On-exchange health insurance is bought through government marketplaces, complies with ACA standards, and offers eligibility for subsidies. Off-exchange insurance, purchased directly from insurers or brokers, may not follow ACA rules and doesn’t provide access to subsidies, often resulting in higher costs for consumers. The key difference lies in the purchase source and adherence to ACA regulations.
In short, the key difference between on-exchange and off-exchange health insurance is where it was purchased and whether it is subject to Affordable Care Act (ACA) regulations.
Learn more about how this impacts your insurance options and which would better suit your coverage needs.
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On-Exchange Health Insurance
You can purchase on-exchange health insurance through any public marketplace operated by the federal government, a state government, or a government-contracted entity. This allows for broader comparison of various qualified health plans (QHPs) offered by several insurance companies. Unless you are eligible for a Special Enrollment Period (SEP), you can only secure a new on-exchange policy or adjust existing coverage during an annual open enrollment period between November 1st and January 15th.
Eligibility
All citizens, nationals, and lawfully present immigrants living in the United States and not actively incarcerated can purchase on-exchange health insurance. However, only individuals and families below 400% of the federal poverty level (FPL) can access affiliated government subsidies. While people above this threshold can still secure on-exchange coverage, they usually must pay higher monthly premiums to retain it.
Coverages
To comply with ACA standards, an on-exchange health plan must have a minimum actuarial value (the combined average cost it will pay for covered services) of 60%. Likewise, these policies must include the following essential benefits:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Pregnancy, maternity, and newborn care
- Mental health and substance abuse services, including behavioral treatments like counseling and psychotherapy
- Rehabilitative services and devices that help people with injuries, disabilities, or chronic conditions gain or recover mental and physical abilities
- Laboratory services
- Preventative and wellness care, including chronic disease management
- Pediatric services, including dental and vision care
- Birth control and breastfeeding coverage
Off-Exchange Health Insurance
Private agencies and brokerages run off-exchange markets that offer health insurance to individuals and employers of all sizes. Unlike the Health Insurance Marketplace and other public exchanges, these forums allow customers to choose between ACA-compliant plans and non-compliant policies that occasionally include dental and vision care, wellness services, fertility coverage, and short-term or catastrophic benefits.
Unless granted a SEP, off-exchange customers can only purchase coverage during the same annual enrollment period between November 1st and January 15th.
Eligibility
As with policies secured through a public marketplace, most adults lawfully residing in the United States can buy off-exchange health insurance. However, individuals who purchase ACA-compliant plans outside of a public exchange cannot access the same premium subsidies.
Comparatively, whereas public exchanges only sell group coverage to small employers with fewer than 50 full-time employees, companies of all sizes can purchase off-exchange benefits.
Coverages
Most private insurance agencies and brokerages allow consumers to choose between QHPs or alternative policies outside ACA jurisdictions. Available off-exchange coverages vary from market to market and can include:
- ACA-compliant QHPs
- Vision and hearing plans
- Dental benefits
- Catastrophic health plans
- Wellness services
- Short-term coverage
- GAP insurance
- Medical indemnity insurance
- Group coverage for large employers
All “major medical plans” that cover expenses associated with hospitalization and severe illness must comply with ACA standards, regardless of on-exchange or off-exchange status. However, off-exchange “expected benefit” policies like short-term coverage, catastrophic health plans, fixed indemnity insurance, and dental or vision packages are exempt from many ACA regulations.
How Much Do Health Insurance Plans Cost?
Health insurance costs vary depending on many factors, including eligibility for federal subsidies.
On-Exchange Health Plans
The Health Insurance Marketplace categorizes policies into four metaled tiers: Bronze, Silver, Gold, and Platinum. While Bronze plans set the lowest premiums, they charge the highest deductibles, copayments, and coinsurance for covered services. Conversely, Platinum plans cost the most upfront but cover a higher percentage of care. Regardless of tier, HMOs and similar policy types with restrictive medical networks cost less upfront than PPOs and other more flexible forms of coverage.
Individuals and families below 400% of the FPL with on-exchange coverage can access ACA-mandated premium tax credits, significantly minimizing insurance costs relative to their income. Some people at the lowest end of this threshold can even utilize on-exchange cost-sharing reductions, diminishing their share of deductibles, copayments, and other typical out-of-pocket expenses.
Off-Exchange Health Plans
Off-exchange health insurance costs vary based on your policy details, medical network, and specific insurer. However, because even ACA-compliant off-exchange plans never include premium tax credits, they generally cost more than similar coverage purchased through the Health Insurance Marketplace. Therefore, these market discrepancies may not matter to individuals with incomes above 400% of the FPL.
Should You Get an On-Exchange or Off-Exchange Health Plan?
Deciding between an on-exchange or off-exchange health insurance plan should hinge on your unique personal and financial situation.
Consider On-Exchange If…
- You have an annual income below 400% of the FPL and eligibility for a premium tax credit
- You have a particularly low income eligible for specific cost-sharing reductions, such as discounted deductibles or copayments
- Your company has fewer than 50 employees and eligibility for subsidies through the Small Business Health Options Program (SHOP)
- You want to compare various plan options from multiple insurance companies all in one place
- Premium tax credits
- Cost-sharing subsidies
- Plan comparison
- Free customer support
- No “expected benefit” policies
- Coverage for small businesses only <50 employees
- Premium tax credits only for individuals <400% FPL
Consider Off-Exchange If…
- You have a high annual income, making you ineligible for premium tax subsidies
- You want more control over your healthcare choices and supplementary benefits
- You own a company with over 50 employees and want to take advantage of tax-deductible premium contributions
- You want personalized support from an expert insurance broker
- Wider plan variety
- Premiums are tax-deductible for companies
- Direct contact with agents and experts
- Lack of benefits for some plans
- No premium tax credits or reductions for individuals <400% FPL
- Plan comparison must be done individually
Advantages
When comparing off exchange vs on exchange health insurance coverage, consider each market’s specific advantages.
On-Exchange Health Plans
- Provide premium tax credits to individuals below 400% of the FPL and similar subsidies to small businesses
- Low-income beneficiaries can occasionally access an additional cost-sharing subsidy to reduce deductible and coinsurance costs
- Shoppers can conveniently compare plans from multiple insurers by filtering their preferred medical networks, coverages, and premium costs
- Typically have free online or over-the-phone customer support
- All plans follow ACA regulations and provide the ten essential health benefits
Off-Exchange Health Plans
- Allow customers to choose between both ACA-compliant and non-compliant coverage, offering more access to supplementary and alternative benefits like dental insurance or short-term health plans
- Companies of any size can purchase off-exchange group coverage and deduct their premium contributions from their taxes
- Customers can work directly with expert insurance agents and brokers to find affordable and comprehensive benefits for themselves or their employees
Drawbacks
Conversely, both on-exchange and off-exchange health insurance policies present notable disadvantages.
On-Exchange Plans
- Public markets do not sell “expected benefit” policies, making it harder to customize plans with supplementary dental or vision care, short-term health insurance, or catastrophic coverage
- Only cover small businesses with 50 or fewer full-time employees
- Only people with annual incomes below 400% of the FPL can access premium tax credits
Off-Exchange Health Plans
- Do not always follow ACA mandates, meaning some plans may have actuarial values below 60% and lack certain essential benefits
- Even individuals below 400% of the FPL would not receive premium tax credits or cost-sharing reductions on ACA-compliant plans purchased through a private market
- Unlike wide-reaching public exchanges, private health insurance markets require customers to compare policies from multiple insurers independently
All in All
Health insurance consumers must make critical decisions surrounding their preferred level of care and out-of-pocket contributions. While on-exchange policies offer premium tax subsidies and a convenient online marketplace, off-exchange coverage may better suit higher-income individuals and companies with large workforces. Weigh your medical needs against your budget before settling on a final plan. If necessary, request assistance from a licensed insurance agent or customer service operator to pinpoint affordable benefits that would thoroughly protect you, your family, or your employees from physical and financial harm.