One of the fundamental components of last year’s health care law is the creation of health care “exchanges.” While the law itself remains mired in controversy and threats of repeal, the state-based programs, if and when fully implemented, should make it easier for small-business owners and individuals to compare and select health care coverage. Exchanges are intended to create a competitive marketplace and increase access to affordable health care insurance.

The exchanges are a variation on the Small Business Health Plan (SBHP) option endorsed by SEMA members over the past decade. They are also different. A core concept behind SBHPs was to create national competition by allowing companies to purchase insurance across state borders. That may eventually happen with the exchanges, but they will first focus on creating and managing competition within state borders.

It may take a few years before the exchanges are in full operation, but the following should help SEMA members understand what is on the horizon.

Q: What is a health care exchange program?

A: An exchange is a marketplace where small-business owners (100 or fewer employees) and individuals can purchase health insurance plans in their state based on price and quality. The intent is to create a transparent and standardized method for comparing policies and understanding benefits and coverage. Plans will be divided into four types based on the level of benefits: bronze, silver, gold and platinum.

Q: How does an exchange work?

A: Each state will develop a web-based portal to buy health insurance. Small businesses and individuals can use the marketplace website to comparison-shop different insurance options. Most states are still developing the exact structure of their exchanges, but they will work within uniform federal standards.

Q: Will all states have exchanges?

A: Under the health care law, states are given the option to establish their own exchanges, form regional or multi-state exchanges (smaller-population states may opt for regional programs) or not participate. Should a state fail to establish an exchange by January 1, 2014, the federal government will establish the exchange. The federal government can begin that process if it determines by January 1, 2013, that a state has not made a sufficient effort to create an exchange.

Q: Who will be allowed to purchase insurance from exchanges?

A: Initially, exchanges will be available to employers with 100 or fewer workers and individuals purchasing their coverage (without access to employer coverage). In 2017, states will have the option of allowing larger companies to participate. States have the option of combining the individual/small group markets within one exchange or creating two separate exchanges. The small group exchanges are referred to as Small Business Health Options Program.

Q: What will health care coverage offered in the exchange include?

A: The federal government will establish an “essential benefit package” that defines minimum benefits to be covered within the four different exchange plan levels. The federal government is still developing those standards, which are scheduled to be released by the end of 2011. Once the standards are issued, states will begin to design their exchanges in accordance with federal guidelines. Not every state program will be the same, and many states are currently considering how their individual programs will be governed and regulated.

Q: How much will coverage included in exchanges cost?

A: Health care premiums will be different depending on the amount of coverage included per plan and location. Insurers are prohibited from raising premiums based on gender or health condition. In addition, annual health care deductible payments made before insurance payments take effect will be limited at $5,950 for individual plans and $11,900 for family plans.

Q: Can employers still work with insurance agents and brokers to obtain coverage for their employees?

A: Yes. Most states plan to include an option for businesses and individuals to enroll in an exchange-based coverage plan through a certified, licensed independent agent or broker. If you are currently working with an agent or broker, that person will be able to assist in determining which plans within the exchange provide the most reasonable coverage and assist in understanding the relationship between state and federal mandates in the new health care law. However, per federal law, insurers will not be required to sell plans within the exchange.

Q: How will exchanges help me as a small-business owner?

A: According to the U.S. Department of Health and Human Services (HHS), exchanges should increase competition in an open market of private insurance plans by pooling them together. Therefore, small-business owners can comparison shop and increase their health insurance purchasing ability in the marketplace. The exchanges will also provide small-business owners with tools to compare benefits, price and quality of coverage.

Q: Is there already a website that will help me find health insurance?

A: Yes. HHS has created an informational website (www.healthcare.gov) that outlines how the health care law is being implemented. It includes helpful information on insurance options, tax credits and comparisons between different coverage types. The website is being constantly updated. The website will eventually link to the exchanges in order to create a one-stop shop for finding health
care insurance.

As states continue to develop their exchange programs, SEMA’s government affairs office will keep members informed to make the best choices possible for their businesses. For more information, please contact Dan Sadowski, congressional affairs manager.