State exchanges can be thought of as state-run marketplaces for insurance plans. Under an exchange, enrollees are pooled together, similar to an employer group in the traditional insurance model. Because of these large pools of enrollees, the insurers can spread risk and administrative costs and therefore can offer plans at a lower rate to individuals.
Insurance companies that choose to sell their products through an exchange will be required to comply with consumer protections in the ACA, such as offering insurance to every qualified applicant. Exchanges will contract with the insurance companies, who will in turn make their products available for purchase. To make exchange coverage more affordable, certain individuals will receive premium assistance in the form of federal tax credits. In addition, some recipients may also receive subsidies toward cost-sharing expenses.
Types of Exchanges
A state-based exchange will be responsible for establishing and operating the exchange, certifying qualified health plans, developing electronic, streamlined, and coordinated eligibility and enrollment systems, conducting consumer outreach, and ensuring the financial sustainability of the exchange. Currently, 16 states and D.C. have a state-based exchange.
A partnership exchange allows the state and federal government to assume responsibility for a defined set of activities within the exchange. States entering into a state-federal partnership exchange may administer plan management functions, in-person consumer assistance functions, or both, and HHS will perform the remaining exchange functions. Seven states have an exchange which partners with the federal government.
In a Federally facilitated exchange, the Department of Health and Human Services (HHS) performs all of the exchange functions. 27 states have a federally facilitated exchange.
What is the difference between a federal insurance exchange and a state-run health insurance exchange?
In general, federal and state exchanges work the same way. Consumers shopping in an exchange will choose among insurance plans. However, there are differences between federal and state exchanges that are important to some consumers.
States-based exchanges can decide which insurers participate and whether to require benefits beyond those set under federal law. They can accept all insurers whose policies meet the law's requirements, for instance, or limit participation by requiring that insurers meet specific quality or pricing guidelines. The federal exchanges will accept all qualifying plans.
States that build their own exchanges can also decide whether to be more proactive in selecting insurers that offer benefits targeted to a state's particular needs. For example, a state with a high rate of diabetes might select insurers with special programs to combat diabetes.
Functions of State Exchanges
The Affordable Care Act requires that state exchanges:
- Operate a toll-free hotline and website for providing information;
- Ensure that health insurance plans meet certain standards (for example, related to marketing, access to health care providers, and reporting on quality of care);
- Provide information in a standard format to help consumers compare insurance companies and benefit plans;
- Determine eligibility for individual premium tax credits, cost-sharing assistance and coverage requirement exemptions;
- Determine eligibility for Medical Assistance;
- Determine eligibility for small business premium tax credits;
- Provide real-time enrollment in health benefit plans;
- Make an electronic calculator available to display the cost of coverage;
- Communicate with employers regarding employee tax credit eligibility, cancellation of coverage, etc;
- Establish a Navigator program that connects applicants to an individual or organization who assists consumers and businesses to navigate an exchange.
16 states and the District of Columbia have a state-based exchange. Seven states have an exchange which partners with the federal government and 27are federally facilitated exchanges. View the map below to see which states will operate state-based exchanges.
View Map of State Exchanges
State Exchange Websites
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico*, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah*, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming
*In New Mexico and Utah, the federal government runs the exchange for individuals while the state will run the small business, or SHOP exchange.