Insurance Exchanges 101

The Field Clinic welcomes Katheryne Lawrence, a third year law student concentrating in health law at the Earle Mack School of Law at Drexel University as a regular contributor over the next several months. This is her inaugural post.

If you have been following this blog, you have seen a lot of discussion about insurance exchanges. They are at the heart of Obamacare, and they will begin operating in just four months - on October 1. But if you are still unsure what they will actually do, you are not alone. Polls show that most Americans are confused about how the health reform law works.

The first thing to keep in mind is that if you presently get insurance through an employer or receive Medicare or Medicaid, the exchanges won't matter to you. In fact, you won't even be allowed to use them. You will continue to receive insurance as you have in the past.

Exchanges are for people who purchase coverage directly from an insurance company or who would like to but have been turned down because they have a preexisting medical condition. If that describes you, then you need to know how the exchanges will work. If you don't, you could end up uninsured, which could subject you to a financial penalty starting in 2014.

Here, in three easy steps, are the most important elements of using an exchange:

First, visit the exchange for your state. Beginning October 1, there will be an exchange in every state. They will function as one-stop shops for purchasing coverage.

How will you find your exchange? The easiest way will be online. Each will have a website and a toll-free telephone hotline for assistance. Depending on your state, your exchange will be run either by the federal government, by your state, or by a partnership between the two. In Pennsylvania, the exchange will be run by the federal government. To learn more about the status of your state's health insurance exchange click here.

Second, consider the coverage options and pick the one that best fits your needs. That will require some decisions, like balancing the cost and the amount of coverage.

In each exchange, the available health plans will be grouped into four levels according to how much they cover. These will be named after precious metals - platinum will be the best, followed by gold, silver and bronze. All of them will cover the same essential benefits that are required of all plans under the health reform law. The main difference will be in the amount of those benefits they pay for. Platinum plans will cover 90% of your expected expenses, gold will cover 80%, silver 70%, and bronze 60%. In addition, some plans will offer additional benefits above those required by the law.

This will translate into differences in the amount you will have to pay out-of-pocket for care. Under bronze plans, you will have to contribute the most and under platinum plans, the least. You can find more information on metal levels and what they mean for your wallet here.

Third, see if you qualify for financial assistance. The key question on many people's minds is, how much is all this going to cost me? That answer depends on the health plan you choose and your income. If your income is low enough (less than 400% of the federal poverty level), you may qualify for a subsidy that will help reduce premiums and out-of-pocket expenses. You may also qualify for Medicaid, depending on the eligibility requirements of your state.

Before you select your plan, you should have your financial documentation ready. The exchange will tell you once it verifies your income and determines if you qualify for a subsidy. To calculate in advance if you will receive assistance and how much it will be, click here.

Finally, start using your new insurance after next January 1, when exchange-based policies will become effective. The most important point to remember of all is that under health reform, you will be able to get one, regardless of your medical condition. Access to coverage will be guaranteed.