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Health-Insurance Exchanges Open Tomorrow: Here’s What You Need to Know

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health insurance exchange

Image courtesy of Flickr/Tax Credits

October 1 will be the first day millions of Americans will be able to start shopping for individual health insurance coverage in the new state-level exchanges.

But polls are telling us what we already know: most people are confused by the new offerings.

All of this comes despite millions of dollars spent by states and the federal government on trying to get the word out to people about signing up. Many states are airing TV commercials and giving out branded doodads, such as "Get Covered" sunscreen.

These efforts are in hopes that more healthy people—not just those with serious conditions—will buy insurance, which will decrease average coverage costs. Currently, healthcare spending eats up about one out of every five dollars in the U.S. each year, which comes out to about $2.7 trillion. And research has shown that with insurance, people are more likely to seek preventive care, lowering medical costs down the road. The new healthcare law requires all plans to offer a host of basic preventive services and treatments, including key screenings, preventive treatments, maternity and pediatric care as well as mental health services, among others.

To help clear up some of the confusion about what these exchanges are and what they offer, we have put together a quick guide.

These exchanges are a key feature of the 2010 Affordable Care Act, which aims to drastically reduce the number of uninsured Americans, lower medical costs and improve care. They were formed to help everyone be able to afford coverage so that they can comply with the so-called individual mandate—the requirement that most everyone have health insurance by 2014.

What is an "exchange"? Also known as healthcare "marketplaces," these are basically shops—accessed online, by mail and in person and operated differently in each state—where consumers can browse and purchase different health insurance plans. Residents will be able to compare various health plan prices and features side-by-side, much as you can when shopping online for, say, a new appliance. Just about anyone can shop for insurance through the exchanges. But those who already get adequate insurance, for example, through an employer or Medicare, or have incomes greater than about four-times the poverty line will likely not receive subsidies to help lower the cost of the insurance. And most employer plans still offer better value and more coverage than what is expected in the marketplaces.

Some critics of the exchanges and individual mandate predicted that they would limit competition among insurance companies and leave consumers with few choices and overpriced plans. However, this has not come to pass. In fact, among the states in which the federal government is helping to run the exchanges, people shopping for new insurance have multiple companies and an average of more than 50 plans to choose from.

Plan offerings and rates vary across different states—and even across different counties. But in an attempt to clearly distinguish the various options, plans across the country have been categorized as bronze (which have the lowest premium with highest out-of-pocket expenses), silver, gold and platinum (which have the highest premium and lowest out-of-pocket expenses). Catastrophic coverage (with very low monthly costs and high deductibles) is also going to be available to some, including those under 30.

Policy prices are based only your location, age and whether or not you use tobacco. No one can be denied coverage or charged a higher rate based on a preexisting medical condition. Individuals earning up to $46,000 a year—and families of four earning up to $94,000 a year—will usually receive tax credits that can be used right away to help offset the cost of buying insurance. So even though the sticker price of a policy might look high, those with incomes in these lower brackets will usually end up paying much less.

The Department of Health and Human Services announced last week that premiums are going to be even lower than anticipated because more companies are offering plans; the competition is driving rates down. The majority of people who are currently uninsured will pay less than $100 per month for insurance, said Kathleen Sebelius, the head of the agency. And many families might pay as little as $25 a month after the instant tax credits. (Although many of the lowest-cost plans offer a relatively small network of doctors and hospitals.) Small businesses are also getting assistance in providing health insurance to employees with tax credits and a program to help improve their bargaining power with insurance companies.

About seven million people who are either currently uninsured or are already buying individual policies on their own are expected to enroll in these new market-based plans. For self-employed people like myself, for example, the exchanges should lower monthly premiums while capping the amount of money that can come out of my own pocket each year for healthcare costs.

The federal government will be helping to run the exchanges in 34 states. The other 16 states (California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington) and the District of Columbia have set up their own exchanges. The federal government has budgeted about $4 billion for 2014 to run these exchanges—a sum that includes funds for public outreach efforts.

One of the goals of the Affordable Care Act is to move the country's healthcare system from service-based medical care—in which doctors and hospitals receive money for providing a treatment or test regardless of whether it ultimately helps the patient—to one based on results. But some physician groups have voiced concern that their members won't accept plans purchased in the new marketplaces because they are rumored to pay doctors less than many of the existing commercial plans. However, as the CEO of Dean Health Plan in Wisconsin told MedPage Today, doctors will likely get more money from patients covered under the new exchanges they would if the patients were uninsured or if they had Medicaid. And more people with some form of insurance will likely mean more people overall using primary care.

Most individuals who do not have insurance for 2014—whether through their employer, an exchange-based program or other means—will face a penalty levied by the IRS of either $95 or 1 percent of their income—fees that will increase in coming years.

Although the exchanges "open" on October 1, coverage purchased there between then and December 15 won't begin until January 1, 2014. Open enrollment will be available until the end of March. Following that, open enrollment will be October 15 through December 7 of each year except for those experiencing major changes, such as marriage or job loss. People can find information about their state's health insurance exchange and shop for policies at www.HealthCare.gov.

The views expressed are those of the author and are not necessarily those of Scientific American.

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