Know About Off-Exchange Health Insurance Plans

Individuals who have a shop for health insurance plans must be well aware of a health insurance exchange. Every U.S. State has an official exchange, most of the exchanges are jointly run by the state and federal government and are established under the Affordable Care Act. Off-exchange health plans refer to insurance plans that are not purchased through the state’s health insurance exchange.

However, 12 states along with the District of Columbia have their own health insurance exchanges and have their own enrollment websites. If individuals buy health insurance through the health insurance exchange in their state, then it is considered an on-exchange plan. If they directly buy from the insurance company on their own or with the help of a broker, then it is referred to as off-exchange. Some of the brokers are able to enroll clients in on-exchange plans or through the government’s direct enrollment process.

Background

People need to understand the difference between on and off-exchange health insurance plans, and it is important to understand that there is just one official exchange or marketplace in every state. Individuals can find their state’s exchange by selecting their state on Healthcare.gov. Individuals while shopping can come across private exchanges or other entities that are considered as a marketplace but if they are not the official exchange in the state, then the plan will be considered as an off-exchange plan.

On and Off-Exchange Individual and Family Health Plan

Individuals shopping for health insurance on their own should know that there are both on and off-exchange plans available in the marketplace. However, if they are buying an individual major plan, then it has to be fully compliant with the ACA, regardless of the fact whether the individual is purchasing it on-exchange or off-exchange. The plans that are not available on-exchange such as Grandfathered and grandmothered plans are technically considered off-exchange plans. These plans are no longer available for sale. Even a short-term health plan that is regulated as major medical coverage in some states is not counted as individual major medical coverage and is technically is an off-exchange plan, as it is sold outside the exchange. Since short-term plans are not regulated by the ACA, so they do not comply with any of its rules.

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ACA Parameters Applicable to both On- and Off-Exchange Individual Health Plan

  • These plans have to cover ACA’s essential health benefits without any annual limits.
  • The plans cannot have out-of-pocket maximums in excess of the limits set every year by the federal government
  • The plans cannot use medical underwriting that means the plans have to cover pre-existing conditions immediately after being effective. An Individual’s medical history cannot be used to determine their eligibility for coverage.
  • The plans are allowed to charge older applicants more than three times as much as a 21-year-old is charged.
  • If the same plan is sold both on-exchange and off-exchange, then the plan should be cold for the same premium amount.

However, there is one caveat, individuals who don’t qualify for premium subsidies may find that if they wish to buy a silver-level plan, then they can get a similar or identical plan off-exchange for less money compared to on-exchange price.

Glaring Difference between On-Exchange and Off-Exchange Plans

The major difference between on- and off-exchange plans is the subsidies. Premium subsidies and cost-sharing reductions are only available if individuals shop in the exchange and if they buy a plan outside the exchange then they simply cannot claim the subsidies. Even if the individual has an on-exchange plan and paid full price, then also they will have a chance to claim the subsidy. But this will only be possible if they had on-exchange coverage. Therefore, off-exchange plans are generally only reasonable when people are aware that they are not eligible for premium subsidies.

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Before the year 2020, there was no way for the people to switch from an off-exchange plan to an on-exchange plan even if their income dropped in the middle of the year and made them newly eligible for premium subsidies. However, this changed in 2020, a new rule created a special enrollment period for people having off-exchange coverage. If their income decreases in the middle of the year making them eligible for the subsidies, then they will have the option to switch to an on-exchange plan during this special enrollment period.

Number of People having off-Exchange Coverage

United States Department of Health and Human Services meticulously track on-exchange health insurance enrollments. It tracks the number of people who sign up during open enrollment each year and also track the number of people who have effectuated coverage early in the year and in mid-year.

Though enrollment of off-exchange plans is not in the practice. In the initial days of ACA implementation, it was estimated that both on-exchange and off-exchange enrollment were almost equal but with time this has been changed. It is mainly due to the steep increase in the premium price of the ACA-compliant plan in 2017 and 2018 and with the premiums price being more stable in 2019 and 2020, but are still higher compared to earlier years.

Enrollees of the on-exchange plans were greatly protected from the rate increase with the premium subsidies that grew every year to keep pace with rate hikes. In the year 2019, around 87% of nationwide exchange enrollees were receiving premium subsidies. Though the rate increase for off-exchange plans was just as substantial no premium subsidies were offered to offset the cost so the off-exchange coverage became increasingly unaffordable.

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It was determined in analysis, that out of the total number of people enrolled in the individual market plan, an increasing number of people had on-exchange coverage. As per a report published by the CMS, it was evident that there was a sharp decrease in the individual market enrollment, especially among people who don’t get subsidies, but everyone enrolled in off-exchange plans have to pay the full price of the plans, as no subsidies are available. On-exchange enrollment has remained stable but unsubsidized enrollment along with off-exchange enrollments is much lower compared to the early years of ACA implementation.

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