Q: Health Insurance Exchanges, Explained

A health insurance exchange, more commonly known as a marketplace, is an online one-stop shop for health insurance coverage for individuals and families. Exchanges make it convenient for your employees seeking individual insurance policies to compare policies based on benefits, provider networks, co-pays, coinsurance, deductibles, and premiums.

HealthCare.gov, the federally facilitated Marketplace created under the Affordable Care Act (ACA) runs health insurance exchanges for many states. However, an increasing number of exchanges are fully administered and maintained by the states themselves. Shoppers who live in states with their own health insurance exchanges will be routed to the appropriate website after entering their zip code on the HealthCare.gov site.

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Employers that don’t offer health insurance can nonetheless increase the odds their employees secure affordable and comprehensive care by helping them navigate the applicable exchange. And, for those employers that provide Qualified Small Employer Health Reimbursement Arrangements. (QSEHRAs), such assistance may boost participation.

Here are answers to some of the questions your employees might have about exchanges:

How do I find the right health insurance exchange?

A federal or state government-run health insurance exchange is available in every state.

State-based marketplaces

For 2021, the District of Columbia and the following states offer their own marketplaces:

States with state-run health insurance exchanges are responsible for running their individual health insurance market. Individuals in those states will apply and enroll in health insurance plans on the state’s marketplace website.

State-based marketplace-federal platforms

Six states operate their own exchanges through the federal HealthCare.gov platform:

The above states have state-run marketplaces and are responsible for running all of its functions. However, they rely on Healthcare.gov for eligibility and enrollment. When an individual is ready to buy a health insurance plan, they will do so through Healthcare.gov.

Federally-facilitated marketplaces

The remaining 30 states rely on Healthcare.gov for all of their exchange functions. 

  • Alabama
  • Alaska
  • Arizona
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Louisiana
  • Michigan
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • New Hampshire
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • West Virginia
  • Wyoming

When is the open enrollment period for health insurance exchange plans?

For the past several years, open enrollment through the federal Marketplace Exchange, HealthCare.gov has run from November 1 – December 15, for coverage starting January 1 of the following year (under the Obama Administration, the open enrollment period ran from November 1 through January 31).

States that use the federal platform can’t change those dates, but states with their own platforms have some flexibility, so your employees should check for the applicable dates in their own state every year. Three exchanges have permanently extended their open enrollment plans:

  • California (ending January 31)
  • Colorado (ending January 15)
  • District of Columbia (ending January 31)

The Biden Administration recently re-opened the open enrollment period as a response to COVID-19. A new open enrollment period will begin on February 15, 2021 and end May 15, 2021 for the federal marketplace. Several other states also extended or re-opened the open enrollment period for 2021, including:

  • California: February 1, 2021 to May 15, 2021

● Colorado: February 8, 2021 to May 15, 2021

● District of Columbia (DC): February 15, 2021 to May 15, 2021

● Maryland: Through March 15, 2021

● Massachusetts: Through March 23, 2021

● Minnesota: February 16, 2021  to May 17, 2021

● Nevada: February 15, 2021to May 15, 2021

● New Jersey: Through May 15, 2021

● New York: Through March 31, 2021

● Pennsylvania: February 15, 2021 to May 15, 2021

● Rhode Island: Through May 15, 2021

● Washington: February 15, 2021 to May 15, 2021

If your employees want to know more about each state, please check-out the state exchange websites.

What are special enrollment periods?

Special enrollment periods are instances when your employees can buy insurance on a government exchange outside of open enrollment. These periods are available when they experience qualifying life events.

Some examples include:

  • Changes in household size, residence, or income
  • Non-voluntary loss of health insurance (for example, losing Medicare, Medicaid, or CHIP eligibility or insurance through a family member)

Healthcare.gov has a more comprehensive list of special enrollment periods and qualifying life events. 

Depending on the event, an individual may have 60 days before or 60 days following to enroll in a plan. If your employees miss their window, they may have to wait until the next open enrollment period to apply.

Tip: Make sure your employees know they’ll need to provide documentation of their qualifying life events, typically within 30 days of applying and selecting a new health plan.

What information do I need to get started on my health insurance exchange?

Health insurance exchanges might seem intimidating to some of your employees, particularly those who aren’t computer-savvy. Fortunately, the process is relatively easy.

They’ll generally begin by creating an account and completing a short questionnaire that asks about:

  • Location
  • Age
  • Tobacco use
  • Type of policy needed (individual or family coverage)     
  • Information necessary to determine eligibility for subsidies, such as household income.

Encourage your employees to have this information on hand before they sit down at the computer.

Once they input the basic information, they’ll be presented with various health insurance plans to compare based on their most important features. When they settle on a plan, they can purchase it right there.

How do the “metal” tier categories work?

Federal and state exchanges assign insurance policies to one of four “metal” categories: Bronze, Silver, Gold, or Platinum. The categories reflect how the plan splits the costs between the insured and the insurance company—not the quality of care.

The cost-sharing generally breaks down along the following lines:

TierInsured’s shareInsurer’s share
Bronze40%60%
Silver30%70%
Gold20%80%
Platinum10%90%

Bronze plans usually have the lowest premiums but the highest out-of-pocket costs for care. Conversely, Platinum plans have the highest premiums with the lowest costs for care. All plans cover preventive care at no cost, based on ACA requirements.

Which government subsidies are available?

If your employees purchase health insurance through a federal or state health insurance exchange, they may qualify for subsidies in the form of premium tax credits (PTCs) and/or cost-sharing reductions (CSR).

Tip: An employee may want to talk with a tax advisor on their eligibility for subsidies, how their taxes may be affected, and what would happen in the event of reconciliation of repayment of credits.

PTCs

PTCs reduce monthly premium payments and are available for households with incomes of 100% up to 400% of the federal poverty level. For 2021, the qualifying income ranges from $12,760 to $51,040 for an individual and $26,200 to $104,800 for a family of four. PTCs can be applied to policies in any metal tier. (This calculator can help your employees compute the amount of PTCs they might qualify for.)

Your employees can:

  • Claim advance premium credits (APTCs) when they purchase their policies and decide how much to apply to their premiums each month. The IRS will pay that amount to the insurer directly.
  • Claim their PTCs when they file their federal income tax returns.
  • Combine approaches.

PTCs are based on estimated household income entered during the application process. Insureds must reconcile any APTCs with the PTCs due based on actual income on Form 8962, Premium Tax Credit (PTC).

If APTCs exceed the amount an insured was entitled to, they must repay the difference on their federal income tax return (subject to certain limitations). Conversely, if PTCs exceed APTCs, the insured receives a credit, reducing their tax payment due or increasing their refund.

Tip: If your employees deduct their health insurance premiums on their individual tax return, they’re not allowed to deduct the portions paid for by PTCs or APTCs.

CSR

Cost-sharing reductions decrease out-of-pocket costs for care. Unlike PTCs, they’re available only with Silver plans.

CSRs are intended for lower-income insureds—those with household incomes from 100% to 250% of the federal poverty line. Eligible individuals are placed into plans that automatically apply the CSR.

What if my subsidy-qualifying circumstances change?

If, for example, your employees experience changes in household income or family size, they could see changes in their PTCs or CSR. Such changes must be reported to the health insurance exchange when they occur. An employee may want to consult with a tax advisor on these changes.

How does the receipt of subsidies affect my federal income tax returns?

Government health insurance exchanges submit Form 1095-A, Health Insurance Marketplace Statement, to the IRS to report certain information about their customers. They also send copies to the customers.

Among other things, the forms report:

  • Covered individuals
  • The total monthly premiums paid
  • The amount of APTCs

If your employees received APTCs or want to claim PTCs on their tax returns, they’ll use the information from their copies of their Form 1095-A to complete Form 8962. Filing a tax return without Form 8962 will delay refunds and could affect future APTCs and CSR.

Tip: Remind your employees who received APTCs or want to claim PTCs that they must file a federal income tax return with Form 8962 attached even if they’re not otherwise required to file.

What are private health insurance exchanges?

Although the vast majority of exchanges are government-run, the number of private exchanges run by insurance companies or brokers has grown over the past several years. These exchanges usually include options not available on the government exchanges—what are known as off-exchange plans—and may also provide suggestions on the best coverage for a person’s circumstances.

Off-exchange plans generally satisfy the same ACA requirements as on-exchange plans, other than providing plans across all four tiers. Like exchange plans, premiums can be based on only four factors: location, age, tobacco use, and individual or family coverage.

The downside is that PTCs and CSR aren’t available for plans obtained through a private exchange. Furthermore, anyone considering using a private exchange should know that not all the plans offered are compliant with the ACA, and may not offer minimum essential coverage or minimum value.

Finally, anyone considering a plan on an private health insurance exchange should carefully review the terms to make sure they fit their needs, especially if the individual is required to comply with any state individual mandate or wants the insurance premium to be reimbursed under a QSEHRA.

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