One of the key components of the Affordable Care Act is the creation of a health insurance exchange. The federal health care reform act requires each state to have an exchange in place by 2014. The Affordable Care Act gives states the first opportunity to run exchanges. If a state is unwilling or unable to run an exchange, the U.S. Department of Health and Human Services (HHS) will create an exchange to operate in that state.

What is an exchange?

The federal Affordable Care Act contemplates an exchange to be one-stop shopping place where people can purchase health insurance coverage.

Exchanges will allow individuals below certain income levels to obtain financial assistance in the form of tax subsidies and cost-sharing reductions that will make health insurance more affordable. When individuals apply for a plan through the exchange, they will also be screened for Medicaid and Children's Health Insurance Program (CHIP) eligibility.

Small businesses will also be able to purchase insurance for their employees through the exchanges.

Individuals and small businesses choosing to purchase a qualified plan through the exchange will be assisted by a navigator and provided information about the quality and cost of the health plans. Individual and small business can also enroll in a health plan via a Web Portal or a Phone Hotline.

South Dakota has received a $1 million planning grant to assist in determining if it is feasible for South Dakota to have a state based exchange and outline the pathway for creating an exchange. The state has also drafted a Health Insurance Exchange Functionality Diagram to help outline the basic functions of an exchange as laid out in the Affordable Care Act.