One important component of the Affordable Care Act (ObamaCare) is the creation of statewide “exchanges” or organizations that will oversee the sale and purchase of health insurance, mainly for people outside of the employer-sponsored insurance market.
The law invites, but does not require, states to create exchanges for their residents. In December 2012, states had to decide if they would establish and manage their own exchanges, or if they would refuse. Eighteen states and the District of Columbia elected to run their own exchange. Seven states agreed to operate their exchanges as federal-state partnerships. The federal government will step in and create exchanges in the remaining 25 states.
Through the exchanges, states (or the federal government) will monitor and rate what types of plans are bought and sold. Tax credits and subsidies will be provided to some people, and penalties for noncompliance will be levied on others.
Many ObamaCare advocates and mainstream media outlets celebrate the exchanges as “health insurance marketplaces” where consumers will find information and a variety of insurance options. But far from creating a real marketplace, these exchanges will simply be a mechanism for the government to exert greater control over the health insurance arena, which will result in less competition, fewer choices, and less innovation.