Off-Exchange vs On-Exchange

There is a lot of confusing jargon in health insurance, and terms like off-exchange and on-exchange are no exception.

Put simply, off-exchange and on-exchange refer to plans bought on or off the Health Insurance Marketplace. The Affordable Care Act (ACA) established the Marketplace (also commonly referred to as the “exchange”) to make it easier for people to get health insurance coverage.

Understanding the differences between on-exchange and off-exchange health insurance plans will help you choose the best option for your financial situation and healthcare needs.

What are On-Exchange Health Insurance Plans?

When you enroll in a healthcare plan through the Health Insurance Marketplace or your state-run exchange, you are considered an on-exchange member.

Depending on household size and income, on-exchange plans may qualify for subsidies or premium tax credits, making them affordable for those with lower incomes. On-exchange members may also be eligible for Cost-Sharing Reduction plans.

On-exchange plans adhere to ACA guidelines. They are also subject to specific open enrollment periods.

What are Off-Exchange Health Insurance Plans?

Off-exchange health insurance plans are sold and purchased directly from an insurance carrier or a licensed broker rather than through an official state or federal ACA Marketplace, which hints at why they are called “off-exchange.”

Typically, these plans do not offer subsidies and are not eligible for premium tax credits. Many off-exchange health insurance plans provide the same coverage as on-exchange ACA plans, obeying the ACA guidelines for qualified health insurance.

The Advantages of On-Exchange Plans

Due to the subsidies and premium tax credits available, on-exchange plans are ideal for those with lower incomes. It is also easier to compare all on-exchange health plans via the Marketplace at Healthcare.gov or at state-based exchange’s website.

The Advantages of Off-Exchange Plans

While off-exchange plans don’t typically provide these same subsidies and other tax benefits, they offer other advantages. Off-exchange health insurance plans may have greater plan customization and coverage options. These plans do not have income restrictions; in other words, those excluded from financial help through the Health Insurance Marketplace based on their income won’t encounter the same roadblocks with off-exchange plans.

Can you use your ICHRA to help purchase plans?

You can use your ICHRA (Individual Coverage Health Reimbursement Arrangement) funds to purchase a qualified health plan via the Health Insurance Marketplace (on-exchange) or directly from an insurance carrier or a licensed broker (off-exchange). However, if you get an ICHRA through your employer or other means, note that you typically won’t be eligible for premium tax credits on the exchange.