Read about “state-based” health insurance, private markets, and the federal marketplace.
Are you looking for health insurance coverage for yourself and your family? Or are you a small business owner looking for affordable health insurance for yourself and your employees?
If you’ve answered, “Yes” to either of these questions, then you might have heard of state-based health insurance. So how do state based plans work, are they federally subsidized, and how do you purchase them? Here’s what you need to know about state-based health insurance.
There’s actually no such thing as state-based health insurance
If you hear someone reference state-based insurance, what they’re likely referencing is a health insurance plan that is regulated by the department of insurance in that state.
That doesn’t mean that you can only use the insurance in that state, and it doesn’t mean you have to buy it on the state’s exchange. It simply means it was approved as an insurance product in that state, for that state’s residents. You can’t buy it, if you live in another state.
To really understand health insurance you first have to understand that there are a number of different types of coverage you can buy.
The first is major medical health insurance. Major medical health insurance is usually the most comprehensive coverage you can buy, and it’s also typically the most expensive. Every major medical health insurance plan offered in a state has been approved by that state’s department of insurance (with a few minor exceptions). That means, if you don’t live in that state, you can’t enroll in that plan.
There are three distinct features of major medical health insurance:
- Its guaranteed to be offered to anyone, regardless of their health, so long as you apply for coverage during an open enrollment period.
- It has to cover 10 essential health benefits mandated by the affordable care act, which include things like maternity care, mental health coverage, and substance abuse
- A person cannot be charged more for coverage based on their health history.
- You can find details on our web site
- Some short-term health insurance plans are filed in one state, through an association, and offered in many states.
- So, for example, some states have agreed that an association-based short-term health plan filed and approved in one state, like, Wisconsin can be sold in their state as well, so that the insurance company doesn’t have to spend the time and money to file the product it in each state. That saves time and money and lowers costs.
- You can find details on our web site
- Most indemnity plans are also filed in one state, through an association, and offered in many states.
- Again, some states have agreed that an association-based indemnity health plan filed and approved in one state, like, Wisconsin can be sold in their state as well, so that the insurance company doesn’t have to spend the time and money to file the product it in each state. That saves time and money and lowers costs.
What are “state-based” health insurance exchanges?
State-based health insurance is sold via state health insurance exchanges. A state-based health insurance exchange is an insurance marketplace where the state provides the infrastructure, the website, and the customer support for individuals and small businesses to purchase state based plans.
When the Affordable Care Act was signed into law by President Obama in 2010, states were allowed to choose whether to establish their own state-based health insurance exchanges or not. Some states already had their own state-based health insurance exchanges, so they could decide if they wanted to continue operating. In states that chose to not form their own health insurance exchanges and offer state based plans, individuals can obtain insurance through the federal exchange.
There are also other options for buying health insurance on the individual market, such as getting a plan directly through the insurance company, or buying from a private broker like eHealth, where you’ll get to see hundreds of plans from various companies. Every state has major medical plans that are not sold on the state-exchange, so make sure to check out this type of “state-based” health insurance when shopping online.
States that offer their own health insurance are allowed to determine which insurers can offer state based plans via their exchanges. In some states, all insurers can participate. In others, they have to meet certain coverage or rate requirements. In yet others, the states give priority to insurers whose plans offer benefits that align with the state’s overall health needs. For example, if a state has a high rate of obesity, it might select insurers that offer coverage focused on obesity treatments.
States with their own state-based health insurance marketplaces
So exactly how many states run their own health insurance exchange?
Currently, there are 15 states with their own marketplaces. Some of these marketplaces offer plans for individuals, as well as for small business owners and employees. Others have marketplaces that are only for owners and employees of small businesses. In these states, individuals can’t purchase state-based health insurance and are instead are required to go to Healthcare.gov. But in every state, people still have the choice to buy on private marketplaces, such as brokers like eHealth, or straight from a health insurance company. Below are the states with their own state-based insurance marketplaces:
- District of Columbia
- New Mexico
- New York
- Rhode Island
How federal subsidies work with state based plans
While many people believe that state based plans are only available for people with low incomes, the truth is that they actually benefit a large portion of the middle class. The reason for this is that federal subsidies on state-based health insurance plans apply for people within certain income brackets. If you earn between 133 percent and 400 percent of the federal poverty level, then you qualify for federally supported state-based health insurance. That means that your monthly premiums for your state based health insurance plan will be lower depending on how much subsidy you qualify for.
In 2017, the federal poverty guidelines were as follows:
|Number of people in family||Federal poverty level|
Federal subsidies on state-based health insurance are frequently referred to as “tax credits” because they’re automatically added to your tax refund. However, they’re applied at the beginning of the tax period to lower the premiums on your state based plan based on your estimated income for the year. If you earn more or less than what you estimated, your subsidy is adjusted accordingly when you file your tax return. Be careful about guessing your income when applying for health insurance. If you are estimating your income and guess low in order to get a larger tax credit, you’ll likely end up owing money once tax season comes around.
How do you buy health insurance on state-based health insurance exchanges?
If you want to purchase insurance on a state-based health insurance exchange, the process is relatively simple. When you go to the relevant state-based health insurance website, you’ll be asked to enter some person information to determine whether you qualify for a federally supported state-based health insurance plan. (Note: You can also go to Healthcare.gov, which will redirect you to your state’s marketplace.)
If you qualify, you’ll be presented with the health insurance plans you qualify for. You’ll see that the plans are divided into four categories. These categories represent how you and the insurer will divide medical costs:
- Bronze: You pay 40 percent; the insurer pays 60 percent.
- Silver: You pay 30 percent; the insurer pays 70 percent.
- Gold: You pay 20 percent; the insurer pays 80 percent.
- Platinum: You pay 10 percent; the insurer pays 90 percent.
Of course, the right category for you will depend on your own specific needs. You’ll be able to review the health insurance plans and what specific coverage options they offer before selecting one. And don’t worry if you find it confusing: Most marketplaces provide additional phone support in case you need extra assistance understanding the various options.
What to do if you don’t want state-based health insurance
If you don’t qualify for state-based health insurance or don’t want it, then the good news is that there are still ways to find affordable health insurance. You can learn more about individual health plans here or about family health plans here.