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Buying Health Insurance in 2014 and the Difference Between a Private Marketplace and a Public Marketplace

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It's amazing how time flies by. We are now less than three months from the first open enrollment period, which starts October 1 and consumers will be given their first opportunity to purchase health insurance with the new rules of Obamacare in place.

With open enrollment just around the corner, it is very important that consumers understand how they will be able to shop for and purchase health insurance.

Do you qualify for financial assistance?

The Affordable Care Act (ACA) provides for the possibility of financial assistance (referred to as the health insurance premium tax credit) for individuals and families whose household incomes are below 400 percent of the poverty level. This tax credit will be available to purchase health plans called "qualified health plans" that have been approved and are available on a state or federal marketplace.

To determine how much financial assistance a consumer will receive, the consumer will be required to complete an application with the federal government.

How do consumers access plans and apply for subsidies?

The ACA mandated the creation of online public marketplaces, sometimes called "exchanges." For the first open enrollment, it is expected that 35 states will utilize an individual marketplace created by the federal government and 15 states plus the District of Columbia will create their own online marketplaces. The marketplaces, whether state-run or federally run, will offer consumers the opportunity to comparatively shop for qualified health plans available in the consumer's geographic area and apply for a subsidy. The government-run marketplaces, however, will not necessarily offer every available health insurance option available to a consumer.

Private companies will also run private marketplaces, or exchanges, that may offer the same qualified health plans, but may also offer additional "off-exchange" health plans. The private online platforms are called web-based entities, or web-based brokers. A "web-based entity" (WBE) is a government-approved phrase to describe online websites where consumers will be able to shop and purchase health insurance on the private market.

The services of WBEs have been around for a long time in the individual health insurance market. The biggest players have already enrolled millions of consumers in individual plans and have created shopping experiences that may differ slightly from how the government-run marketplaces operate. The WBEs offer their service free to consumers and they generally receive their compensation straight from the insurance carriers.

Most, if not all, WBEs will also offer off-exchange health insurance policies that provide consumers different health care benefits at different prices than the qualified health plans and the off-exchange plans will also satisfy a consumer's obligation under the ACA to maintain health insurance.

A well-run WBE will offer the same qualified health plans available on the government run marketplaces, at the same prices, plus additional products such as off-exchange products and ancillary products, including dental and vision insurance. If a consumer decides to purchase a qualified health plan, then the WBE can still integrate with the government-run marketplace to assist the consumer in applying for a subsidy and the information that the consumer gives regarding the subsidy calculation will be collected and maintained solely by the government.

Because of the experience in the market and the unique products they offer, it makes sense that these already established web-based entities should play a role in the state and federal marketplaces.

What if a consumer has questions or needs assistance?

Regardless of whether a consumer accesses available plans via a public government-run marketplace or a privately run marketplace, there will be assistance available should the consumer have questions. The government-run public exchanges will utilize trained staff known as "navigators" or "assisters" to help consumers through a portion of the process.

It should be noted, however, that these navigators and assisters are likely not going to be licensed health insurance agents and not necessarily have the same training. In fact, many states have mandated that navigators will not be permitted to provide advice regarding policy benefits.

Consumers should be aware that licensed agents will still be available and ready and willing to assist with any policy questions that each consumer may have, however, it is not clear whether the government will facilitate the contact with the licensed agent or whether the consumer will be responsible for locating an agent.

One of the benefits of using a private exchange marketplace is that many of these companies will employ trained and licensed health insurance agents to walk consumers through the process from start to finish, should the consumer request the assistance and without requiring the consumer to take any additional action.

With October 1 approaching, there will be an overload of information hitting consumers regarding open enrollment and purchasing health insurance. It is important that consumers know their options and know what assistance is available to them.