How the Health Insurance Exchange Really Works
Insurance works best when there is a large enough group of participants to spread the financial burden of health care costs. This means a group needs enough healthy people paying premiums to cover the costs of sick people who need a major medical procedure.
Very small businesses and individuals who do not receive health insurance through an employer cannot share risk. They must purchase health insurance in the non-group market, which is notorious for high costs and inadequate benefits packages. A lot of small businesses and families end up paying too much while getting little care, or are denied coverage altogether due to pre-existing conditions. These people simply lack the market strength to get a good deal from large insurance companies.
Congress wants to fix this problem by creating a health insurance exchange. This would allow individuals and some businesses to come together in a larger group—flexing their muscle in the market place to get a better deal from insurers.
The exchange would allow people to select from a range of high quality, affordable, well-regulated, health insurance plans. Insurers would not be able to deny people coverage based on pre-existing conditions, charge them more because they’re sick, or cancel their coverage. And people who could not otherwise afford coverage will receive help paying their premiums.
Let’s say a small business wants to offer health insurance to its employees but can’t because it is too expensive. The owner and employees could buy coverage through the exchange. They would receive understandable and unbiased information about the plan choices and help figuring out which one is best for them. They could potentially receive federal credits that would bring down the cost depending on income. And once they choose a plan, they would have the security of knowing that the plan will always be there.
The health insurance exchange is an important component of health reform, particularly for individuals and small businesses. It will: