There are still many questions regarding the health care exchanges and Medicare Pathways believes the more important facts about health care exchanges that are available will help everyone understand what to expect when the exchanges open for enrollment. As such, Medicare Pathways has searched and found the following important facts about health care exchanges that will assist in understanding the exchanges and what will happen to expect when the exchanges open for enrollment.
Important Facts about Health Care Exchanges: A health care exchange is a web portal to purchase insurance
A health insurance exchange is a web (or internet) portal where individuals and businesses can shop for and purchase health insurance plans. There will be two types of exchanges throughout the United States that will impact employee benefits:
- Public exchanges facilitated by the state and/or federal government
- Private exchanges facilitated by private industry stakeholders (insurance providers, brokers or benefits consultants)
Important Facts about Health Care Exchanges: Public health insurance exchanges will open for enrollment October 1, 2013, for an effective date of coverage of January 1, 2014.
The Health Care Exchanges will open for small business and individuals to enroll on October 1, 2013, for coverage to go into effect by January 1, 2014. Exchanges facilitated by the state and/or federal government are expected to provide an online marketplace for individuals and small employers.
These health insurance exchanges will be open for:
- Individuals without access to affordable employer-provided health insurance coverage
- Small businesses
Note: Employer provided health insurance coverage is considered affordable when the employee’s required contribution does not exceed 9.5% of their annual income.
In 2017, state based exchanges may make provision for businesses with more than 100 fulltime employees to purchase employee benefits plans through public health care exchanges.
Important Facts about Health Care Exchanges: Private exchanges generally provide “cost controlling” options for businesses of all sizes
Unlike the public exchange, private exchanges have more flexibility, because they are not associated with federal guidelines from the Patient Protection and Affordable Care Act (also known as “PPACA”) and the Department of Health and Human Services (also known as “HHS”). Private exchanges will offer health coverage options to multiple workforce segments and sizes. Additionally, private exchanges can sell all products and services, including voluntary insurance, unlike public exchanges, which can only offer medical and dental insurance. Many of these exchanges help employers to move toward a defined contribution model that can help better control health care costs, while still offering employees robust benefits options through defined contribution.
Important Facts about Health Care Exchanges: Tax subsidies are only available through a public exchange
Only public exchanges assess and determine an individual or small business’ eligibility for a premium tax credit to help offset the cost of coverage and defray some costs associated with using health care services. Therefore, subsidies and credits may not be available to individuals and employers purchasing coverage through a private exchange. These credits and penalties can include the following:
Tax Credits and Penalties
Individual credits: Individuals with household incomes between 100% and 400% of the federal poverty level are eligible for tax subsidies if they are not eligible for affordable employer-provided coverage.
Small business credits: Small businesses may be eligible for a tax credit of up to 50% of their premium payments if they have 25 or fewer full-time equivalents whose average annual wages are no more than $50,000. While it is still too early to tell exactly how competitive the exchanges will be, tax credits coupled with the options in the exchanges may help your business to provide cost-effective workplace benefits.
Penalties: Employers with at least 50 fulltime equivalents must offer minimum essential health coverage to their fulltime employees or face a penalty. In some cases, it may be cost effective for employees to purchase coverage through the exchange, despite the employer’s responsibility to pay a penalty.
Important Facts about Health Care Exchanges: Coverage will be available in Tiers
“Silver” coverage, or the 70/30 coverage option, will be the public exchange benchmark. State exchanges will have many unique characteristics, but each will offer four levels of coverage, which vary depending on the proportion of medical expenses the insurance plan is expected to cover. Of these plans, a “silver” plan (one that pays 70 percent of medical expenses or actuarial value) will be the benchmark for calculating subsidies. Individuals can “buy-up” to other plan levels, as well as dental coverage. Additionally, they can purchase voluntary insurance outside of the public exchange.
The Health Care Exchange Plan Tiers are as follows:
- Bronze: plan pays 60 percent of medical expenses (actuarial value)
- Silver: plan pays 70 percent of medical expenses
- Gold: plan pays 80 percent of medical expenses
- Platinum: plan pays 90 percent of medical expenses
Important Facts about Health Care Exchanges: Exchanges affirm the importance of employee education
Health insurance reforms and exchanges will provide employees with the option to purchase insurance directly from the individual market, so individuals will need to better understand both their options and health risks. While the Patient Protection and Affordable Care Act requires businesses to communicate to employees about exchanges and potential eligibility for tax subsidies, employees will be responsible for deciding how they spend their health care dollars. As some employers move toward defined contribution plans, employees will be in control of how they use and add to their employer’s contribution. As health care costs continue to be a concern for many Americans, it is increasingly important for employees to understand their benefits options, make smart benefits decision, and wisely manage their health care dollars.
Important Facts about Health Care Exchanges: Voluntary products work with major medical coverage to provide a safety net
Whether purchased at work or through a private exchange, supplemental policies work together with major medical insurance to help provide protection to policyholders. As health care costs continue to rise, these policies help provide an extra layer of financial protection for employees without adding to the employer’s overall cost of benefits. Unlike major medical insurance, these policies pay cash benefits directly to the policyholder (unless assigned otherwise) if they get sick or injured, and are a way to offer a broader benefits package to the business’ workforce without adding to the employer’s benefits costs.
As more information is made available Medicare Pathways will try to keep you up-to-date on the status of the Health Care Exchanges and what to expect. Medicare Pathways wants you to stay informed regarding all things insurance!
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