Health Insurance Exchange: A new insurance marketplace
Who remembers what shopping for an airline ticket used to involve? Price shopping was done by calling individual airlines or a travel agent. Finding the best deal was frustrating and time-consuming. Then online discount airfare companies changed this process forever. The White House is hoping to drive a similar change in the way people purchase health insurance by creating a new insurance marketplace called a Health Insurance Exchange. The approval of the Affordable Care Act (ACA) in March of 2010 started a wave of sweeping changes and initiatives. They are aimed at reforming the healthcare provider and insurance industry in the wake of unsustainable cost growth.
The Health Insurance Exchange section of the ACA calls for the creation of a new insurance marketplace in each state that allows individuals, families and small business owners without coverage to pool resources and increase their buying power to make insurance more affordable. Commercial insurance companies will list their plans on the Exchange under Gold, Silver and or Bronze plan categories. They will compete for business, based on cost and quality under a base set of Exchange rules. Health Insurance Exchanges, if successfully implemented, could make shopping for different medical coverage plans easier and more transparent, the same way online discount airfare companies did for the travel industry. Health Insurance Exchanges, whether state or federally funded, are set to go live in January 2014. Fifteen states have indicated intent to create their own Exchanges. However, the majority of states, including Virginia, have declined, defaulting to the federally-funded Exchange.
The advent of a common insurance marketplace, coupled with new requirements for employer-sponsored healthcare coverage and the whole issue of Medicaid expansion, has many people wondering if a major wave of people will seek coverage through the Exchange. With the new ACA requirement mandate that companies with 51 or more employees (full-time equivalents) provide health insurance or face a $2,000 fine per employee (excluding the first 30 employees), many people expect a significant number of Exchange customers.
Small businesses are an important part of the Lynchburg economy. For the Lynchburg Chamber of Commerce, 82.9 percent or 714 companies have less than 100 employees. A more sensitive issue could be a potential economic incentive for medium to large-sized companies to drop their current group coverage, pay the $2,000 fine per employee and give each employee a stipend to offset the purchase of their individual coverage on the Exchange. In total, this may be a more cost effective strategy, although it could lead to an offset in either the recruiting or retention of top talent. Exchange participation also could grow based on smaller companies, which historically have not provided coverage, accessing more competitive pricing on the Exchange for their employees.
State Medicaid expansion may provide another potential boost. The controversial Supreme Court ruling in June 2012 upheld the Medicaid expansion provision as part of the ACA, but eliminated the federal government’s enforcement ability (withholding federal Medicaid dollars) should states refuse to participate. The state participation question currently breaks down by the following: 10 states will not participate, five (including Virginia) lean towards non-participation, five lean towards participation, 18 will participate and 11 are undecided/no comment. An estimated 400,000 currently uninsured Virginians could qualify for Medicaid under the new rules and access coverage on the Exchange should Virginia choose to participate.
There are still many questions about how Exchanges will operate. Will the new marketplace open on time in January 2014 and, most importantly, who will be shopping for insurance coverage? Insurance companies and businesses alike will be watching and preparing for this new development.