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A Quick Guide to Health Insurance Exchanges

Robert Berger

The Affordable Care Act (aka Obamacare) is about to make its big debut. Beginning in just a few months, individuals will be able to shop for medical insurance through exchanges. Whatever you think of the politics behind Obamacare, the law will change the health insurance marketplace. And whether you'll end up paying more or less for coverage is an open debate.

With Obamacare putting these health insurance exchanges into action soon, you may be wondering what they are, when they'll start and how they work. Here's what you need to know:

What are health insurance exchanges?

A health insurance exchange enables individuals and small business owners to shop for health insurance coverage. You'll be able to shop for health insurance online, over the phone or by mail. At their core, health insurance exchanges are meant to make shopping for health care coverage easier and to bring more competition to the marketplace, thus lowering premiums.

By Oct. 1, 2013, every state must have an exchange set up, though each exchange will look a bit different. States have the option of running their own exchanges, partnering with other states, partnering with the federal government or opting out altogether. States that opt out will have a federally-run exchange in place.

Currently, states that will run their own exchanges include California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Massachusetts, Maryland, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, Washington and the District of Columbia. States not listed here will either partner with the federal government to run an exchange or will have their exchange fully run by the federal government.

How will they work?

Individuals will be able to compare policies from the insurance companies approved for each exchange. Policies will be rated into four categories based on level of coverage: bronze, silver, gold and platinum. All the exchanges will include a toll-free number so you can get more individualized help shopping for your plan if you need it.

Each policy will meet a basic level of coverage dictated by Obamacare. All exchange policies are required to cover:

-- Ambulatory services (outpatient care)

-- Emergency services

-- Hospitalization

-- Maternity and newborn care

-- Mental health and substance abuse therapy

-- Prescription drugs

-- Rehabilitative services and devices

-- Laboratory services

-- Preventative and wellness services

-- Chronic disease management services

-- Pediatric services

Bronze-level plans will cover just the basics, while higher-level plans will cover more - and may also have lower co-pays or co-insurance fees. Many bronze-level plans will also have a high deductible, so you may have to pay out of pocket until you reach a certain maximum - around $6,000 for individuals or $12,000 for families.

Will all exchanges be the same?

Not all states will have the exact same exchange. The insurance companies participating will vary from one exchange to another, as will the premiums. For instance, in California, the state exchange has only allowed a certain number of insurers to participate, which officials say will help narrow the exchange to the best-value offerings. Colorado, on the other hand, allows any insurer to participate, as long as they meet minimum federal qualifications.

What if consumers can't afford the premiums?

For consumers who can't afford the premiums, there are some potential benefits for those who qualify. First, Obamacare has expanded Medicaid coverage to people at or below 138 percent of the federal poverty level, or $32,499 for a family of four and $15,856 for an individual in 2013. The Medicaid expansion, however, has not been adopted by all states.

Second, consumers who make between 138% and 400% of the federal poverty level ($32,499 to $94,200 for a family of four and $15,856 to $45,960 for an individual) will be eligible for health care premium subsidies on a sliding scale basis.

Rob Berger is the founder of the popular personal finance blog the Dough Roller.

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