Starting January 1, 2014, those who want to buy private health insurance for themselves and their families will be able to use these state-run exchanges to find better deals. Instead of searching individually for an insurer, you’ll be able to use the exchange to choose a private plan from a menu of options. Plans cannot refuse to sell you a policy and must comply with the new consumer protections.
Insurance plans will vary—from generous to modest—but each plan must include basic, comprehensive medical coverage and prescription drug benefits. As with the online travel services, you’ll be able to compare the plans’ costs and benefits head-to-head online. What policies will cost is not yet known, but there will be annual limits on how much you have to spend on your deductible and co-pays.
Subsidies or tax credits will be available if you have a low or moderate income. Americans who make less than 133 percent of the federal poverty level would be able to enroll in a newly expanded Medicaid program. For people with somewhat higher incomes (up to 400% of poverty), tax credits are provided to reduce premium costs.
Imagine that you decided you didn't like your current health insurance and you wanted to change it. Most employers offer few if any alternatives. Patients can decline insurance offered by employers but the cost for insuring individuals can be very expensive due in part to limited bargaining power with insurers. Providers can simply refuse to sell you health insurance, or they can increase your prices because of past illness. They can sell you a plan that's insufficient for your needs and that's thick with loopholes and technicalities.
The Health Insurance Exchange gives you another option. Unlike an employer, it will have a wide variety of competing providers offering different plans with varying benefit levels, emphases and costs. Unlike the individual market, insurers won't be able to discriminate based on your health history or your future risk. Plans will have to be certified as meeting a minimum level of comprehensiveness. Plans that routinely treat patients poorly will lose customers to competing insurers.
Creators of the concept hope to spur productive competition, increase efficiency, increase innovation and consumer power. If the health insurance exchange has lower prices and higher quality, more individuals are likely to buy coverage. The dominos continue to fall if more patients buy coverage from a specific plan, that plan will increase buying power for drug price and other economic negotiations. Eventually the exchange model could spur innovations in the delivery of health insurance to a majority of Americans.
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