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Health Insurance Exchange Implementation


The overall broad policy goal of the Affordable Care Act is to expand health insurance coverage to nearly 50 million currently uninsured Americans.  The establishment of health insurance exchanges is a critical step toward achieving this broad goal.  Exchanges are intended to create open, transparent, competitive, and more affordable health insurance marketplaces where private insurance plans compete to enroll small businesses and individuals. Under the law, states have the option to either establish their own exchange or to rely on the Federal Fallback Exchange.  States also have the option to pursue a "partnership" model with the federal government whereby the state performs some exchange functions itself but relies on the federal government for others.  Finally, the ACA allows for the establishment of regional exchanges, but no state has yet expressed an interest in this approach.

The Supreme Court case challenging the constitutionality of the Affordable Care Act essentially suspended exchange development efforts across the country.  But now that the Court has upheld the requirement that virtually everyone buy insurance or pay a financial penalty, states are once again examining implementation issues and trying to decide when, if, and how to move forward.  


In addition to efforts by the federal and state governments to set up insurance exchanges for the individual and small group markets, work is underway in the private sector to set up exchanges for large employers who are not currently, nor may ever be, depending on the state, eligible to participate in the government exchanges.  Faced with rising health care costs and increasing uncertainty in the economy and labor market generally, some large employers are moving toward a defined contribution approach to providing health benefits.  Instead of self-insuring or purchasing an insured product, employers provide employees with a pre-determined amount of money and access to a private health insurance exchange where employees make their own decisions about the level and type of health insurance they need.  While this new approach is still in its infancy, many in the health policy community believe this is a trend to watch, and as employers seek to maintain their competitiveness in their industries and geographic areas, we may soon reach a tipping point where employers see this as a viable opportunity and prepare to make the shift.  This shift may occur independent from anything that may happen at the state and national levels with the ACA-mandated exchanges.