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 major medical health plans (and dental plans, in many areas) with the exchange, and people comparison shop on the exchange from among the available health plan listings.
This article will help you understand what the exchange is, who uses it, the financial assistance that’s available through the exchange, and what you need to know about buying your own health insurance.
The phrase health insurance exchange most commonly refers to public health insurance exchanges developed by the government because of the Affordable Care Act (the ACA, also known as Obamacare).
(Private health insurance exchanges also exist, usually to serve employers buying health coverage for their employees, but that’s generally not what people are referring to when they say “health insurance exchange.”)
Public health insurance exchanges are used to buy individual and family health insurance plans that are compliant with the ACA. “Individual and family” or “individual market” means health insurance that people buy on their own, as opposed to coverage that’s obtained through an employer or via a government-run program like Medicare or Medicaid/CHIP. (Note that the exchanges can also facilitate enrollment in Medicaid/CHIP, depending on the state and the person’s eligibility category.)
These exchanges are the only place people can obtain premium subsidies and cost-sharing reductions, which serve to reduce premiums and out-of-pocket costs for millions of eligible enrollees. (In many states there are Enhanced Direct Enrollment (EDE) entities that can facilitate enrollment in the exchange using their own third-party websites.)
More than 16 million people obtained coverage through the exchanges nationwide during the open enrollment period for 2023 coverage. Out of those enrollees, nearly 14.8 million were receiving premium subsidies, and more than 7.8 million were receiving cost-sharing reductions.
People who are eligible for Medicaid based on their income can enroll in Medicaid via the exchange in their state. Depending on the state, this can either be done entirely through the exchange, or the exchange will direct them to the state Medicaid office once a preliminary eligibility determination indicates that they’re likely eligible for Medicaid.
In some states, small group plans for small businesses are available through the exchanges as well. But that segment of their market has attracted few enrollees, and the federal government announced in May 2017 that they would no longer operate the small business enrollment system (used in 32 states as of the 2024 plan year) after the end of 2017.
Instead, small businesses in those states enroll directly through insurance companies or with the help of a broker, and pay premiums to the insurers rather than making premium payments through the exchange. But SHOP-certified plans, via agents, brokers, and insurers, are only available in limited areas in some of those states; most states that use HealthCare.gov simply don’t have any SHOP-certified plans available at all anymore, due to low interest in that program.
This article focuses on the ACA’s public health insurance exchanges and the individual market health insurance plans that make up the bulk of the exchanges’ private plan enrollments. It’s “exchanges,” plural, because each state has an exchange. And 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.
HealthCare.gov Plus 18 State-Run Platforms
States had the option of creating their own exchanges or relying on the federal government to create an exchange for them. Some states have hybrid exchanges that are either a partnership between the state and federal government or a state-run exchange that uses the federal enrollment platform (HealthCare.gov).
As of the 2024 plan year (enrollment beginning November 2023), there are 19 fully state-run exchanges, three state-run exchanges that use HealthCare.gov for enrollment, six state-federal partnership exchanges, and 23 federally-run exchanges.
The largest health insurance exchange, HealthCare.gov, is run by the federal government, serving health insurance shoppers in 32 states for 2024 (including the states with partnership or state-run exchanges that rely on the federally-run enrollment platform).
The other 18 states and the District of Columbia each run their own exchanges (eg, platforms such as Nevada Health Link, Pennie, New York State of Health, and Connect for Health Colorado).
Some states have used the same exchange platform ever since the exchanges debuted in the fall of 2013, while others have changed their approach over time.
Recent changes include Maine, Kentucky, and New Mexico, all of which transitioned from state-run exchanges that used the HealthCare.gov platform to state-run exchanges with their own enrollment platforms in the fall of 2021.
Virginia will begin operating its own exchange platform in November 2023. Georgia will join them in the fall of 2024, and Illinois will follow suit in the fall of 2025.
Exchanges Are Enrollment Portals—They’re Not Your Insurer
It’s important to understand that the exchanges are just a platform for purchasing coverage. If you buy health insurance via Covered California, for example (the state-run exchange in California), Covered California is not your insurance company.
Instead, your insurance company will be Health Net, or Blue Shield, or Anthem, or any of the other private insurers that offer coverage via Covered California.
And to clarify one other point that sometimes creates confusion, the terms “exchange” and “marketplace” are used interchangeably. But the term “market” is used more generally.
So while a health insurance exchange or marketplace refers specifically to the portal in each state that people can use to compare the various options and enroll, the term “health insurance market” applies much more broadly.
The health insurance market can include plans sold outside the exchange and employer-sponsored plans as well as grandmothered and grandfathered plans (the latter two types of coverage are no longer available to new enrollees, but still remain in force for some employers and individuals who had previously purchased them).
What’s the Difference Between “On-Exchange” and “Off-Exchange”?
If you’re buying a health insurance plan in the individual market, you’ll probably hear people referring to “on-exchange” plans versus “off-exchange” plans.
An “on-exchange” plan is simply one that’s purchased through the exchange. People can shop for exchange plans on their own, or they can have help from a broker or navigator.
If you’re in a state that uses HealthCare.gov as its exchange, there are certain third-party websites (operated by brokers or insurers) that can facilitate your enrollment in an exchange plan via the third-party website. Ask plenty of questions if you’re working with a broker or a private website, to ensure that you’re getting an on-exchange plan if that’s your preference.
“Off-exchange” plans, on the other hand, are purchased without going through the ACA exchange in your state. They can be purchased directly from an insurance company, or with the help of a broker. Premium subsidies and cost-sharing subsidies are not available if you buy an off-exchange plan, even if you’d otherwise be eligible.
And you can’t go back and claim the premium subsidy on your tax return if you bought an off-exchange plan, whereas you can if you buy an on-exchange plan and don’t take the premium subsidy upfront.
But in many cases, the plans themselves are identical or nearly identical, on- and off-exchange. All individual major medical plans with effective dates of January 2014 or later are required to be fully compliant with the ACA, regardless of whether they’re sold in the exchange or off-exchange. That part is important: Insurance companies cannot sell non-ACA-compliant major medical health plans in the individual market, even if they sell them outside the exchange.
Depending on how your state has structured its exchange, the health plans available on-exchange might have to adhere to additional requirements beyond simply being ACA-compliant. For example, some states require some or all of the plans sold in the exchange to be standardized, with the same set of specific benefits offered by each insurer. And some states require on-exchange plans to embed pediatric dental coverage on each health plan.
Some insurers choose to only offer their plans for sale on-exchange, others only offer them off-exchange, and others offer plans both on- and off-exchange (note that Washington DC does not allow plans to be sold off-exchange; ACA-compliant individual and small group health plans can only be purchased there via DC Health Link, the District’s health insurance exchange).
Non-ACA-Compliant Plans Sold Outside the Exchange
Plans that are currently for sale outside the exchange but that are not compliant with the ACA generally fall into the category of “excepted benefits,” which means they’re specifically exempt from the ACA’s rules, and are, by definition, not individual major medical health insurance.
Excepted benefits include short-term health insurance, limited benefit plans, fixed indemnity plans, accident supplements, critical illness/specific disease plans, and dental/vision insurance.
There are also various other types of coverage, including healthcare sharing ministries, and Farm Bureau plans in a few states, including Kansas, Iowa, Tennessee, Indiana, Texas, and South Dakota, that are not considered health insurance and thus not subject to health insurance rules and regulations.
Some of these plans, including short-term plans, healthcare sharing ministry plans, and Farm Bureau plans, are designed to serve as stand-alone medical coverage for at least a short while, although they all have gaps in their coverage when compared with ACA-compliant plans—some more so than others.
The rest of the excepted benefits are designed to serve as supplemental coverage. Excepted benefits and “non-insurance” plans are available off-exchange in most areas. Dental/vision plans are available on-exchange in most areas.
Who Can Use the Exchanges?
All U.S. citizens and legally present residents who are not imprisoned and not enrolled in Medicare are eligible to purchase a health plan in the exchange in the state in which they live.
Under ACA rules, undocumented immigrants cannot enroll in coverage through the exchanges, even without premium subsidies. But Washington state has received a federal waiver that will allow the state to open its exchange to undocumented immigrants starting in the fall of 2023. And Colorado has created a separate platform that undocumented immigrants can use to obtain coverage.
In some states, small businesses can also purchase coverage in the exchange (in most states, this is limited to businesses with up to 50 employees). Note that in states that use HealthCare.gov’s small business exchange, the exchange is no longer handling enrollment, and is having businesses enroll directly with insurers instead. Some of the state-run exchanges are also using this approach, so on-exchange availability of small-group health coverage is fairly limited.
As a result of the Grassley Amendment in the ACA, members of Congress and their staffers are required to obtain coverage in the exchange. To accommodate this requirement and ensure that Congress and staffers didn’t lose their employer premium contributions, the government created a workaround that lets Congress and staffers enroll in small group plans through the state-run exchange in the District of Columbia (DC Health Link).
DC Health Link reported in 2021 that about 11,000 of their small group enrollees were members of Congress and their staffers. The annual open enrollment period for members of Congress and their staff runs for one month in the fall. This is an enrollment window for employer-sponsored coverage, so it’s not the same as the open enrollment period that applies to individuals purchasing their own health insurance through DC Health Link.
How Many People Have Coverage Through the ACA’s Exchanges?
At the end of open enrollment for 2023 coverage (which ended on January 15, 2023, in most states), total exchange enrollment in individual market plans stood at more than 16.3 million people, including enrollments conducted via HealthCare.gov and the 18 state-run exchanges.
This was a record-high enrollment, driven in large part by the subsidy enhancements created by the American Rescue Plan and extended by the Inflation Reduction Act.
Small businesses can enroll in plans through the exchanges, but there were fewer than 200,000 people enrolled in small business exchange plans nationwide in 2017—the vast majority of the ACA exchange enrollees have coverage in the individual market.
How Health Insurance Exchanges Work
Exchanges are designed to increase competition and ease comparison shopping. Insurance companies compete for your business in the exchange. This direct competition is meant to keep the cost of health insurance premiums down. Exchanges/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, although the specific coverage that’s offered will vary from one state to another, depending on the benchmark plan that the state uses:
- Ambulatory care (outpatient care)
- Emergency services
- Maternity and newborn care
- Mental health care, including treatment for substance use disorders)
- Prescription drugs
- Rehabilitation services and habilitative services, including devices
- Laboratory services
- Preventive care
- Pediatric vision and dental care (coverage for adult dental and vision services is not required. And the rules for pediatric dental coverage are a little different from the other essential health benefits).
Covering essential health benefits is part of being ACA-compliant, so the off-exchange individual major medical plans available in your area will also cover the essential health benefits.
Standardized plans are available in the exchanges in nearly all states, including those that use HealthCare.gov. In California’s exchange, all of the plans are standardized.
All health insurance policies offered in the exchange must conform to one of five benefit tiers: catastrophic, bronze, silver, gold, or platinum. Both on- and off-exchange, a policy’s benefit tier (bronze, silver, gold, or platinum) describes the percentage of average covered healthcare expenses the plan will pay, otherwise known as the actuarial value (AV) of the plan.
You can learn more about how these benefit tiers work in, “Bronze, Silver, Gold, and Platinum—Understanding the Metal-tier System.”
In most areas of the country, platinum plans are scarce or not available at all in the individual/family market. Silver and gold plans are available in all areas of the country (insurers that offer plans in the exchange are required to offer them at the silver and gold level, at a minimum). But there have been some years when some areas were lacking bronze plans.
Catastrophic plans cover less than 60% of the cost of essential health benefits for a standard population, but they still must adhere to the ACA’s cap on out-of-pocket costs. Catastrophic plans also include three primary care office visits before the deductible, and certain preventive care is covered in full, just as it is on all ACA-compliant plans. Everything else applies to the deductible and is only covered after it’s met. And the deductible on a catastrophic plan must be equal to the federally-set maximum limit on out-of-pocket costs, which is indexed each year.
Both inside the exchange and outside the exchange, Catastrophic plans are only available to those up to age 30 or to those who qualify for a hardship exemption from the mandate to purchase coverage (although there’s no longer a federal penalty for not having coverage, the mandate itself still exists and an exemption is still required in order to purchase a catastrophic plan if you’re 30 or older).
Exchanges provide subsidies to help pay for health insurance. Health insurance exchanges are the only access point for government subsidies (premium tax credits) that make health insurance more affordable.
You can apply for a government health insurance subsidy through 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?”
Even if you think you might be eligible for a premium subsidy but aren’t sure due to fluctuations in your income, you’ll want to consider buying a plan through the exchange. You can pay full price and then go back later and claim the subsidy (since it’s really just a tax credit) on your tax return. But you can’t do that if you bought your plan off-exchange.
This is particularly important to understand through at least 2025, since the American Rescue Plan and Inflation Reduction Act have temporarily made subsidies so much larger and more widely available. But to take advantage of that extra financial help, you must be enrolled in an on-exchange health plan.
In addition to premium subsidies, cost-sharing subsidies (also known as cost-sharing reductions) are also only available if you buy a silver plan through the exchange in your state. If your income makes you eligible for cost-sharing subsidies and/or premium subsidies, you’ll want to enroll through the exchanges (as opposed to enrolling off-exchange an insurance company) in order to take advantage of the available assistance.
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, or to create an exchange but use the federal enrollment platform. In that case, residents use the federal government’s exchange at HealthCare.gov.
The following states have their own enrollment websites, although you can get to them by starting at HealthCare.gov and clicking on your state or entering your zip code:
In every state, enrollment in the exchange (and outside the exchange) is limited to an annual open enrollment window (November 1 to January 15 in most states) and special enrollment periods triggered by qualifying events.
A health insurance exchange, or marketplace, is a platform that allows people to purchase their own health insurance coverage. And income-based subsidies are also available through the exchange, to reduce the premiums and out-of-pocket costs that enrollees have to pay. Each state has its own exchange, but the exchange can be run by the state (as is the case in DC and 18 states for the 2024 plan year) or by the federal government (as is the case in the other 32 states). During the open enrollment period for 2023 coverage, more than 16.3 million people enrolled in health insurance through the exchanges nationwide.
A Word From Verywell
If you don’t have health insurance from an employer or the government (Medicaid, CHIP, Medicare, VA, etc.), it’s in your best interest to comparison shop in your state’s exchange. If you’re uninsured or relying on a non-ACA-compliant health plan, you might be pleasantly surprised to see how affordable an exchange-based plan could be, especially once you factor in the income-based subsidies that are available.