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A health exchange or health insurance exchange is an organization that provides a marketplace for individuals, small businesses, and other interested parties to purchase health insurance coverage at rates that are competitive, and lower than these groups can obtain on the open market. These exchanges are designed to function like cooperatives, thereby offering a range of plans with similar rates to those employed by large corporations, and providing participants with relevant data that will allow them to make informed choices. Rules are typically in place concerning the type of coverage that can be offered and the pricing structure that may be employed in a health exchange. In the U.S., each state is supposed to create an exchange as part of the recently enacted healthcare reform law, assuming it is fully implemented.
In the U.S., many individuals obtain health insurance through their employers. These companies are able to negotiate relatively reasonable rates with the insurers because the risk can be spread over a large group of employees, many of whom are in good health. Self-employed individuals, or those who work for smaller businesses, or who are unemployed, retired, and/or ineligible for U.S. Medicare or Medicaid often face much higher rates. The concept of the health exchange is to provide a place for these people to purchase health insurance at fair, affordable prices.
By design, a health exchange is supposed to function like a cooperative for the purpose of purchasing medical insurance. It groups large numbers of people who would have to purchase insurance on their in a group purchase plan at lower rates, similar to a food cooperative. This allows the members to enjoy the purchasing power of a large company and provides the insurer with a large pool of customers among whom to spread risk. The exchange negotiates with insurers to get the best possible rates and plans on behalf of the members. The health exchange also provides consumers with detailed information concerning their options, thus allowing them to compare plans and select the best ones to meet their needs.
In general, there are rules governing the type of insurance policies that can be offered through a health exchange. All of the plans are supposed to include certain minimum levels of coverage, and insurers are not authorized to deny coverage to members of the exchange. There can also be different tiers of coverage; those who are willing to pay more can get increased coverage. Although exchanges are not supposed to set the prices, they usually have the power to reject plans that are too expensive, and to stop offering plans that implement unreasonable rate increases.
As part of impending health reform in the U.S., each state is supposed to create its own health exchange. The design and implementation of the exchange is left up to each individual state as long as certain guidelines are fulfilled. It is envisioned that many of the exchanges will utilize web portals on the Internet and telephone help lines among other possibilities.
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