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What is the Difference Between Private and Federal Exchanges?

What is the Difference Between Private and Federal Exchanges?

Posted Feb 06, 2014 by Jenifer Dorsey

The term health insurance exchange is being used a lot lately. We hear about state exchanges, the federal exchange, public exchanges, private exchanges and even Obamacare exchanges. While some of  these labels are used interchangeably, they are not necessarily the same things. There are a few distinctions to be made.

State, federal and public exchanges
On Oct. 1, 2014, open enrollment began for health insurance purchased through the Health Insurance Marketplace. The Health Insurance Marketplace is a blanket term for the state-based and federally facilitated health insurance exchanges created as a result Affordable Care Act. This marketplace was designed to help make health insurance more affordable and accessible to more Americans and is sometimes referred to as the public exchange.
 
All states are required to offer an exchange to their residents. The structure varies slightly, however. When the health care reform law passed, states were given three options:

  • Create and operate their own exchange
  • Use the federal government’s exchange
  • Partner with the federal government

Regardless of which option they selected, all states must comply with certain rules established by the health care reform law. The Obamacare exchanges, as they are also known, allow individuals and families as well as small group employees to shop for health insurance that is considered minimum essential coverage. Minimum essential coverage includes plan options within the four actuarial metal levels as well as the essential health benefits and fulfills the requirement that most Americans have health insurance.
 
Plans sold via the Health Insurance Marketplace may qualify for financial assistance in the form of premium tax credits and cost-sharing subsidies. Eligibility is income-based. People may also apply for Medicaid through the exchanges. Exchanges in some states also sell adult dental insurance plans; however, they are not required to do so and dental insurance does not qualify for financial assistance.
 
HealthCare.gov is the federal exchange website. States responsible for their own exchanges have created their own websites. Those in partnership situations may have their own informational state website and use HealthCare.gov for enrollment. To find out where to shop in your state, click here.
 
Private exchanges
Health insurance exchanges existed before the Affordable Care Act. Much like the Health Insurance Marketplace, private exchanges offer a place to shop for individual and small group health insurance coverage. They are typically set up by nonprofit organizations, brokers and health insurance carriers.
 
While they may offer health insurance that qualifies as minimum essential coverage under the Affordable Care Act, plans purchased through them do not qualify for tax credits and other financial assistance. Participating carriers tend to be smaller than those participating in the state-based and federally facilitated exchanges. Furthermore, additional types of health insurance benefits may be offered.
 
This option is often appealing to small group employers who want to give their employees multiple health insurance plan options rather than attempting a one-size-fits all solution. In a private exchange, employers can set a defined contribution amount and allow employees to spend it on different products and plans they feel are best suited to the needs of themselves and their families.
 
Private marketplace
You may also hear the term private marketplace. This a general reference to health insurance coverage sold away from the public exchanges.  All individual major medical insurance coverage sold on or away from the Health Insurance Marketplace must meet the Affordable Care Act’s requirements. That includes essential health benefits, not denying people coverage or charging them more based on health history, and plan options that fit within the actuarial metal levels, among other provisions. Plans sold in the private marketplace do not qualify for financial assistance.
 
If you are uncertain where to buy health insurance, contact one of healthedeals.com’s certified health insurance advisors at 888-839-7679. They can help you determine your options on and away from the Health Insurance Marketplace.

Jenifer Dorsey is a freelance writer whose specialties include health and fitness, wellness, sports and recreation. She is a competitive amateur track cyclist who also enjoys mountain biking, hiking, camping and other outdoor adventure. Jenifer received a B.A. in journalism from Columbia College Chicago and is an MFA candidate at Naropa University. She lives in Colorado.