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The health insurance exchange landscape

Monica Noether, Sean May, and Matt List, CRA Insights, June 2013

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A central feature of the Patient Protection and Affordable Care Act (ACA) is the establishment of exchanges to “offer Americans competition, choice, and clout” when purchasing health insurance. These exchanges are intended to provide access to affordable health insurance coverage for individuals not covered by Medicaid or lower cost, employer-based insurance, i.e., individuals currently uninsured or covered by individual or small group insurance plans. The ACA requires that states establish an operational exchange by January 1, 2014, which can either be operated by the state or rely wholly or partially on the federal exchange. In either case, the exchanges are expected to provide a forum for competition among insurers to provide plans that meet the criteria of access to insurance regardless of health status; partial standardization of plan design, including mandated coverage of certain “essential health benefits”; and pricing within regulated rate bands.

The ACA also mandates that, beginning in 2014, individuals not covered by employer-based plans, Medicare, Medicaid, or other suitable coverage must obtain individual coverage or pay a penalty. These individuals, along with many small groups, are the target of the exchanges. Federal subsidies for those meeting certain income thresholds are intended to encourage the purchase of insurance through the exchanges. Beginning in 2016, employers with 100 or more employees may also purchase health insurance through an exchange. The Congressional Budget Office (CBO) estimates that exchanges will serve seven million individuals in 2014 (the first year of operation), increase rapidly to 22 million by 2016, and stabilize between 24 and 25 million thereafter.

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