Will N.C. Implement Obamacare-II What is an Exchange?
November 15, 2012 5 Comments
This is the second post in my series Will North Carolina Implement Obamacare? Here is the introductory post. This post addresses the question, “what is an insurance exchange?”
The big idea is to set up a market place where consumers can shop for private health insurance policies. A health insurance exchange is a website through which individuals or small businesses can purchase health insurance with subsidies from the federal government that are based on your income. Typically, paper and phone enrollment options are also available. In Massachusetts, the health insurance market available to individuals and small businesses created by Romneycare is called The Connector.
The goal of an exchange is to provide information about insurance choices (premiums, deductibles, physicians in a network, extra benefits, etc.) to consumers in a way that helps them make the best coverage choice for them. If you have picked an employer based health insurance plan, then you may have used a similar web interface that guides your choice (here is Duke University’s). An exchange will provide a place where an heretofore uninsured North Carolinian can purchase the plan of their choice without having to worry about being denied coverage because they are sick.
N.C. could decide to develop its own version of an exchange, in much the same way Massachusetts built its Connector,and California is well down the road to creating one. However, we also can decide to let the federal government create an exchange in our state. A federal exchange will piggy back on the infrastructure that is now used by Medicare beneficiaries living in N.C. who decide to enroll in one of Medicare’s private insurance-based options (known as Medicare Advantage). Below is a example of two Medicare Advantage plans available in zip code 27705 (Durham NC), shown just to give a sense of the type of information that must be communicated in an exchange (there are many plans available in 27705; this is just to give you a taste).
The first plan requires no premium beyond what is paid by Medicare to the private insurance company, while the second requires an individual to pay a $29/month additional premium. The consumer has to decide whether the extra premium is worth it. And so it will be in an exchange that is created by the implementation of the ACA. The point is to provide information to to consumers so that they can pick the plan that is best for them.
North Carolina could decide to set up our own exchange, in which case North Carolinians will be making the myriad choices and decisions required to operationalize an exchange for our State. My next post in this series will delve more deeply into the pros and cons of a state v. a federal exchange.