The Affordable Care Act (ACA) created new health insurance marketplaces that exist in each state. These marketplaces are either operated by the federal government, referred to as federally facilitated marketplaces (FFM) or by the state, referred to as state-based marketplaces (SBM). These marketplaces enable consumers to shop for and compare health plans, and access premium tax credits and cost-sharing reductions to make health insurance more affordable. In most states, consumers can also buy health coverage outside the marketplace.
For the most part, health insurers selling individual coverage outside the health insurance marketplace will have to provide many of the same consumer protections that insurers inside the health insurance marketplace provide. However, some types of coverage sold outside the marketplace are exempt from the ACA’s rules, and consumers should fully review the terms of their coverage to ensure it provides adequate protection. In addition, not all coverage sold outside the marketplace meets the federal standard for “minimum essential coverage” meaning that enrollees in those plans are not eligible for some special enrollment periods in the event of certain life changes, such as a permanent move.
Health insurance marketplace
Consumers are eligible to purchase health insurance coverage through the marketplace if they:
- Live in the state in which they are applying;
- Are a citizen of the U.S. (or are lawfully present); and
- Are not currently incarcerated.
Consumers will need to go through additional eligibility screening to determine whether they are eligible for premium tax credits or cost-sharing reductions to help make their marketplace plan more affordable.
Premium tax credit
Individuals may qualify for financial help with premiums and out-of-pocket costs for coverage purchased through a health insurance marketplace. Financial help is available in two forms: a premium tax credit and cost-sharing reductions.
To be eligible for the premium tax credit, the individual must meet all of the following criteria:
- Be enrolled in a health plan through the health insurance marketplace, and
- Not eligible for other minimum essential coverage like Medicaid or an affordable employer sponsored plan
The level of financial help is calculated based on the price of available plans and household income; lower income individuals are eligible for greater subsidy amounts, and some higher income individuals may not receive subsidies.
Getting more information about your coverage options. All health plans must provide individuals with a Summary of Benefits and Coverage, which uses a standard format to outline the benefits, cost-sharing and coverage limits of plans. The Summary of Benefits and Coverage must also state whether the plan meets minimum value and counts as minimum essential coverage. The Summary of Benefits and Coverage must be made available to consumers at open enrollment and upon enrollment of coverage, upon request, and whenever there is a significant change in the plan.
Comparing plans and understanding options. Since 2014, if a new plan is offered to an individual or small business, it must meet federal standards for the adequacy and affordability of coverage. The federal rules establish minimum standards for benefits and cost-sharing, limit the factors that may be used to set premiums, and require plans to fall within established levels of actuarial value. Actuarial value (AV) is the percentage of total average costs for benefits that a plan will cover, and under the Affordable Care Act these AVs correspond to metal levels, which are platinum (90 percent); gold (80 percent); silver (70 percent) and bronze (60 percent). This means that if you purchase a silver plan, the plan will pay, on average, 70 percent of covered benefits and you will be responsible for the remaining 30 percent. You can find a chart outlining how federal rules apply to different insurance markets and types of coverage here. If you qualify for cost sharing reductions, the actuarial value will be higher, reducing your out-of-pocket obligations.
All new plans available in the marketplace or through the Small Business Health Options Program (SHOP), including those sold through a health insurance marketplace must meet the following requirements:
(NOTE: Plans that do not comply with the ACA, including short-term limited duration insurance, association health plans, and health care sharing ministries, do not meet these standards. States may enact stronger laws or rules to protect consumers.)
- Minimum essential benefit standard. Insurers are required to cover a minimum set of benefits within at least the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
- Access to key services. Health plans must cover recommended preventive care at no cost-sharing (co-payments, coinsurance and deductible); allow individuals to designate any participating pediatrician to be their child’s primary care doctor; and use emergency services without prior authorization or higher cost-sharing for out-of-network emergency room care.
- Prohibition on discrimination based on health status. Prior to the Affordable Care Act, insurers could refuse to accept applicants based on health risk. Under the Affordable Care Act, health insurers can no longer do this.
- Prohibition on pre-existing condition exclusions. Prior to the Affordable Care Act, some insurers would refuse to cover care for an individual’s pre-existing conditions for up to 12 months. Under the Affordable Care Act, health insurers are no longer allowed to exclude pre-existing conditions from covered benefits under the plan.
- Minimum level of coverage. Individual coverage must provide a minimum level of financial protection for health costs, at least 60 percent of total average costs for covered benefits. Further, the Affordable Care Act requires plans to be offered at specified coverage levels, so that individuals can more easily compare them. The lowest level of coverage (60 percent) is called the bronze level. A silver level plan will cover 70 percent of total average costs for covered benefits, a gold plan covers 80 percent, and a platinum plan covers 90 percent. Individuals under age 30 or who cannot find “affordable” coverage are eligible to purchase catastrophic coverage.
- Modified community rating. Insurers are no longer allowed to charge higher premiums based on the health status or claims experience of an individual. However, insurers may charge more if the individual is older than average (up to three times more) or if he or she uses tobacco products. Premiums can also vary by geography.
- Prohibition on annual and lifetime limits. Prior to the Affordable Care Act, health plans could limit how much they paid toward benefits, for example, no more than $100,000 in a year or $1 million in a lifetime of coverage. Under the Affordable Care Act, health plans can no longer impose annual or lifetime dollar limits on benefits.
- Limits on out-of-pocket costs. Health plans must limit out-of-pocket costs for essential health benefits to no more than $8,700 for an individual or $17,400 for a family in 2022 (this amount will grow each year to track increases in medical costs). Depending on household income, the limits may be lower for individuals and families that qualify for cost-sharing reductions in a health insurance marketplace.
- Covers young adults up to age 26. Health plans must allow families to keep their adult children on the family plan up to age 26. This applies even if the child isn’t a student, doesn’t live at home or is not financially dependent on his or her parents.
- Sufficient access to providers. In addition to the above rules, plans offered in a health insurance marketplace must also meet federal standards for network adequacy, ensuring access to primary care doctors, specialists, and “essential community providers” such as community health clinics without unreasonable delay.
(NOTE: States may enact stronger laws or rules to protect consumers)
Marketplace Plan Renewals and Eligibility Re-Determinations. All health insurance marketplaces must annually re-determine individuals’ eligibility for enrollment and financial assistance, but that redetermination may take place automatically in order to reduce demands on IT and support infrastructure and maximize retention. For example, marketplaces use income information from the IRS to verify income for re-determinations of financial assistance eligibility. Federal law also requires insurance companies to renew policies for enrollees, with limited exceptions. Thus, even if the consumer takes no action, their coverage will still be renewed although they may not receive financial assistance. For enrollees receiving premium tax credits and cost-sharing reductions who have not contacted the marketplace to update their information for the last two years and no IRS income information is available for the previous two tax years, the marketplace will discontinue premium tax credits and cost-sharing reductions unless the enrollee contacts the marketplace and receives an updated re-determination.