Health Insurance Exchanges

Health Insurance Exchanges: the Competitive Health Insurance Marketplace

What is a health insurance Exchange?

The Affordable Care Act (ACA) requires states to create Exchanges, a competitive marketplace for individuals and small businesses to purchase insurance. Exchanges, which must be operating in states by January 1, 2014, will be the main way that people gain coverage in the ACA. It's estimated that by 2019, Exchanges will serve as a gateway for an estimated 29 million people to find their insurance.While the Exchanges will be a major way people get insurance under the ACA, the majority of people overall will continue to get coverage from their employer, just as they do now. 

If designed well, Exchanges can provide individuals and small business owners with a "one stop shop" to compare and buy health insurance. The concept is to provide consumers with more control and greater transparency in making their choices about health insurance. People can also enroll in public programs through Exchanges. Exchanges use the power of a large insurance pool, made up of individuals and small businesses, to generate competition among insurers to seek better quality plans at a lower cost.

The ACA creates two kinds of Exchanges: Health Insurance Exchanges for individuals and Small Business Health Options Program (SHOP) Exchanges for small business owners. The ACA delegates primary responsibility for governing and operating the Exchanges to the states, with the federal government primarily HHS setting minimum standards. States have the option to merge the individual and SHOP Exchanges, partner with other states to form multi-state regional Exchanges, or form multiple Exchanges within their state, if each one serves a geographically distinct area.

If a state decides not to run its own Exchange or doesn't meet minimum federal standards then HHS can create a federal Exchange in that state, or find a non-profit entity to run it.