On-Exchange vs. Off-Exchange
On-exchange health insurance refers to health insurance that is purchased through your state's Marketplace.
Marketplace, on-exchange, off-exchange
The Affordable Care Act makes shopping for health insurance easier and less confusing.
Every state has an online website where you can shop for health insurance. Most are run by the federal government and use the site Healthcare.gov.
→ It is only through these sites that one can get financial help with paying premiums.
The word Marketplace usually refers to the online exchange run by the federal government called HealthCare.Gov . Individual states have the option to setup up their own exchanges.
• To date, the Marketplace serves the majority of the United States, with 18 states including the District of Columbia maintaining their own online exchanges.
The word off-exchange does not refer to a particular place or online site. Even though a number of insurance brokers have created websites that try to capitalize on the term by calling their site a "private exchange."
♦ To purchase insurance off-exchange means to purchase insurance directly from an insurance company or through a broker, not through the online Marketplace or state run exchanges.
♦ A key point to remember is that premium tax credits can only be used to purchase health insurance from the Marketplace or one of the state run exchanges. So your first place to start should always be the Marketplace or your state's exchange.
The Affordable Care Act (ACA) requires that health insurance policies regardless of whether they are purchased at the Marketplace or off-exchange to provide certain minimum benefits while also limiting out-of-pocket costs. All plans must cover 10 categories of health care services. These are referred to as Essential Health Benefits.
The law provides new protections for consumers without regard to where they purchase insurance.
♦ Insurers are prevented from denying coverage because of a pre-existing condition.
Conditions like asthma or heart disease, or charging more because of a person’s gender or occupation.
♦ Insurers are no longer able to charge women more than men for the same coverage or charge firefighters, first responders, and others more just because of their jobs.
When on-exchange plans are better
Premium tax credits are the main reason for buying a plan from the Marketplace. The premium tax credit is a form of subsidy.
♦ The way the Affordable Care Act is setup the premium tax credit may only be used to help reduce the cost of a plan purchased from the Marketplace or your state's exchange.
Premium tax credits are available to people with incomes up to 400% of the Federal Poverty Level (FPL). According to the Kaiser Foundation an estimated 85% of people using the Marketplace qualify for some premium tax credit.
People with incomes above 400% can purchase coverage at the Marketplace but normally they would not receive a premium tax credit because they are considered to have too much income.
However, the American Rescue Plan Act of 2021 greatly expanded Premium Tax Credits so that incomes above 400% could receive some tax credits also. The Inflation Reduction Act (IRA) of 2022 extended this benefit until the end of 2025.
♦ Importantly - In 2025, APTC are still available to individuals and families earning more than 400%. After 2025, there maybe be a cutoff at 400%.
Plans sold at the Marketplace will have limits on cost sharing expenses like deductibles, copayments, and out-of-pocket maximums. These plans are called Qualified Health Plans. All plans sold at the Marketplace must be certified as a Qualified Health Plan.
♦ All Qualified Health Plans offer the same core set of benefits, including preventive services, mental health and substance abuse services, emergency services, prescription drugs and hospitalization. Some plans include benefits beyond the core set because the state where they are sold may require certain benefits.
Insurance companies can choose to sell the same Qualified Health Plans off the exchanges. They are not required to do so but they can if they want.
♦ It is important to understand that plans sold off the exchanges do not have to be certified as Qualified Health Plans.
When off-exchange plans are a better
The Marketplace is the best option for people who qualify for premium tax credit and cost-sharing reductions. Because these forms of subsidies are only available for plans purchased at the Marketplace.
But if your income is too high to qualify for a premium tax credit, there is no reason to shop only at the Marketplace.
It is very important that you understand - if you choose a plan off-exchange because your income is too high to qualify for a premium tax credit you will not be able to change your plan until the next open enrollment period. This is even if you income goes down and your premiums become a financial burden.
♦ The Affordable Care Act tries to make allowance for people with special circumstances so that they may enroll in health insurance through the Marketplace during times outside of Open Enrollment. Hence the term Special Enrollment period
♦ Unfortunately, you cannot voluntarily drop coverage or fail to pay your premiums. This would not qualify as a special circumstance. You would need to wait until Open Enrollment (in the fall) to sign up for a new plan through the Marketplace.
Some plans are the same, some are not
Some insurance companies will offer the same policy both at the Marketplace and off-exchange, if this is the case the price will be the same. You just won’t be able to use a premium tax credit with the off-exchange plan.
Most off-exchange plans are a little different than those offered at the Marketplace. Some may be a Qualified Health Plan while others may not be.
Of course, when the plan differs from the Marketplace version the price will also be different.
♦ In general, plans off-exchange have a little higher premium but a significantly higher deductible then similar Marketplace plans.
The best deal remains the Marketplace plans if they fit your needs and even more so if you qualify for a premium tax credit.
♦ As of January 2024, just over 20 million people are enrolled in Marketplace plans.
• Heading into 2025 it is estimated that 2.5 million people purchased off-exchange.
It has been estimated that 30% of off-exchange individuals left money on the table.
A recent study found that many off-exchange individuals had incomes between 100 — 400% of the federal poverty level, meaning they could have received a tax credit to use to help buy insurance if they had used the exchanges.
Why might this be?
Many people are still confused. They don't really understand what Obamacare is and how they might benefit. Some people even believe that it was repealed.
• Some insurance companies – United HealthCare – offer very little at the Marketplace but have a large presence off-exchange. United HealthCare also has a large network of providers.
• Many off-exchange plans offer broader networks of providers and many provide out-of-network benefits that people find fit their situation better.
People with family members being treated for a serious medical condition often times will want to have the widest selection of doctors and facilities.
PPO and POS type plans offer access to broader provider networks. PPO and POS type plans also provide coverage for benefits received from out-of-network providers.
This is very important if a person’s situation forces them to seek the services from the best doctor or best hospital which may not always be in their plan’s network.
What does the future look like...
The Marketplace has suffered a drastic reduction in PPO and POS type plans since the first plans were offered back in the fall of 2013.
In 2016, HMOs and EPOs comprised 73% of all plans. However, in many areas of the country only HMO type plans are now offered at the Marketplace.
♦ Today’s Marketplace HMO plans have much narrower networks than they had in the past. They also tend to have narrower networks than their off-exchange cousins.
HMOs are Managed Care plans. They initially started out focusing on managing the care of their members. They have drifted toward controlling costs first and care second.
Insurance companies rely on these plans to control costs by limiting access to specific providers and limiting payment to in-network providers.
The rush to control cost has led to an epidemic in "surprise bills" and “balance billing” from providers - like anesthesiologists and radiologist - who may work in a network hospital but refuse to accept payment at network provider rates.
Some states have tried to put the brakes on this practice but so far it continues at an ever growing pace. It is a plague on the healthcare industry.
A number of politicians in Washington has voiced strong concern about this practice, but so far no one has been successful at getting legislation passed to control balance billing.
♦ This is strange since Medicare has rules to protect against this.
It has been estimated that roughly 50% of off-exchange plans are still PPO or POS plans. Since these types both provide out-of-network benefits this makes off-exchange plans more attractive and balance billing less of a concern.
The trend away from PPO and POS type plans to HMO type plans is well underway both for the Marketplace and off-exchange.
Consumer protections to rein in balance billing practices will eventually come about, but for right now patients do not have many options.
