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What Is a Health Insurance Exchange?

By Aditi Mukherji, JD | Last updated on

What is a health insurance exchange? The Patient Protection and Affordable Care Act's Health Insurance Marketplaces, or Exchanges, are designed to provide an affordable alternative to buying coverage directly from individual health insurers. The exchanges will be open for business beginning October 1, allowing consumers to shop for health plans.

So what do consumers need to know about these new Marketplaces? Here are a few common questions about Obamacare's Health Insurance Exchanges and, more importantly, answers to those questions:

Understanding Obamacare


About This Series: From the Editor

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What Are Health Insurance Exchanges?

A Health Insurance Exchange is an online marketplace where shoppers can research all their options and then buy health insurance.

With one Marketplace application, you can learn if you can get lower costs based on your income, compare your coverage options side-by-side, and then choose to enroll.

While private companies will be offering all of the insurance plans, either your state or the federal government will run the Marketplace.

How Do Health Insurance Exchanges Work?

Each Marketplace website gathers the health coverage options available in your area in one place. You can compare plans based on price, benefits, and other factors important to you before you make a choice. Plans will be presented in four categories -- bronze, silver, gold, and platinum -- to make comparing them easier.

Bronze-level plans have the lowest out-of-pocket costs and higher monthly premiums, while platinum-level plans have the highest out-of-pocket costs and lower monthly premiums. However, if you qualify for subsidies, your premiums may be significantly lower. (We'll cover subsidies in a separate blog post later this week.)

All insurance plans on an exchange have to offer some core benefits -- called "essential health benefits" -- like preventive and wellness services, prescription drugs, and coverage for hospital stays.

What Are Consumers Supposed to Do?

If you already have health insurance (through your employer, for example), then you don't need to do anything.

For others who are shopping for health insurance, you can fill out an application checklist. Also, find out which entity runs the Marketplace in your state by using federal website's menu. If your state runs its own Marketplace, then you'll use your state's website; if your state hasn't set up its own Marketplace, then you'll use the federal one. Each website also explains the process in greater detail.

Again, open enrollment starts October 1, which is when applications will become available. Coverage starts as soon as January 1, 2014. Open enrollment is set to end March 31, 2014.

What happens, though, if you choose not to have health insurance? Check back tomorrow, as our "Understanding Obamacare" series covers the potential penalties for not being insured under Obamacare.

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