Insurance Exchanges Required in the Federal Patient Protection and Affordable Care Act

Insurance Exchanges Required in the Federal Patient Protection and Affordable Care Act

Get your questions answered on healthcare reform and how it affects your business!

The Washington Restaurant Association has retained the services of healthcare expert Donna Steward to help educate the restaurant industry and individually answer member questions. Every week, we will conduct a toll-free conference call where members will be able to ask questions relating to the healthcare issue and receive a response on the spot. This is a member-only benefit to WRA members.

The sessions take place every Friday through the end of April and begin at 10am and will end at 11am. The next conference call is this Friday, March 15 at 10am PST. The call-in number is 1-800-582-3014, participant access code is 699019287.

To read other FAQs or listen to recordings from previous calls click here.

The federal Patient Protection and Affordable Care Act (ACA) requires the establishment of health insurance exchanges in each state.   The exchanges have two primary functions:  1) to provide a forum for interested individuals and small employers to review and compare health plans offered for sale in the exchange; and 2) to determine whether individuals interested in purchasing coverage in the exchange are eligible for federal premium subsidies.   The law provides three options for the creation of the exchanges: 1) individual states can administer a state-based exchange that meets the federal requirements and adheres to current and future federal rules; 2) states can partner with the federal government and share administrative responsibilities; or 3) the federal government can administer the exchange in the state.

Washington state has chosen to develop a state-based exchange and in accordance with the federal law, is on track to open the Washington exchange for enrollment in October, 2013.  The first day of coverage for those who enroll in the exchange will be January 1, 2014.  More information on Washington’s exchange may be found at

The following are frequently asked questions regarding the health exchanges:

Who can get coverage in the exchange?

Any individual interested in purchasing coverage from the new Washington state program will be allowed to do so.  Individuals with incomes between 100-400% of the federal poverty level (FPL) will be eligible for federal subsidies if they choose coverage in the exchange.  In addition to individuals, small employers will also be able to purchase small employer group policies in the exchange.  At this time, large employers (those with more than 50 employees) are excluded from the exchange.

When will the exchange be open in Washington?

Individuals and small employers will be allowed to enroll in the exchange beginning in October, 2013.  However, coverage will not begin until January 1, 2014.

I am a large employer that already provides health coverage, why should the exchange be of interest to me?

The exchange could be an additional resource for large employers only providing coverage to full-time employees.  With the onset of the individual mandate, under which all individuals throughout the country must demonstrate they have health coverage, part-time employees and other employees not covered by your health plan may put increasing pressure on you to provide them with coverage in your plan.  Rather than just saying no to their requests, you can choose to refer them to the exchange where they can find coverage, and may also receive a federal premium subsidy to help pay for the coverage.  This option exists for all employers in all states, regardless of whether or not the state has chosen to operate an exchange.  Since exchanges must be operational in all states regardless of the state’s decision, there will be an exchange option available for all individuals throughout the country.

What kind of health care coverage will be available in the exchange?

In the state of Washington, only health policies that have been certified as “qualified health plans” by the Office of the Insurance Commissioner may be sold in the exchange.  These plans must meet all of the coverage, metal tier and essential health benefit requirements included in the federal law, plus any additional requirements determined by the state.

Which insurers will be selling coverage in the exchange?                                                   

It is too early to tell which insurers will be selling coverage in the exchange.  However, all of the insurers individuals and small employers are currently familiar with (Group Health, Premera, Regence, United, etc), have expressed an interest in providing such coverage.  In addition, certain insurers that are currently providing coverage only in other state programs such as the Medicaid program, have also expressed an interest in providing individual coverage in the exchange.  It is thus possible there may be new insurers enrollees have to choose from as well.

I am a small business owner, will my only choice for coverage be through this new state program?

NO!  A private market for all purchasers will continue to exist along with the state exchange.  Employers should look at all possible options before selecting coverage.  This may require independent research along with the assistance of an agent or broker.  Employers of all sizes should check into all private market options including association health plans (AHPs) offered through professional organizations, retail memberships such as Costco, and local chambers of commerce or other business organizations.  AHPs can be of particular benefit to small employers as they can in most instances offer small employers more affordable large group rates instead of standard small group rates.

I heard some states decided they are not going to do an exchange, can they do that?

Yes.  As mentioned above, states had three options to choose from regarding an exchange in their state.  They could administer a state exchange where the state would pay the administrative costs and control some of the design elements while adhering to federal laws and rules regarding its form and function; they could partner with the federal government and split some of the responsibilities and costs of administering the program; or they could decline to participate and the federal government would be responsible for making sure people had access to applicable coverage, likely enrollment in the Federal Employees Health Benefit Program or something similar.

In the situation you heard about, it is likely those states chose to let the federal government administer the exchange option in their states.  Contrary to some concern, this would not constitute some type of federal government takeover of health coverage in those states.  The states that choose to not have state involvement with the exchange actually have more flexibility to develop alternatives to meet the needs of the uninsured in their states.  They will likely maintain very healthy private markets and individuals seeking coverage from the exchange in those states will be just those seeking the federal subsidies.  The federal footprint will actually be smaller in those states.

How much will coverage cost in the exchange?

The final details regarding available health plans and premiums are still being finalized.  It is not likely small group coverage will be remarkably less expensive in the exchange than it is in the private market, especially if a fee is added to the cost of coverage in the exchange to pay for administrative costs.  Many of the new insurers interested in providing coverage in the exchange are interested in only individual coverage, not group coverage so while individuals may see a slight reduction in premiums from this year’s costs due to increased competition, that is not likely to be the case for small employers looking for group coverage.  However, it is important to note that the federal government will be helping insurers cover losses in the exchange during the first two years.  With this extra support, some insurers may offer lower premiums knowing that if they do experience losses, they can tap into federal dollars to cover the losses.

Donna Steward, President, Kiawe Public Affairs

This publication is intended to inform employers about provisions of the Patient Protection and Affordable Care Act and how those provisions may affect them.  This information should not be construed as legal or tax advice, and readers should not act upon the information contained therein without professional counsel.

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