The insurance exchanges are required to offer four levels of coverage: bronze, silver, gold and platinum. The difference among these coverage tiers rests with their “actuarial” value – in other words, how much a plan will cover before the patient must chip in for co-insurance, deductibles and co-payments. (Net Quote) According to the Kaiser Family Foundation, the actuarial values for the four levels of coverage are: (The Kaiser Family Foundation)
- Bronze: 60 percent
- Silver: 70 percent
- Gold: 80 percent
- Platinum: 90 percent
All plans will cover certain essential health benefits determined by the U.S. Department of Health and Human Services, such as ambulatory services, emergency care, maternity care and prescription drugs. (Net Quote) Consumers will be able to choose their level giving them more freedom and control over their health care. Individuals or families who have a greater need for health care coverage, can choose a higher level offering better benefits that are covered at a higher rate reducing their economic strain, whereas healthy individuals will benefit through lower premiums by choosing a lesser coverage while still receiving piece of mind should anything go wrong.
While all legal residents are eligible to purchase insurance through the exchanges, the health reform legislation dictates that individuals with incomes between 138% and 400% of the federal poverty level will be eligible to receive sliding-scale federal subsidies, in the form of tax credits, for the purchase of health insurance through these exchanges. (Kaiser Family Foundation) Coverage of individuals who fall under 138% of federal poverty level will be handled by the newly expanded Medicaid, with the federal government covering 100% of all new enrollees onto Medicaid through 2016 and then tapering off to 90% in the year 2020 and beyond. States would then be required to cover the difference which is a sticking point with many of the states.
To reduce the economic strain incurred by families under the ACA, subsidies in the form of tax breaks and out-of-pocket expenses will be offered for individuals and families ranging from 100% to 400% of the poverty level. In addition, incomes from 100% to 250% of the federal poverty level will also qualify for help in paying out-of-pocket costs for the co-pays and deductibles not covered by their health insurance. (Moeller)The federal poverty level is roughly $11,000 for an individual and rises by $3,960 for each additional family member. The amount of the subsidy an individual of family will be eligible for depends on their income. The silver plan will also serve as the benchmark for tax credits even though it will not be the same in every state. However, the percentages of this premium that can be received as health insurance tax credits will be the same and are based on a sliding scale of the federal poverty level percentages. (Moeller)
Twenty-six states challenge the legality of the ACA, claiming that it violated the U.S. constitution. Texas was one of them and Governor Rick Perry told federal officials that Texas had no intention of expanding Medicaid or establishing a health insurance exchange. (Fernandez) But, according to the Texas Medical Association, 25 percent of the state’s population lacks health insurance – 6.3 million people, including 1.2 million children – the highest of any state. (Texas Medical Association) The options for Texas are the same as they are for the other 49 states and the District of Columbia. Texas can choose to set up a state-run exchange, join a regional or multi-state exchange program, or allow the government to run one for them. But, Governor Perry seems to think that the expansion of Medicaid will ensure further state debt and the exchanges are forcing higher taxes on individuals and small companies through the individual mandate. By refusing to set up the exchanges and expanding Medicaid Governor Perry is leaving billions of federal dollars on the table that could benefit the uninsured in Texas. (Boney) Health care is one of the state’s biggest industries, and hospitals in Texas are likely to push hard in the coming months to get the Lone Star State to take Obamacare into its warm embrace. (DeLuca) Unfortunately it’s too late for Texas to have a state run health care exchange up and running by the mandated date of January 2014. Since Texas and several other states are unwilling to create an exchange, the federal government is preparing to step in and shoulder the burden of providing the insurance marketplace that is essential to the success of the Obama’s health care law. Federal and state officials and health policy experts expect that the federal government will run the exchanges in about half of the 50 states — a huge undertaking, given the diversity of local insurance markets. (Pear) It appears that Texas will be one of those twenty-something states whose exchange will be set up and run by the federal government.
There are consequences with any of the options that Texas faces when deciding on an exchange. If Texas decides to create their own state run exchange, various administrations will be needed to both monitor and control the numerous regulations that the Affordable Care Act requires. As details have become apparent over the last year or so, it is clear that whether the federal government runs the exchange or the state administers its rules for it amounts to the same thing, that the costs of running an exchange will impose a significant burden on the state, and that not setting up a state-based exchange is likely to force the law to be re-opened and hence renegotiated. (Arlinghaus) Governor Perry has already stated that Texas will not create an exchange or increase the coverage of Medicaid to 138% of the federal poverty level, saying it does not do anything to address the health care system. Some predict that even though states have the option of creating their own exchange, they will not have much control over how its run. If states are not given some autonomy to work with, what is the incentive to create the exchange? Whether run directly by the federal government or mandated by the federal government and carried out by local agents is immaterial. The regulations and decisions come from Washington with perhaps a few window dressing exceptions. (Arlinghaus) Federal funds will offset any start up costs but once the exchange is up and running, the states will start shouldering the majority of the exchange.
If the Department of Health and Human Services has to create an exchange for Texas, than the federal government will end up bearing the financial responsibility. As stated earlier, having a single federal administration running one large exchange or fifty separate ones, you run the risk of backlash from the public. Opponents of both the state exchanges and the Affordable Care Act itself are urging states not to open exchanges which could force the Act to be reopened and reworked.
The third option that Texas and the other states have is the ability to set up regional or multi-state exchanges. At first glance this seems like the ideal situation, but each state would have decreased control over how its run.
State-run insurance exchanges offer consumers an easier more efficient way of shopping for health insurance. The exchanges along with the increase of Medicaid required by the Affordable Care Act, is attempting to increase accessibility to health insurance for millions of currently un-insured individuals. States have the option of creating their own exchanges with the help of the Department of Health and Human Services or using a government created exchange instead. There are four levels of coverage required bronze, silver, gold and platinum that cover 60%, 70%, 80% or 90% of health care expenditures respectively. Virtually every U. S. citizen is eligible to benefit from the exchanges including a separate “SHOP” exchange designed for small businesses. Subsidies in the form of tax breaks and out-of-pocket reimbursements will cushion the blow for individuals who are now required to have insurance but struggle to pay for it. It is anticipated that half of the states will not setup their own exchange requiring the government to do it for them. Texas just happens to be one of those states even though they have the highest rate of non-insured individuals in the U.S. States have three options to choose from when deciding how they will approach the exchange question. They can create their own exchange following the guidelines and regulations set forth by the federal government. They can create regional or multi-state exchanges by pooling their resources with neighboring states and share some of the burden, or they can let the federal government run the exchange for them. In the end, it is up to each individual state to weigh the pros and cons of creating an exchange. There are consequences in all three options and the states must decide what is right for them.
Works Cited
Arlinghaus, Charlie. "A State-Run Federal Exchange is the Worst of Both Worlds." 25 January 2012. The Josiah Bartlett Center for Public Policy. 8 August 2012.
Boney, L. Jeffrey. "Affordable Healthcare for ALl....Unless You Live in Texas Governor Perry says 'NO' to Medicaid Assistance." July 12 2012. Houston Forward Times. 1 August 2012.
Carey, Robert. "Health Inurance Exchanges: Key Issues for State Implementation." September 2010. Robert Wood Johnson Foundation. 1 August 2012.
DeLuca, Matthew. "What is Rick Perry Thinking by Rejecting Obamacare Help?" 10 July 2012. The Daily Beast. 1 August 2012.
"Explaining Health Care Reform: What are Health Insurance Exchanges?" May 2009. The Henry J. Kaiser Family Foundation. 1 August 2012.
Fernandez, Manny. "Perry Declares Texas' Rejection of Health Care Law "Intrusions"." 9 July 2012. The New York Times. 1 August 2012.
Kaiser Family Foundation. "A Profile of Health Insurance Exchange Enrollees." March 2011. The Henry J. Kaiser Family Foundation. 1 August 2012.
Moeller, Philip. "How New Health Insurance Subsidies Will Work." 27 July 2012. U.S. News Money. 1 August 2012.
Net Quote. Bronze, silver, gold or platinum? Understanding the new coverage levels under health care reform. 25 October 2011. 1 August 2012.
Pear, Robert. "Work Starts on Exchanges for Lagging States, Including Florida." 6 August 2012. Herald-Tribune. 6 August 2012.
Texas Medical Association. "The Uninsured in Texas." n.d. Texas Medical Association. 1 August 2012.
The Henry J. Kaiser Family Foundation. "Summary of Coverage Provisions in the Affordable Care Act." 2010. The Henry J. Kaiser Family Foundation. 1 August 2012.
The Kaiser Family Foundation. "What the Actuarial Values in the Affordable Care Act Mean." April 2011. The Henry J. Kaiser Family Foundation. 1 August 2012.
U.S. Department of Health & Human Services. "Intial Guidance to States on Exchanges." n.d. Healthcare.Gov. 2012 August 2012.
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