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Can you save with a health exchange?

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Highlights
  • States face a deadline to have a certified health exchange up and running.
  • Only two states, Massachusetts and Utah, have functional exchanges so far.
  • "The whole purpose of the exchange is to provide some cost containment."

In less than three years, millions of Americans will obtain health insurance, many for the first time, through a health exchange mandated by the Patient Protection and Affordable Care Act.

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What is a health exchange? How will they operate? And most importantly, will they save you money?

The answers are beginning to crystallize as states invent their own versions of these new entities.

According to HealthCare.gov, a health exchange is a transparent and competitive insurance marketplace where individuals and small businesses can compare and buy affordable and qualified health insurance plans that meet certain benefit and cost requirements. Exchanges also will interface with state and federal programs, including Medicaid, to offer subsidies to qualifying individuals.

States face a Jan. 1, 2013, deadline to have a certified health exchange up and running, one year ahead of the individual mandate that requires most Americans to obtain health insurance. If a state is not ready, the federal government reserves the right to operate an exchange for them.

2 states, different exchanges

Only two states -- Massachusetts and Utah -- have functional exchanges so far, and they couldn't be more different.

Massachusetts has state-mandated health coverage and features two exchanges within its Health Connector: Commonwealth Care for those who qualify for government subsidies, and Commonwealth Choice, which offers affordable gold-silver-bronze coverage plans from nine competing carriers. The Health Connector is considered a prototype for Affordable Care Act exchanges.

"What Massachusetts does is, they put the participating insurance companies through a bid process once a year and the products have the exact same benefit," says Brian Carroll, CEO of Small Business Service Bureau, an administrator for Commonwealth Choice. "Like a travel site, when everybody has a ticket from Boston to Miami, you just compete on price."

The Utah Health Exchange, by contrast, serves as a Web portal where consumers can learn about and purchase health insurance online. It also enables employees of participating small businesses to select a health plan under their employer's policy that best suits their needs. Just one year old, the exchange is operated under the Governor's Office of Economic Development.

"We have four carriers participating as state providers, and we actually have 146 registered plan designs from those four carriers," says Patricia Conner, director of the Office of Consumer Health Services in Utah.

Anne Gauthier, senior program director of the National Academy for State Health Policy, a nonpartisan organization that helps states with health policy and practice, says most state plans will likely fall somewhere between these two models.

"Massachusetts tends toward exchange-heavy and Utah toward exchange-light," she says. "Every state's approach to policy goals will determine the structure and rules under which their exchange operates."

3 ways to structure an exchange

Gauthier says states face three basic structural options:

  • Run the exchange as a state agency under the governor;
  • Run it as a quasi-public agency governed by a board (California has chosen this model); or
  • Run it as a state-established nonprofit.

States also can choose to participate in a regional health exchange under the Affordable Care Act, though Gauthier views this option as unlikely. "That makes sense in some ways, but it's challenging enough to make these decisions within one state, let alone across borders and political systems and environments," she says.

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