Purpose Of Exchanges

Purpose and Function of an Exchange
In the context of a health reform plan aiming for a substantial expansion in the number of people insured and
universal access to affordable coverage, there are a number of functions envisioned for exchanges, including:
1. O ffering consumers a choice of health plans and focusing competition on price. Exchanges offer enrollees
a choice of private health insurance plans, and some proposals also envision including a public, Medicarelike
plan. Covered services and cost sharing (i.e., deductibles, coinsurance or copayments, and out-ofpocket
limits) would be organized or standardized in ways that make comparisons across plans easier for
consumers. The aim is to focus competition among plans on the price of coverage and minimize the tendency
for plans to vary benefits in order to attract healthier than average enrollees.
2. P roviding information to consumers. In conjunction with offering a choice of health plans, an national health insurance exchangeis
intended to provide consumers with transparent information about plan provisions such as premium costs and
covered benefits, as well as a plan’s performance in encouraging wellness, managing chronic illnesses, and
improving consumer satisfaction. The national health insurance exchangecould also serve a customer assistance function—typical for
large employers—to assist consumers who encounter billing or access problems with their plans.
3. Creating an administrative mechanism for enrollment. For people who obtain private insurance coverage
through work, the employer typically facilitates enrollment in a plan and the payment of the premium. This
is especially true in larger businesses. An national health insurance exchangecould serve a similar function for people without access
to that kind of assistance, including people buying insurance on their own or who work for small businesses.
The national health insurance exchangecould also be used to determine eligibility for and administer income-related subsidies.
Alternatively, these functions could be handled by a government agency or through the tax system.
4. M oving towards portability of coverage. Coverage through an national health insurance exchangecan be de-linked from employment,
helping to make health insurance more portable for people moving from job to job. However, since
employment-based coverage would still exist under some proposals, insurance may not truly be fully
portable. Exchanges also could coordinate enrollment shifts between Medicaid and subsidized private
coverage for people with very low and potentially changing incomes.
MAY 2009