One of the most trumpeted benefits of the Affordable Care Act is that all individuals will have access to affordable health insurance. The current plan requires on October 1, 2013 the healthcare exchanges will be available for individuals and small employers to purchase insurance plans.

So what is an exchange? Visualize the exchange as a healthcare marketplace. Some states are setting up their own exchanges, some are partnering with the federal government while others are deferring to the exchange being set up at the federal level. Individuals and small employers (under 50 FTE’s) will go online to the exchange web site and key in some basic information. Once this information is entered the business or individual will be presented with insurance carriers that serve that geographic area, multiple benefit plan options and rates.

It is anticipated that small businesses will need to provide the following information, business address, names, age and smoking status of each covered worker. The employer can then chose the plan that best fits their coverage needs and budget. The process will work identical for individuals, with the addition of income. If a business or individual needs assistance there will be a toll free number. This number will be answered by an exchange representative, called a Navigator, which can answer questions regarding the plans and coverage benefits. Most states are working with the insurance broker community to allow them to participate as well.

Carriers can offer up to four plans, bronze, silver, gold and platinum. Not all carriers will offer all four plans but there will be similarities between all bronze plans, as an example, to allow for side by side comparisons between carriers. This model follows closely with the model currently being used by Medicare Supplement carriers.

Underwriting will be limited to geographic location, age, and smoking status.
1. Geographic location ratings will be set, as it is currently, by the carriers and approved by the state. These geographic variances recognize the differences in costs of services based on location.
2. Age band rates will allow carriers to set rates based on age. There is a limit of 3:1, meaning that the highest rate cannot exceed three times the lowest rate, for age rating.
3. Smokers will be rated (increased) by up to 50%. The rate up for smokers cannot apply to anyone but the smoker. This is important because it will prevent a carrier from rating up an entire group if only one participant smokes.

There are still several issues to be decided regarding the exchanges. Seven states are adopting a model that will limit the number of carriers that will be allowed to participate in the exchange, called the contracting model. Four states have adopted a clearinghouse model which will allow all carriers that have a qualifying health plan to contract.

Since the target start date is October 1, 2013 there will numerous guidelines released in the near future. If you have questions regarding the Affordable Care Act and how it will impact your company, contact me at gary@illuminaregroupinc.com