State Exchanges: A Horse Of A Different Color, Depending on Who YOU Are

October 8, 2013

Dorothy stands at the gates of Oz, where the gatekeeper declares, “Welllll, that’s a horse of a different color.”

The idiom has come to describe a situation that takes on new meaning based on new contextual information. Case in point are the state-run and federally-managed health insurance exchanges, which opened for business on October 1st. These public exchanges mean different things to different constituencies, depending on whether you are a large or small employer, an insurance company, or a consumer.

So before you traipse down the yellow brick road to affordable health care, you should know that the exchanges are indeed “a horse of a different color,” depending on who you are.

1.  Large Employers: 3 big opportunities

Public exchanges will create a viable market for individual health plans for the first time in American history. This presents three big opportunities for large employers.

First, part-time and seasonal workers now have a viable and federally funded alternative to selecting their company’s so-called “limited medical plan” or going uninsured.  This has the dual benefit of providing access for more of these workers to insurance they need, without the additional cost being absorbed by the company.

Second, if a company chooses to sponsor health benefits for its early retirees (under the age of 65), it has a once-in-a-generation opportunity to compare early retiree group plans with individual plans in state exchanges and determine which option offers more value.

Third, COBRA participants, who pay 102% of the premium for their company’s health plan, now have access to plans that offer equivalent or better plans, probably at dramatically lower cost.

2.  Small Employers:  First-time opportunity

State exchanges provide employers with fewer than 50 workers a great first-time opportunity to evaluate whether to continue their group plans (which can be subject to large annual premium increases) OR allow their employees to tap into state exchanges for individual plans. If they choose state exchanges, many small employers are looking at grossing up pay to assist their workers in purchasing individual plans.

In addition, although delayed this year, the 2015 SHOP exchanges will provide more attractive small group health insurance alternatives.

3.  Insurance Companies:  Bigger market opens opportunities

Insurances companies have the opportunity to participate in a much bigger market for individual health plans with sustainable profits as millions more Americans purchase plans on public exchanges.

The transition to exchanges also invites change to the delivery model from business-to-business (B2B) to business-to-consumer (B2C).  Alongside the opportunity to access a larger market, there is also the opportunity to deal directly with health care consumers.

4.  Consumers: Take steps to find the best plan

The millions of Americans who will shop for insurance for the first time starting October 1st would be well-advised to Stop, Wait, Look, and Ask for Help.

STOP: Don’t be in a hurry to buy a plan. Start your research and plan comparisons when exchanges open on October 1st. But since the plan you purchase will not go into effect until January 1, 2014, there is no rush to make your final decision right away. The advisors and agents handling enrollments on the new exchanges will be more skilled at helping you a few weeks after enrollments begin – and you’ll be more familiar with your exchange. Don’t wait too long, though: there will likely be lots of people who will wait until the last minute to enroll and you don’t want to be part of the last-minute rush. And be aware that you must enroll by December 15, 2013 if you want your coverage to start on January 1, 2014.

WAIT: First, set a budget for your health plan. Use the online tools and offline support available to you to find out whether you qualify for a federal subsidy for health insurance based on your income.  If you do qualify, the amount of your subsidy will help you figure out how much you can spend on a health plan.

LOOK: Do a thorough comparison of your plan options. Most exchanges will offer plans at four levels based on the coverage and price: platinum, gold, silver and bronze. Don’t fall into the trap of buying the plan with the cheapest premiums. Instead, use the help available to you to figure out what kind of coverage you need based on your health, the doctors and hospitals available in your area and your expected out-of-pocket expenses.

ASK FOR HELP: Lots of help is available to you in the form of online tools and telephone support — take advantage of it. Buying health insurance can be complicated. But help is available to make it less confusing. Your exchange will provide online tools and telephone support. In addition, community organizations in many states have been enlisted to act as “navigators,” guiding consumers through the process. If you live in one of the 36 states that have chosen to have the federal government run their exchanges, some independent companies have been authorized as brokers to help you select and enroll in plans. You are not alone!

In this brave new world of exchanges, you can’t just click your heels three times and end up at home. To get the most out of the state exchanges, it’s all about identifying the choices and opportunities unique to who you are and starting to take advantage of them.

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