So, What Exactly Is a Health Insurance Exchange Anyway???

I’m a health care expert who follows health reform closely, so when I’m confused about something I know most people are.

When Massachusetts passed the universal coverage law in 2006 I didn’t understand exactly what the Connector was supposed to do. If they had called it a health insurance store or marketplace or comparison site I would have grasped the concept better. Once it’s explained it’s obvious, but why use the word “connector” in the first place?

The federal Affordable Care Act makes matters even worse. It calls these things health insurance “exchanges.”

That word has the wrong connotations. When I hear the word “exchange” I think of a stock exchange. That’s not somewhere I go to buy or compare products or services to use. Others think of “exchange” as what they do when they made a purchase that was the wrong size or received a gift they didn’t like.

Even for health wonks that fully grasp the concept, the word “exchange” is confusing, because the term is also used in the context of health information exchanges, which are used to exchange clinical data. I often hear people asking about the impact of the “exchange” –without specifying “insurance exchange” or “information exchange,” and I have to ask them which they mean.

There’s a simple solution to this: let’s dump the word “exchange” and use a term that’s more understandable and appropriate. How about:

  • Store
  • Marketplace
  • Comparison site
  • Supermarket

David E. Williams is co-founder of MedPharma Partners LLC, strategy consultant in technology enabled health care services, pharma, biotech, and medical devices. Formerly with BCG and LEK. He writes regularly at Health Business Blog, where this post first appeared.

24 replies »

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  5. In a sense, I do agree that word “exchange” has to be dumped. It never was the perfect word for this imperfect bill.

    I guess like everything else, “we will see.” Here in Michigan, many are still uninformed. Maybe this goes back to the original question, as would this have been easier with more awareness?

    I do agree with a poster above though, I work in the industry and I am a little weary about giving all my information to a person they dragged off the street to be a navigator.

  6. {If family of two have health insurance, and one of them decide to use it for couple medical procedures will insurance policy premium go up?

    Please advice.


  7. Well dealing with a health care insurance is quite tough now days for any individual; therefore in order to get better health insurance program we used to take beneficial lessons from different health insurance programs along with health care programs such as Affordable Healthcare Act where health insurance exchange programs are consists of more value. So to understand the current features of health care programs we used through this above article. Really we get some beneficial health care term from here.

  8. Hey Aurthur,

    I know you probably have been duped by someone when they called you saying that they are from IRS and want your SSN to verify that you do not owe any back taxes and you readly gave them your SSN without even verifying that its an actual IRS agent. I know fear of hiding taxes on your return made you freeze and give away SSN right away 🙂

    Anyway for your information, there will be fingerprinting and background check done for every person who wants to become assister, Moreover its not free and one has to pay to for background check. you can read more here http://www.healthexchange.ca.gov/StakeHolders/Documents/Assisters%20Webinar%20FINAL02072013.pdf

    I wish you not to get duped again.

  9. I can’t wait to turn over all my financial records and ssn to a navigator/assister that probably has no training, licensing, or criminal background check to determine if they have been convicted of any felonies like identity theft or insurance fraud. I will be even happier when the navigator determines I do not qualify for any subsidy, but I can purchase a $2,000 deductible for $850 a month, but only when the next open enrollment rolls around.

    Jim, have you signed up to be a navigator or do you have to wait until you are actually out of prison for that pesky, Acorn fraud conviction?

  10. What is important is that does consumer know these new options available to them and can government effectively advertise insurance exchanges and its beneffits to low income people. California Exchange seems to be doing a better job in defining, spending money and creating new jobs to educate its populations by having exchange navigator and assisters program.

    You can earn $58 per new applicant enrollment to covered california health exchange.

  11. Regardless of whether it is called insurance exchange, marketplace or other the government will still be able to get out the information to the public by whatever the site name is going to be, the same as it did with pcip. There is going to be little confusion when the media is going to be pimping the words insurance exchange within an insurance marketplace.
    I wound up investing in a state insurance exchange dot com domain name through http://healthinsurancedomainnames.com back in 2010 and I think it really just ads immense credibility rather than averagejoehealthinsurance.com.
    Regardless there are an immense amount of people that are going to be looking for entry and I think separating myself a bit will be a great investment in the end. Again though, people will simply continue to search as they ever have before which is health insurance. With so many people looking, its not going to be hard to conduct business regardless of the name exchange or marketplace.

  12. Okay, so now I can call the Exchange a Store, a Marketplace, a Comparison site, and a Supermarket. Problem is, I still don’t know what the hell it is and how it’s supposed to be better for me than simply going to my doctor and paying him before I leave the office.

  13. Gee, if this law is supposed to be the panacea for all that is wrong with the country’s health care, why is ‘rebranding’ necessary? Couldn’t be because the entire program is a sham, lie, and disaster.

    Which is why it should be rebranded as DOA. If it truly were a panacea, rebrand it as PUBLIC OPTION and really start the ball rolling in a national insurance pool option.

  14. No ‘exchange’ is the perfect word for it, you are just looking at the wrong fun house mirror for an appropriate example of definition and function. It is not like the NYSE – it is more the Chicago Green Energy Exchange for Cap and Trade. No new value to the market place, no transparency of the transfer of funds, no determinant underwriting, and an architecture built upon fines, regulations, leavied seizures without solving delivery or the status quo. That should get you into the neighborhood – at least close enough to smell the stink of this thing for what it is.

  15. Mr. Carol…”People who qualify for a subsidy will quickly learn the web address or phone number that they need to access to gain information about available health insurance policies.”

    Kind of a catch 22…since the first (and to many unsuspecting rubes, last) function of the “exchange” will be to determine the individual does not qualify for a subsidy. The folks that do qualify for the subsidy will quickly learn their magical coupon is only good for a limited time (open enrollment) and likely and unfortunately that was last month. But there’s always next year. Except, your $2,000 coupon is only good for purchasing a $12,000 plan, so better come up with the other $10,000. Wait, if I had $10,000, I would go buy an individual policy for like $250 a month. Sorry, that plan does not exist anymore. Thanks obama administration.

    I agree it does not matter what they call the “exchange”. However, I vote for something more accurate, like “Brigadoon”, you know the ficticious place that appears only for one day every 100 years. “Why do people have to lose things to find out what they really mean?”

  16. Lots of changes are needed Peter1, but with appropriate emphasis, the Affordable Care Act will be hailed as one of the most significant social acts ever implemented. As the current commercial says: “When pigs fly…” and with a little close analysis it is obvious that they they have been flying for quite some time and will soar even higher in the next few years.

  17. “The federal Affordable Care Act makes matters even worse. It calls these things health insurance “exchanges.””

    On “HealthCare.gov” it’s actually called a “Health Insurance Marketplace”. Of course a true marketplace assumes a large pool of buyers and sellers acting independently where there is no mandate for buyers to participate.

    When you change the name of a pig, is it still a pig?

  18. TANSTAAFL! Un intended consequences and outcomes will be common in this social experiment. “exchange” suggests buy and sell, like the NYSE for equities.

  19. The Exchanges will turn out to be the only place healthy people are forced to buy small pool, high risk, expensive insurance – unless of course you’re getting a government subsidy.

  20. Very well put Mr. Williams.

    Richard Feynman once tried to prepare a freshman lecture on a physics topic of interest and failed. His conclusion – he didn’t understand the topic sufficiently well to explain it to freshman students. This from a Nobel prize winner and one of the great minds of the 20th century.

    Leads me to think that we doing an incredibly poor job of communicating the changes and issues in health care clearly and concisely.

  21. I don’t think the use of the word, exchange, is a big deal even if there may be other words that more accurately reflect the exchange’s core function. People who qualify for a subsidy will quickly learn the web address or phone number that they need to access to gain information about available health insurance policies.

    I think the bigger surprise will come when people learn exactly what is offered on a particular exchange, how much it costs and the risk profile of the population that signs up for coverage. There will be public exchanges that serve the individual insurance market and separate exchanges for the small group market. There will also be private exchanges. Lots of small group employers especially may seize the opportunity to provide their employees with a defined contribution of about what they were already spending for health insurance and send their workers and their families to the exchanges so they can find a policy that more closely fits their needs, ideally with a nice subsidy to help cover the cost.

    The biggest issue, in my opinion, is the ultimate cost of the subsidies which could easily turn out to be much higher than the CBO and other so-called experts currently estimate. We’ll see.