What Is a Health Insurance Exchange?

Comparison shopping for health insurance is just like comparison shopping for other things, only you do it on a health insurance exchange rather than in a brick-and-mortar store. Image © Noel Hendrickson/GettyImages


A health insurance exchange, otherwise known as a health insurance Marketplace, is a comparison-shopping area for health insurance. Private health insurance companies list their health plans with the exchange, and people comparison shop on the exchange from among the available health plan listings.

The phrase health insurance exchange most commonly refers to public health insurance exchanges developed by the government because of the Affordable Care Act, although private health insurance exchanges do exist.

Public health insurance exchanges are used to buy standardized individual and family health insurance plans known as Obamacare. Private health insurance exchanges are usually designed to serve several large employers, so most people will only encounter them when signing up for job-based health insurance.

Although the word Marketplace invokes the mental image of a physical place where shoppers wander from stall to stall checking out the vendors' wares, most people access health insurance exchanges via the internet. The largest health insurance exchange, HealthCare.gov, is run by the federal government, serving health insurance shoppers in more than 50% of States.

How Health Insurance Exchanges Work

Exchanges increase competition and ease comparison shopping. Insurance companies compete for your business using the Marketplace. This direct competition is meant to keep the cost of health insurance premiums down.

Marketplaces ease the comparison of plans by using an "apples to apples" approach:

  • All health insurance policies offered through the exchanges provide a minimum set of essential health benefits.
  • All health insurance policies offered must conform to one of four benefit tiers: bronze, silver, gold, and platinum.

    A policy’s benefit tier describes the percentage of covered healthcare expenses the plan will pay, otherwise known as the actuarial value of the plan. You can learn more about how these benefit tiers work in, "Bronze, Silver, Gold, and Platinum—Understanding the Metal-tier System."

    Exchanges provide subsidies to help pay for health insurance. Health insurance exchanges are the only access point for government subsidies that make health insurance more affordable for Americans with modest incomes. You can apply for a government health insurance subsidy on your  health insurance exchange, and the subsidy is only good for health insurance bought on the health insurance exchange. Learn more about health insurance subsidies in, "Can I Get Help Paying for Health Insurance?"

    Exchanges issue exemption certificates. Even if you don't want to buy health insurance, you may end up having contact with your health insurance exchange since health insurance exemption certificates are only issued through health insurance exchanges. If you don't have health insurance, but you want to avoid the tax penalty for being uninsured, you'll need an exemption certificate. Find out if you're eligible for an exemption from the mandate to buy health insurance in "Can I Get a Health Insurance Exemption??"

    Finding Your Health Insurance Exchange

    Your state may run its own health insurance exchange such as the one run by California, Covered California. Or,  your state may have opted not to create a health insurance exchange. In that case, residents use the federal government's exchange at HealthCare.gov.  Find out how to contact the health insurance exchange in your state, or whether residents of your state use the federal government's exchange.

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