How to Buy Health Insurance on Private, Federal and State Exchanges

By Kate Ranta on May 4, 2023 @ 03:10 PM

What does it all mean, and how do you use it?

As a consumer in a world after health care reform was passed, you may understandably be intimidated. It can all be extremely confusing and there are lots of terms and concepts thrown around. It’s enough to leave you dizzy!

There is the whole online “health care exchange” thing. We know it takes some time to wrap your head around all of it. First, there are private exchanges that benefit companies have in place. Then there are public exchanges offered by the federal government and individual states. What are the differences between them? Let’s try to make some sense of it all, so you’re on the right track for your health needs.

What is a health insurance exchange?

It is an online marketplace that allows people to compare and purchase health insurance plans. There is always an open enrollment period where you can make your choices and have a time window to make changes. If you experience a qualifying life event (birth/adoption, loss of previous benefits), there can be a special enrollment period. The passage of the ACA means you cannot be denied health insurance coverage or charged more because of a pre-existing condition.

Private Exchanges

Many companies in the U.S. have turned their attention to private exchanges for employee benefits. If your company is one of them, what does it mean for you and your family?

Well first, we should clarify. Private health care exchanges are not part of the federal or state marketplaces mandated under the Affordable Care Act (ACA). Those were created so individuals could shop for and buy health insurance on their own.

Private exchanges are operated by benefit companies and allow individuals and employees to sign up for benefits. The benefits company negotiates with the employer on behalf of their employees.

Now what are the upsides—and downsides—of health benefits through a private exchange?

Upsides

Private exchanges allow you the flexibility to compare and purchase plans that meet your needs. Your costs are based on stipends put in place by your employer. They can include how much you pay out of pocket before the insurance shares the cost. The plans will typically offer flexibility and be based on the demographics of the employees (age ranges, physical nature of the work).

Downsides

Employers across the board normally pay the same percentage of health premiums (around 20 percent for single coverage and 32 percent for family coverage). However, some employers opt for a fixed premium dollar amount. Meaning, the employer would pay part of the amount, and you would have to pay the rest. There is concern that private exchanges signal deterioration in employee benefits—that employers will use the fixed rate to avoid having to pay a certain percentage of health insurance costs.

Shopping Tips

You will be able to choose from a “menu” of health plans that your employer has chosen. You know best what health care services you and your family will need. If you get stuck, it is worth talking to your HR representative and looking over the enrollment materials provided by your employer. It’s also worth having some personal information at your fingertips. This can make the enrollment process more straightforward. The information can include:

Last year’s tax returns for you and your family
Projected income for the year
Medical history
Social Security numbers
Employer and income information for every member of your household who needs coverage (for example, pay stubs or W-2s)
Policy numbers for any current health insurance plans under which members of your household are covered.

Federal and State Exchanges

The federal health insurance marketplace was created with the passage of the ACA. It allows the American public—particularly individuals and small businesses—to secure health insurance that fits their needs. The state exchanges were also developed with the same goal in mind, such as the New York State of Health and Covered California.

These public exchanges are intended to be a simpler way for people to buy health insurance. With one application, you can find and compare plan options, see if you qualify for lower costs, and choose coverage to suit your healthcare needs and budget. You can make apples-to-apples comparisons of plans.

Upsides

There are three critical words: Essential Health Benefits. These are services that must be covered under all health plans. They include but are not limited to:

Pediatric dental services
Ambulatory patient services
Emergency services
Hospitalization (such as surgery)
Maternity and newborn care
Mental health and substance abuse services
Prescription drugs
Coverage for dependents up to age 26
Additional preventive care for women and children at no cost (contraception, breast cancer screenings, autism screenings for children at 18-24 months)

Downsides

It’s no secret the federal health exchange website has had its share of technical difficulties over the years. And for people who do not qualify for subsidies they may have trouble with the cost of marketplace health insurance plans. There is also the potential issue of having a smaller network of doctors and dentists to choose from. Some providers do not accept public health plans, due to ACA provisions. Patients are not on the hook for previous service costs if they lose their coverage. And the insurance will only pay doctors for visits during the first 30 days.

Shopping Tips

Without a doubt, the concept of purchasing health insurance on your own—and online—is a momentous change. However, there is homework and responsibility that goes with it. You will need to find out if your state has its own exchange. If it does not, you will need to use the federal exchange. A simple Google search can let you know. Once you are on the federal or your state website, you can sign up using basic information including your family size, tax information, income, and medical history. You don’t want your enrollment to be slowed down due to lack of documentation. Tip: Be honest with your answers—health insurance is taxed, and you may be eligible for premium tax credits!

Phew! Got all that? We know it is difficult to understand it all. It’s a lot to take in. But with some research and organization, you can leverage these exchanges to make the best health care choices for you and your family.