Marketplace Health Insurance
Marketplace Health Insurance Information
Health Insurance Marketplaces Overview
Each state will have a Health Insurance Marketplace where individuals and small businesses may purchase insurance. A Marketplace provides consumers with the ability to easily compare and purchase health insurance. A Marketplace can be operated by a state or by the federal government. Marketplaces operated by a state are called State-based Marketplaces. Marketplaces operated by the federal government are called Federally-facilitated Marketplaces.
There are two types of Marketplaces:
- The Individual Marketplaces for individual consumers and their families
- The SHOP Marketplaces for small business owners.
Functions of a Marketplace
The major functions of a Marketplace include:
- Certifying health plans to participate in a Marketplace as QHPs
- Determining individuals’ eligibility for enrollment in a QHP
- Determining individuals’ eligibility for premium tax credits and cost-sharing reductions
- Determining or assessing individuals’ eligibility for enrollment in Medicaid and/or the Children's Health Insurance Program (CHIP)
- Facilitating individuals’ enrollment in a QHP
- Carrying out certain plan oversight functions, including monitoring QHP issuers for continuing compliance with certification requirements
- Facilitating employers’ applications and employee enrollments in coverage through SHOP
Note: Subsequent topics in this course will provide more information on affordability programs available in the Marketplaces, and the eligibility and enrollment rules and procedures related to these programs.
State-based Marketplaces and Federally-facilitated Marketplaces
Beginning October of 2013, consumers can apply and enroll in coverage through the Marketplaces in every state and the District of Columbia. Some states will establish their own Marketplaces, known as State-based Marketplaces. If a state chooses not to establish its own Marketplace, the Department of Health and Human Services (HHS) will either establish a Federally-facilitated Marketplace in that state, or will operate the Marketplace in partnership with the state. (These are called State Partnership Marketplaces, and they are one type of Federally-facilitated Marketplace.) All Marketplaces will carry out the same major functions.
Individual Marketplace & SHOP Insurance Plans
Marketplaces will perform a set of core functions: determining the eligibility of individuals and enrolling individuals in QHPs; certifying health plans as QHPs for operation within the Marketplaces; ensuring QHP accountability; facilitating eligibility determinations for governmental programs, such asMedicaid and Children's Health Insurance Program (CHIP); determining eligibility for advance payments of the premium tax credit and cost- sharing reductions for QHP enrollees.
The Individual Marketplace collects and verifies eligibility information from individuals, determines their eligibility for a QHP, and facilitates enrollment. The streamlined application process will assist in determining an individual's eligibility to enroll in Medicaid and CHIP, and in determining whether an individual is eligible for advance payments of the premium tax credit and cost-sharing reductions. The eligibility determination will use information provided by the applicant on citizenship, incarceration, income, and residency status through a streamlined system that allows the Marketplace to verify an applicant’s information through the Social Security Administration (SSA), the Internal Revenue Service (IRS) (IRS) and the Department of Homeland Security (DHS).
SHOP collects and verifies eligibility information from employers and employees, determines their eligibility for enrollment in a QHP, and facilitates enrollment. After an employer has entered basic information about their business and employees, SHOP will generate information on the range of premiums for all plans available. SHOP also facilitates enrollment for employees’ dependents if offered coverage by their employer. Eligibility for the small business tax credit is determined when an employer files his or her taxes each year.
The Affordable Care Act
The primary goal of the Affordable Care Act is to help millions of Americans obtain health insurance coverage. To achieve that goal, the Affordable Care Act provides new coverage options, gives consumers the tools they need to make informed choices about their health care coverage, and puts in place strong consumer protections. Agents and brokers will play an integral role in helping individuals understand and act on the coverage choices that the Affordable Care Act offers through Marketplaces.
A Marketplace is a mechanism for organizing health insurance options to help consumers and small businesses shop for coverage in a way that permits easy comparison of available plan options based on price, benefits and services, and quality. The Affordable Care Act includes many provisions to make health insurance coverage more accessible and affordable. Key components of the Affordable Care Act that will affect the consumer include:
- Major consumer protections
Health Law Changes in the Affordable Care Act
The health law changes include:
- Creation of Marketplaces, through which individuals who do not have access to public assistance programs or affordable employer-sponsored coverage may compare and purchase plans. Some individuals will be eligible for financial assistance through premium tax credits and/or cost- sharing reductions
- Expansion of Medicaid in some states to cover individuals under age 65 whose household incomes are less than 138% of the Federal Poverty Level (FPL)
- Introduction of a requirement that requires individuals to maintain minimum essential coverage, qualify for an exemption from coverage, or make a payment when filing their federal income tax returns.
Major Consumer Protections in the Affordable Care Act
The Affordable Care Act included many provisions designed to help ensure that consumers have access to effective health care coverage, and to limit their costs. Key provisions that you need to understand in order to best serve the consumer include:
- Extension of health insurance coverage to children up to age 26
- Expansion of the “guaranteed issue” requirement to ensure that health insurance issuers offer group and individual market policies to any eligible individual in a state, regardless of health status
- Prohibition on charging consumers a higher premium based on health status or gender
- Elimination of annual and lifetime coverage limits
- Prohibition on coverage limitations or exclusions based on pre-existing conditions
- Prohibition on precluding a qualified individual’s participation in an approved clinical trial, or discriminating against that individual based on such participation
- Introduction of an 80/20 MLR rule to ensure that at least 80 percent of the premium dollars paid to a health insurance issuer are spent on providing health care
Young Adult Coverage
Under the Affordable Care Act, health plans that cover children must make coverage available to children up to age 26. Young adults can join or remain on a parent’s plan even if they are:
- Married (coverage does not extend to married child’s spouse)
- Not living with a parent • Not attending school
- Not financially dependent on a parent
- Eligible to enroll in their employer’s plan (starting in 2014)
Guaranteed Issue and Guaranteed Renewability
The Affordable Care Act requires health insurance issuers to offer all of their individual market and group market plans to any applicant in the state. It also requires health insurance issuers to accept any individual who applies for those policies, as long as the applicant agrees to the terms and conditions of the policy, including the payment of premiums. This provision is called “guaranteed issue.” Coverage offered through and outside the Marketplaces may restrict guaranteed issue coverage to certain enrollment periods. Additionally, the Affordable Care Act requires health insurance issuers to offer to renew or continue in force coverage at the option of the policyholder. This is called “guaranteed renewability.”
Individual Health Insurance Marketplace Plans
Individual Marketplace Under the Affordable Care Act, everyone will have health coverage, have an exemption, or make a shared responsibility payment in 2014. The Affordable Care Act exempts several categories of individuals from the shared responsibility payment, including members of recognized religious sects and individuals who cannot afford coverage. The Affordable Care Act provides new options for coverage by expanding Medicaid eligibility to a greater number of low-income beneficiaries and creates a state-oriented system of Health Insurance Marketplaces through which individuals can purchase coverage. The Affordable Care Act provides two programs to help individuals afford coverage through the Individual Marketplace: premium tax credits (which may be paid in advance) and cost-sharing reductions. In addition, the Affordable Care Act includes several components that will allow agents and brokers to help consumers be determined eligible and enroll in coverage more efficiently, including:
- A “no wrong door” system that allows for paper and online eligibility determinations or eligibility assessments for insurance affordability programs
- A single, streamlined application that allows consumers to receive determinations for all programs they are eligible for without requiring additional application forms or multiple eligibility determinations. Applications may be filed online, in person, by mail, or by telephone
Qualified Health Plans
Marketplaces will offer only health insurance plans that are certified as qualified health plans, or QHPs. These QHPs must be licensed and accredited, and must meet certain requirements for transparency. To become certified, a QHP must meet a minimum set of criteria, including the following:
- Coverage, at a minimum, of a comprehensive package of benefits, known as essential health benefits, or EHB
- Benefit design standards, including non-discrimination requirements and limits on cost-sharing and out-of-pocket costs
- Network adequacy standards
Essential Health Benefits
The Affordable Care Act requires that health plans offered in the individual and small group markets, both inside and outside of the Marketplaces, offer a comprehensive package of services, known as essential health benefits, or EHB.
EHB include items and services within 10 benefit categories:
- Ambulatory Patient Services
- Emergency Services
- Maternity / Newborn Care
- Laboratory Services
- Mental Health
- Pediatric Services
- Prescription Drugs
- Rehabilitative Services
- Preventative and Wellness
The Affordable Care Act requires that EHB:
- Reflect appropriate balance among the 10 EHB categories
- Do not discriminate based on age, disability or expected length of life
- Take into account the health care needs of diverse segments of the population
For plan years 2014 and 2015, each state was asked by HHS to select a specific health plan’s set of benefits as its “EHB-benchmark plan,” equivalent to a typical employer health plan. If the state did not choose a plan, the EHB-benchmark plan was determined by HHS. The EHB in each state will be measured against the state’s EHB-benchmark plan. Because states elected their EHB-benchmark plans from existing state plans that included state- specific benefits, the EHB package will vary from state to state. Starting in 2014, QHP issuers will need to ensure that every QHP offered in the Marketplace is substantially equal to the EHB-benchmark plan in the state where the QHP is offered.
Five Levels of Coverage
In addition to covering EHB and limiting cost sharing (including out-of-pocket costs), QHPs in a Marketplace must also provide coverage that meets one of five levels of generosity.
The five levels of generosity are called catastrophic, bronze (60/40), silver (70/30), gold (80/20), and platinum (90/10) in ascending order of generosity.
These levels, sometimes referred to as “metal levels” provide several benefits:
- Help consumers, and the agents and brokers who assist those consumers, in comparing coverage options to determine which plans best fit the consumers’ needs
- Help consumers understand their benefits and the cost of services once they enroll
- Facilitate consumer choice based on specific value comparisons
QHP issuers do not have to offer plans in all five levels. However, each QHP issuer must offer a silver and a gold QHP in a Marketplace. These requirements begin on January 1, 2014.
Catastrophic plans are offered in the Individual Marketplace and cover EHB. They provide affordable coverage options for young adults and people for whom coverage would otherwise be unaffordable.
Catastrophic plan enrollees pay higher deductibles than enrollees in bronze, silver, gold, or platinum plans. However, catastrophic plans have several benefits:
- Lower premiums on average than bronze, silver, gold, or platinum plans
- Protection against out-of-pocket costs above $6,350 for an individual and $12,700 for a family
- Coverage of recommended preventive services without cost sharing
Eligibility for catastrophic plans is limited to:
- Individuals under age 30
- Individuals who otherwise do not have an affordable coverage option, or who otherwise qualify for a hardship exemption to the minimum essential coverage rule.
Out-of-Pocket Limits and Minimum Essential Coverage
The Affordable Care Act requires QHPs to provide certain recommended preventive health services without cost sharing or deductible requirements. All QHPs must limit cost sharing for enrolled individuals in the following ways:
- Deductibles and copays cannot be applied to preventive services.
- Deductibles for small group plans cannot exceed $2,000 for self-only coverage or $4,000 for any other coverage (adjusted annually), except to the extent that a higher deductible is necessary to create a reasonable bronze or silver plan.
- Annual cost-sharing limits cannot exceed the limits for certain high deductible health plans including catastrophic plans. (For 2014 the limits are $6,350 for an individual and $12,700 for families.)
No annual or lifetime dollar limits are allowed on EHB beginning January 1, 2014.
Minimum Essential Coverage
Beginning January 1, 2014, individuals not eligible for an exemption are required to demonstrate that they maintain minimum essential coverage or make a payment when filing their federal income tax return. Coverage purchased in the individual market including a Federally-facilitated Marketplace, as well as coverage under government programs such as Medicare, Medicaid, CHIP, and TRICARE, and coverage under an employer- sponsored plan, meet the requirements.
Standards For QHP certification, a plan must have an adequate provider network available to its enrollees. A QHP must: • Offer a network with a sufficient number of providers, including mental health and substance abuse providers, to ensure access to all services without unreasonable delay; and • In addition to the overall network adequacy requirement, a QHP’s network must include a sufficient number and geographic distribution of essential community providers to ensure reasonable and timely access to care for low-income and medically-underserved populations in the QHP’s service area.
What do I qualify for based on the Federal Poverty Income Guidelines?
If You Are...
Premium Tax Credits
Cost Sharing Reductions
138% or Below of FPL
Medicaid or CHIP
Medicaid or CHIP
138% - 250% of FPL
250% - 400% of FPL
400% or Higher of FPL
*Cannot have Group Plan, Medicaid, Medicare or CHIP
**Must be enrolled in Silver Plan
Premium Tax Credits
Individuals enrolling in a QHP through an Individual Marketplace may be eligible for premium tax credits which reduce the cost of premiums for themselves and for any tax dependents. An individual may choose to apply the tax credit towards QHP premium costs on an advance basis – with reconciliation at the end of the year – or to receive the credit on his or her federal tax return filed for the coverage year. Advance payments are paid directly to QHP issuers on a monthly basis.
Individuals eligible for a premium tax credit who do not receive an advance payment of the premium tax credit may claim the credit on their income tax return filed for the coverage year. Individuals who are married at the end of the coverage year are required to file a joint return to receive a premium tax credit.
A tax filer on whose behalf advance payments are made is required to file a tax return for the coverage year to reconcile any advance payments of the premium tax credit with the premium tax credit allowed on the return. Thus, if the premium tax credit allowed on the return is more than the amount of the advance payment of the premium tax credit, the individual may receive the excess amount as a tax return. On the other hand, if the premium tax credit allowed on the return is less than the amount of the advance payment of the premium tax credit, the individual will repay the excess amount via the tax return, subject to statutory caps.
The Marketplaces will provide documentation to the tax filer and to the IRS that will support the reconciliation process, in the same way that an employer or bank provides a Form W-2 or Form 1099.
Eligibility for Premium Tax Credits
Eligibility for the premium tax credit is based on the household income and access to minimum essential coverage. The following summarizes the key eligibility standards for premium tax credits (tax credits that reduce the cost of insurance premiums).
Individuals must meet the following eligibility criteria to be eligible for a premium tax credit: • Not be eligible for minimum essential coverage — including employer-sponsored coverage, Medicaid, CHIP, Medicare, and other forms of coverage — other than through the individual insurance market, unless their employer-sponsored coverage is not affordable or does not provide minimum value.
- Have an annual household income that is between 100% and 400% of the Federal Poverty Level (FPL) (or below 100% of FPL for lawfully present non-citizens who are ineligible for Medicaid by reason of immigration status)
- Be a part of a tax household that will file a tax return for the coverage year and, if the tax household includes a married couple, that files a joint return.
- Be eligible for coverage through a QHP
Calculating the Premium Tax Credit
Premium tax credits are based on annual household income, family size, and the cost of a silver level (AV 70%) essential health benefit (EHB) benchmark plan for that individual or family. The Individual Marketplaces will use this information to compute a maximum premium tax credit for each individual or family, which can then be applied to the purchase of one or more QHPs.
The amount of the premium tax credit depends on the plan that the individual or family selects. If the premium for the selected plan is greater than the maximum premium tax credit, the individual or family may elect to receive the maximum premium tax credit in advance, and pay the difference in a monthly premium cost. If the premium for the selected plan is less than the maximum payment, the individual or family may elect to receive the maximum premium tax credit in advance, and have no additional premium cost.
Example 1: Family A is eligible for a maximum advance payment of the premium tax credit of $800/month. Family A selects a QHP that costs $1,000/month. If they elect to receive the full amount of the premium tax credit in advance, $800/month will be paid directly to the QHP issuer, and Family A will pay the remaining $200/month premium.
Example 2: Individual B is eligible for a maximum advance payment of the premium tax credit of $400/month. Individual B selects a QHP that costs $350/month. If he or she elects to receive the full amount of the premium tax credit in advance, $350/month will be paid directly to the QHP issuer, and Individual B will have no monthly premium payment.
Cost-sharing reductions limit the out-of-pocket costs for EHB covered by QHPs.To be eligible for cost-sharing reductions, individuals must:
Meet the eligibility requirements for enrollment in a QHP
- Meet the eligibility requirements for enrollment in a QHP
- Meet the criteria for eligibility for a premium tax credit
- Have annual household income at or below 250% of FPL, except for members of federally-recognized Indian tribes, who have special standards
- Be enrolled in a silver-level QHP, except for members of federally-recognized Indian tribes who have special standards
There are several categories of cost-sharing reductions that are based on annual household income and family size. Each QHP issuer will implement these differently, based on their specific plan design. When an individual is determined eligible for a category of cost-sharing reduction, the plan comparison pages will reflect adjusted cost-sharing requirements of each plan.