Health Insurance Health Reform

Health Exchanges

The California Healthcare Foundation (CHCF) notes that States face a number of challenges when determining how to design their Health Exchanges mandated by health reform.  Today, I briefly highlight some of the requirements State Exchanges must fulfill.

The plans in the Exchange fall into five broad categories:

  • Platinum, with coverage at 90% of the full actuarial value of the essential benefits package.
  • Gold, with coverage at 80% of actuarial value.
  • Silver, with coverage at 70% of actuarial value.
  • Bronze, with coverage at 60% of actuarial value.
  • Catastrophic, a high-deductible plan available to people under age 30 and to people who qualify for an exemption (because other coverage is not affordable)

Exchanges must also implement tax credit subsidies which vary based on insurance premiums and individual income. The subsidy is based on the premium for the second-lowest-cost silver-tier product available on the exchange within an individual’s geographic area.

States must define the minimum requirements (i.e., minimum benefits covered) for plans to participate in the Exchange. Plans who can participate in the exchange are known as Qualified Health Plans (QHPs). After an Exchange that implements these requirements, it can also extend these restrictions to include health plans outside the Exchange.

States also have the option to combine the small business and individual markets or to keep them separate. California’s Exchange, for instance, will create a separate Small Business Health Options Program (SHOP).

Exchanges likely will attract a large number of individuals. The CHCF estimates that the 2.1 individuals option insurance through the individual market and 3.4 million through the small group market. The population in the exchange, however, may not be stable. There could be considerable movement in and out of the Exchange during the year due to income volatility. According to a recent national estimate, half of adults with family incomes below 200% of FPL will experience a shift in eligibility from an insurance exchange to Medicaid, or the reverse, within a year.

The Exchange need not work in isolation. Many individuals may transition between Medicaid and the Exchange and vice versa. Exchanges could also adopt an policies and practices that would align with Medi-Cal’s efforts to improve the health status and health care outcomes of low-income, high-need individuals.


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