possible to use the constitution as a guide to determine which entity—the federal government or state government—has the right to pass health care regulations.

Politicians made specific arguments against the ACA when it was first passed in 2010. Some of these arguments were about the changes made to the eligibility standards used by Medicaid. Many scholars expected that health insurance exchanges would be safe from these debates. They argued that both Democrats and Republicans had a history of supporting health insurance exchanges. For example, the Massachusetts Connect program on which the ACA exchanges are based was widely attributed to Republican Governor Mitt Romney. However, Republicans in Congress objected strenuously to the ACA. Some believe that greater regulations placed on health insurance will increase the cost of being insured. Others argue that the government should not be attempting to regulate markets, and the health insurance exchanges, on both national and local levels, overstep the government's authority. Still others reject specific parts of the ACA and certain regulations placed on insurance plans listed in health insurance exchanges. For example, the Roman Catholic Church has argued against health insurance exchanges that require insurers to offer contraception in order to be listed. Despite these objections, many states are still working to support and improve their health insurance exchanges.

Terms & Concepts

Federalism: The political philosophy of division between national and state rights. American supporters of federalism argue that the national, also known as federal, government has all of the rights and responsibilities outlined in the Constitution. States have all of the rights and responsibilities which are not mentioned in the Constitution. Because health insurance is not mentioned in the U.S. Constitution, federalists argue that the national government is not legally allowed to regulate health insurance.

Health Insurance Marketplace: Another term for a health insurance exchange. The term marketplace is used instead of exchange to increase the accuracy of discussions. Supporters of using the phrase "health insurance marketplace" argue that the phrasing indicates that health insurance can be bought through the program. Using the term exchange, they argue, leads consumers to believe that they can change their health insurance coverage, but not acquire new coverage.

Obamacare: The ACA quickly became known as Obamacare because the legislation was supported by and attributed to President Barack Obama. The term was first used as a pejorative by opponents in political discourse. However, the term was affectionately appropriated by supporters and has continued to be used after the end of Obama's presidency.

Patient Protection and Affordable Care Act (ACA): Legislation signed into law in 2010 which aims to provide health care to all Americans. Part of this legislation calls for the establishment of health insurance exchanges, which allows citizens to compare and purchase health care.

Universal Health Care Coverage: This political theory argues that all citizens, regardless of their age, economic status, employment, or prior health, deserve to have health care. Many citizens support the idea of universal health care coverage, however, there is much disagreement about how that coverage should be provided, what is necessary health care, and what level of service should be provided.

Bibliography

Berry, K. N., Huskamp, H. A., Goldman, H. H., & Barry, C. L. (2015). A tale of two states: Do consumers see mental health insurance parity when shopping on state exchanges? Psychiatric Services, 66(6), 565–567.

Dafny, L., Gruber, J., & Ody, C. (2015). More insurers lower premiums: Evidence from initial pricing in the health insurance marketplaces. American Journal of Health Economics, 1(1), 53–81.

McGuire, T. G., Newhouse, J. P., Normand, S. L., Shi, J., & Zuvekas, S. (2014). Assessing incentives for service-level selection in private health insurance exchanges. Journal of Health Economics, 35, 47–63. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=96242785&site=ehost-live

Politi, M. C., Kaphingst, K. A., Kreuter, M., Shacham, E., Lovell, M. C., & McBride, T. (2014). Knowledge of health insurance terminology and details among the uninsured. Medical Care Research and Review, 71(1), 85–98.

Rigby, E., & Haselswerdt, J. (2013). Hybrid federalism, partisan politics, and early implementation of state health insurance exchanges. Publius: The Journal of Federalism, 43(3), 368–391.

Stone, P. W. (2017). The problem with insurance exchanges and the need to provide health coverage for the working poor. Nursing Economics, 35(5), 226–227.

van Ginneken, E., Swartz, K., & Van der Wees, P. (2013). Health insurance exchanges in Switzerland and the Netherlands offer five key lessons for the operations of US exchanges. Health Affairs, 32(4), 744–752. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=86873366&site=ehost-live

Weiner, J. P., Trish, E., Abrams, C., & Lemke, K. (2012). Adjusting for risk selection in state health insurance exchanges will be critically important and feasible, but not easy. Health Affairs, 31(2), 306–315. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=74530914&site=ehost-live

HEALTH Insurance Exchanges

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Subject Terms

HEALTH Insurance Exchanges

Abstract

Overview

Further Insights

Issues

Terms & Concepts

Bibliography

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