Health Insurance Exchanges

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The heart of Obamacare is the array of online shopping centers it created, dubbed Health Benefit Exchanges by the 2010 Affordable Care Act, where people who don’t get their insurance through their employer can go to buy coverage. The idea was to create an Expedia for medical coverage instead of airplane tickets, bringing insurance companies together to compete to offer affordable plans. The big question for the exchanges has always been whether they would attract enough healthy young people to offset the cost of older or sicker enrollees. They are best known, however, for the massive computer problems that undermined their 2014 launch. As the second round opened, for 2015 coverage, officials pointed to rates that on average rose only modestly, and to increased interest among insurers. But the exchanges still faced consumer skepticism, partisan opposition and court challenges that could undermine or wreck their ability to reach millions of Americans.

The Situation

One month into the open enrollment period for 2015, which will run from to Feb. 15, it seemed clear that sign-ups for private coverage offered on the health exchanges would exceed the official projection of 9.1 million. Americans buying Obamacare plans for 2015 can expect to pay about 3 percent more on average for the cheapest coverage — a small increase by historical standards — though premium changes vary widely by state. “Bronze”-level insurance, the least expensive full-coverage plans available, will cost at least $307 a month on average for a 50-year-old nonsmoker next year, according to U.S. data analyzed by Avalere Health, a Washington consulting firm. The cheapest “silver” plans, the category most popular with consumers, would cost the same person $381 on average, a 4 percent increase from a year before. While the federal exchange’s website was vastly improved over 2013, the program faced a new challenge: In November, the Supreme Court agreed to hear arguments over a claim that the ACA’s insurance subsidies could only be given to consumers in the 14 states that set up their own exchanges and not to consumers in states that relied on the federal exchange.

Source: the Brookings Institution
Source: the Brookings Institution

The Background

The exchanges are just one part of the law’s approach to bring coverage to many of the 50 million Americans who lack it, but they are its main tool for reaching those not covered by their employer or a government program. The idea behind the exchanges was simple: bringing together the millions of people relying on individual policies would lead to larger risk pools, more competition and lower premiums. That depends on enrolling enough healthy people to offset the cost of sicker customers — otherwise costs could rise, especially for young adults. Congress expected each state to create and manage its own exchange, but only 14 (plus Washington, D.C.) agreed to do so. The rest, reflecting hostility to Obamacare or concerns about the technical hurdles, opted to let Washington do all or part of the job, a point that became more important when the challenge to the subsidies headed toward the Supreme Court.

The Argument

As the new enrollment period opened, polls showed that the health-care reform law continued to be unpopular, although a large majority opposed repealing it. The strong Republican midterm victories revived momentum for another attempt to repeal the law or, more realistically, chip away at some of its less popular provisions. Now that healthcare.gov was working at least relatively well, Republican criticisms tended to focus less on the exchanges and more on other aspects of the law. But conservatives gave strong support to the lawsuit that argued that insurance subsidies should be barred in the 36 states that declined to build their own exchange. They say a passage in the law stated clearly that subsidies could only go to consumers using state-run exchanges. Democrats called the wording a drafting error and said that the totality of the law made it clear that federal exchanges were meant as well.

The Reference Shelf

  • A Bloomberg Visual Data chart tracks state-by-state enrollment in Obamacare.
  • Read the Affordable Care Act here. The section on exchanges begins on page 55.
  • The U.S. government has a calendar of key dates  while the Kaiser Family Foundation is tracking state progress.
  • compilation of new health law regulations published by the Health and Human Services Department.
  • A book by the former Obama adviser David Blumenthal covers the contentious history of health reform in “The Heart of Power.”
  • PriceWaterhouseCoopers reports on how the insurance industry is affected by the exchanges.
  • Bloomberg Visual Data has a chart with a state-by-state rundown of premiums.
  • Bloomberg News “Prognosis for Obamacare” coverage index.

First Published Oct 1, 2013

To contact the writer of this QuickTake:

Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this QuickTake:

Jonathan I. Landman at jlandman4@bloomberg.net