What Are the Differences Between On Exchange vs. Off-Exchange Health Plans?

Health insurance variances can be complex and are often confusing at the consumer level. We have discussed some of the different terms and definitions to help you make sense of the health insurance market. But there are two terms that often come up that still inspire a lot of questions. Today we’ll get into the definitions, benefits, and differences of the on-exchange plans and the off-exchange plans.

Understanding the Definitions

Before diving into the benefits and differences, we thought it might be helpful to carve out the definitions. Knowing what each means, along with the nature of enrollment and parameters, will help you have a better understanding.

An On-Exchange Plan
When you see or read about a plan being on-exchange, it means the plan itself is available on the public exchange only. You can’t enroll in an on-exchange plan anywhere else. Typically, for those individuals who qualify for a tax subsidy, the on-exchange plans are the most logical health insurance choice. Nearly 3.5% of the U.S. population qualifies for these tax benefits.

An Off-Exchange Plan
When you encounter a plan with terms that include off-exchange, it means the health insurance plan is available outside of the marketplace exchanges. The open market plans don’t necessarily have to subscribe to the requirements and guidelines of those plans restricted to the exchanges. This allows for those health insurance providers to be more flexible about what they offer. Individuals who don’t qualify for the tax subsidies will usually find greater plan selections when shopping off-exchange.

How Many Americans Are on Each
There are roughly 13 million Americans, as of last October, who find health insurance in the individual market. Of that group, about 10.7 million enrolled in plans they found through the exchanges or on-exchange via the ACA or Healthcare.gov channels. In 2019, one Kaiser Family Foundation (KFF) analysis found the number of off-exchange Americans reached 2.1 million.

Key Differences Between On-Exchange & Off-Exchange Plans

Aside from the apparent difference of on versus off the marketplace availability, there are a few other differences and details you should know. Understanding which selection is best means understanding these fundamental differences.

Buying Directly from a Health Insurance Company
Off-exchange plans, or those available outside of the marketplace, are offered directly from the health insurance company provider. A licensed broker with credentials to offer direct health insurance plans can also be a consumer enrollment partner. Let’s imagine ABC Insurance Company is currently offering a few variations of an off-exchange coverage option. This company can choose to also provide Affordable Care Act versions of these plans that coincide with federal and state requirements for those marketplace plans.

Compliance for Off-Exchange & On-Exchange Plans
Any plan being offered as an off-exchange plan is not required to adhere to the same standards as those providers offering programs on-exchange. To remain compliant with an on-exchange coverage policy option, there needs to be clear communication to the consumers regarding premiums, deductibles, and out of pocket costs. There are also adequacy standards at the respective state levels that these providers must also meet. Plans on-exchange are required to provide a summary of benefits and consistent, uniform coverage explanations beginning at the start of open enrollment.

Some Off-Exchange Plan Examples
Some of the off-exchange plans that are not required to comply with ACA benchmarks may include short-term health insurance and medical insurance packages (MIPs.) There are catastrophic insurance plans off-exchange, as well. These types of plans are not designed to cover expenses associated with health check-ups or routine immunizations. They instead offer major accidents, illnesses, and injuries only. These plans can make more sense for younger and healthier individuals, who want to take advantage of super-low monthly premiums and don’t usually have ongoing health maintenance or medical visits to worry about throughout the year. But for those who do have or anticipate several routine health trips, these types of low-cost, off-exchange plans are not recommended.

Benefits & Perks to Know About Both Types of Plans

For consumers looking to narrow their searches for health insurance coverage, understanding the benefits of the on-exchange plans and off-exchange options is critical. It begins with knowing your budget, your health conditions, and your anticipated needs for health-related services throughout the plan year.

Buying a Plan On-Exchange
When you browse and enroll with a health insurance plan on-change, you will be afforded a few guarantees. For example, you will know that the plan itself meets the consumer protection guidelines set forth by the ACA. You will also be able to differentiate easily between plan pricing platforms based on the metal tiers associated with costs. Bronze options typically represent lower premiums and higher out-of-pocket expense plans. In comparison, the gold and platinum plans outline those with higher monthly premiums and greater coverage.

On-Exchange Tax Subsidies
The health insurance plans offered on-exchange are also eligible for applicable tax subsidies. Browsing your options, you’ll also be able to submit and apply for tax breaks that will apply directly to the premiums of the insurance you choose. These subsidies can be substantial and reduce monthly premiums by hundreds of dollars in many cases. It’s worth exploring on-exchange plans first to see if you qualify. Even those insurance plans that are the same on and off-exchange will be more affordable to you on-exchange, should you qualify for these tax benefits.

Advantages of Off-Exchange Plans
There are benefits to buying off-exchange. And consumers can make their most educated decisions by first understanding their budgets and health conditions. If your annual income disqualifies you from leveraging the tax subsidies on-exchange, you will likely find a better deal off-exchange. If you’re healthy and don’t have existing conditions that require routine doctor visits or annual scans, the off-exchange plans might be the best option. Off-network plans may also offer more selections of preferred providers and point-of-service plans, both of which are often more limited with on-exchange plans.
Before you move forward with your decision to purchase a health insurance plan on or off-exchange, consider exploring your on-exchange options and applying for tax benefits first. Qualifying for those monthly premium benefits will significantly impact your out-of-pocket expenses. And getting started is easy with W3LL.