What Is a State-Based Health Insurance Exchange?

Are you looking for health insurance coverage for yourself and your family?


Here’s what you need to know about state-based health insurance.

There are two types of state-based health insurance exchanges

State-based Marketplace (SBM): States running a State-based Marketplace are responsible for performing all marketplace functions for the individual market. Consumers in these states apply for and enroll in coverage through marketplace websites established and maintained by the states.

State-based Marketplace-Federal Platform (SBM-FP): These states are considered to have a State-based Marketplace, and are responsible for performing all marketplace functions for the individual market, except that the state will rely on the federal Healthcare.gov website for eligbility and enrollment functions.

Currently Maine is using the State-based Marketplace-Federal Platform (SBM-FP) model.

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What are “state-based” health insurance exchanges?

State-based health insurance is sold via state health insurance exchanges. A state-based health insurance exchange is an insurance marketplace where the state provides the infrastructure, the website, and the customer support for individuals and small businesses to purchase state based plans.

When the Affordable Care Act was signed into law by President Obama in 2010, states were allowed to choose whether to establish their own state-based health insurance exchanges or not. Some states already had their own state-based health insurance exchanges, so they could decide if they wanted to continue operating. In states that chose to not form their own health insurance exchanges and offer state based plans, individuals can obtain insurance through the federal exchange.

There are also other options for buying health insurance on the individual market, such as getting a plan directly through the insurance company, or with the help of an agent or broker. Every state has major medical plans that are not sold on the state-exchange, so make sure to check out this type of “state-based” health insurance when shopping online.

States that offer their own health insurance are allowed to determine which insurers can offer state based plans via their exchanges. In some states, all insurers can participate. In others, they have to meet certain coverage or rate requirements.

How federal subsidies work with state based plans

While many people believe that state based plans are only available for people with low incomes, the truth is that they actually benefit a large portion of the middle class.

The reason for this is that federal subsidies on state-based health insurance plans apply for people within certain income brackets. You can earn up to 400 percent of the federal poverty level to qualify for federally supported state-based health insurance.

This means that your monthly premiums for your state based health insurance plan will be lower depending on how much subsidy you qualify for.

NOTE: Tax Subsidy eligibility is based on your income for the year you’re going to have coverage. [READ MORE]

Federal subsidies on state-based health insurance are frequently referred to as “tax credits” because they’re automatically added to your tax refund. However, they’re applied at the beginning of the tax period to lower the monthly premiums on your health insurance based on your estimated income for the year.

If you earn more or less than what you estimated, your subsidy is adjusted accordingly when you file your tax return. Be careful about guessing your income when applying for health insurance. If you are estimating your income and guess low in order to get a larger tax credit, you’ll likely end up paying some or all of those tax credits back once tax season comes around.

2021 Total Household Income to qualify for Premium Tax Subsidy

Number of people in family     Household Income*
One     $12,760 – $51,040
Two     $17,240 – $68.960
Three     $21,720 – $86,880
Four     $26,200 – $104,800
Five     $30,680 – $122,720
Six     $35,160 – $140,640
Seven     $39,640 – $158.560
Eight     $44,120 – $176,480
*Household Income is ONLY the income of those individuals claimed on your tax return, not the people you live with.

How do you buy health insurance on state-based health insurance exchanges?

If you want to purchase insurance on a state-based health insurance exchange, the process is relatively simple. When you go to the relevant state-based health insurance website [HERE], you’ll be asked to enter some person information to determine whether you qualify for a federally supported state-based health insurance plan.

If you qualify, you’ll be presented with the health insurance plans you qualify for. You’ll see that the plans are divided into four categories. These categories represent how you and the insurer will divide medical costs:

  • Bronze: You pay 40 percent; the insurer pays 60 percent.
  • Silver: You pay 30 percent; the insurer pays 70 percent.
  • Gold: You pay 20 percent; the insurer pays 80 percent.
  • Platinum: You pay 10 percent; the insurer pays 90 percent.

Of course, the right category for you will depend on your own specific needs. You’ll be able to review the health insurance plans and what specific coverage options they offer before selecting one. And don’t worry if you find it confusing: we can provide additional phone support in case you need extra assistance understanding the various options.

You can reach out to our team anytime if you have a question we didn’t cover! Just CLICK HERE.

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