Background on Heath Insurance Exchanges

The Patient Protection and Affordable Care Act, also known as the Affordable Care Act (ACA), envisions health insurance exchanges as state-level "market organizers" for health insurance options. These exchanges would primarily serve individuals and small employers. Additionally, the exchanges will determine eligibility for Medicaid and SCHIP -- as well as eligibility for the federal tax credits that offset the costs of insurance purchased through the exchanges.

The Affordable Care Act encourages states to develop and operate their own health insurance exchanges by 2014. For those states who elect not to do so, the federal government will operate a federalized exchange and make the relevant eligibility determinations for the state and federal programs.

Utah and Massachusetts currently operate exchanges, though these two states have very different approaches. You can find information about Massachusetts' exchanges here at and Utah's exchanges here.

A one-page background paper about insurance exchange and the decisions for Tennessee is available here.

Specific Functions of a Health Insurance Exchange

The Affordable Care Act requires exchanges to:

• Provide both an individual and small group insurance exchange portal (or combined portal)
• Present plan options in a standardized way (i.e., Platinum, Gold, Silver, Bronze)
• Provide web resources (e.g., cost calculator) and toll-free call center support to portal users
• Administer exemption process for individual mandate requirement
• Determine eligibility for and enroll applicants in public programs
• Determine eligibility for new tax credits and cost-sharing reductions (if household income is 100-400% Federal Poverty Level)
• Facilitate advance payments by Treasury to insurers of tax credits
• Determine whether employer-sponsored insurance is "affordable" (less than 9.5% of household income)
• Operate a Navigator consumer assistance program
• Report user and employer data to Treasury
• Generate sufficient revenue to be self-sustaining by 2015

The Exchange also has general responsibility for qualifying plans, communicating information to the Treasury and to employers, etc.

To learn more about state-level insurance exchanges, visit the National Conference of State Legislatures website and the National Academy for State Health Policy.

For additional information on specific topic areas, please click here.