What Is a Private Healthcare Exchange?
Private exchanges are available in the individual or group markets. The public exchanges established by the ACA will provide health insurance options for individuals and small groups.
There will not be public exchanges for large groups, so private exchanges will be popular as brokers and insurance carriers work to help large employers find plans that best meet their needs and also conform to ACA regulations.
What Are the Advantages of a Private Healthcare Exchange?
Private healthcare exchanges do not provide a conduit for the government to subsidize the purchase of policies by low-income employees. Instead, private exchanges let employers provide eligible workers with an employer subsidy (premium contribution) to purchase policies that comply with the federal Patient Protection and Affordable Care Act (PPACA).
The new model is sometimes referred to as “defined contribution”, comparable with employer contributions to 401(k) retirement plans, in which employers “monetize” their commitment in the form of a defined contribution rather than a defined benefit.
How Do Private Healthcare Exchanges Work?
In the case of private healthcare exchanges, employers give each eligible employee fixed amounts for either individual or family coverage, regardless of the plan the employee chooses within those tiers. Workers add their salary-deferred contributions in an amount they select and choose among differently priced healthcare plans. The employee will take into consideration factors such as varying premiums, deductibles, and networks.
If employees select a high-deductible plan that is health savings account (HSA) eligible, they can determine how much extra money from their paycheck they would like to defer into the HSA. Along with health insurance, there are many other benefits available such as dental, vision, disability, life and supplemental plans.
Private healthcare exchanges are changing the way companies provide health benefits, and they are fast becoming a compelling option for large employers and employees. In fact, 6 million people enrolled in their employer-sponsored benefits through private exchanges in 2015, double the number in the previous year.