third stage of the Healthcare Reform law, set to go into effect on January 1, 2014, involves the creation of health insurance exchanges. This
step encourages states to establish an exchange that is regulated by the state’s department of insurance, but it does not make doing so mandatory. Instead, states can either set up an exchange of
their own, join together with other states to form a coalition, or choose not to have a state-based exchange. In this third instance, the federal government would implement the exchange for states
that do not wish to do so.
In their most simple form, insurance shopping exchanges could be compared to a farmer’s market for insurance. All of the companies which participate in health insurance programs within the state
belong to the exchange, and someone looking for the best price on an insurance package can readily compare the companies to find the best deal available. Consumers are not required to buy health insurance through the exchange, but can instead use it as a shopping tool to help them refine their search and reduce the number of insurers they have to choose
from as well as comparing the types of policies and their coverage options.
Another aspect of insurance exchanges will be that consumers have more information available about a potential insurer. Where rates and the policy details were once the only information available
to individuals, the insurance exchange will provide information about specific insurers, organized so that consumers can easily cross check information between two or more companies. For example,
this data could include the frequency and type of consumer complaints the company receives.
Insurance exchanges are being created to promote more competition among insurers, driving the price of coverage plans down. With the ability to compare prices and coverage plans, all insurance
shoppers, including small businesses and low-income individuals, will have easy access to information, helping them make a knowledgeable choice about their healthcare coverage without breaking the
The overall goal remains to reduce the average cost of health insurance by 7% – 10%, which translates to lower premiums for consumers without sacrificing level of care. When health insurance companies participate in a competitive marketplace, people gain access to affordable insurance and insurance companies gain newly insured individuals, which offsets
the cost of providing that insurance at a lower price.
Finally, health insurance exchanges will not replace existing health insurance programs. If you have health coverage through your employer or an organization, you will not have to change insurance
plans. The exchange is there to assist small companies or individuals that are not able to afford coverage, but it is not meant to replace group or individual insurance. In fact insurance exchanges
are expected to significantly lower the cost of purchasing health insurance in the aggregate and could potentially lower the price of plans across the board.