Plan Sponsors Need To Understand Differences Between Public And Private Exchanges

Over the last several years, the phrase “health care exchange” has become a prevalent part of the health care delivery system. The Patient Protection and Affordable Care Act (ACA) created public health insurance exchanges (or marketplaces), and many private companies are now offering employers of all sizes access to private exchanges. Both private and public exchanges offer a wide range of coverage options and serve as a portal to help individuals enroll in health care coverage. According to a recent health reform briefing paper from consultant Milliman, plan sponsors need to be aware of the purpose and mechanics of the different exchanges in order to evaluate whether they provide opportunities for better or more efficient health care delivery to their participants.

Public exchanges. The ACA-created public health insurance exchanges are available to individuals without employer-sponsored health insurance or to those employed by a small business (through the SHOP marketplace). For large employers that currently do not offer health insurance or that are considering eliminating coverage, having employees enroll in coverage through the public exchange might seem appealing. Milliman notes that large employers should address the following questions:

Element of total compensation. Are health care benefits part of a culture of wellness, and/or an important tool to ensure that employees are at work, focused and productive? Or are they simply a tax-effective element of the compensation package?

Retention. How important are health care benefits in attracting and retaining high-quality employees?

Cost. What is the relative cost and value of providing employer-sponsored health care?

Financial health of employees. What is the compensation level of employees and how will they fare financially on the public exchanges?

Private exchanges. Private exchanges are typically offered to employers from consultants such as Mercer or Aon Hewitt. According to Milliman, the private exchange strategy revolves around efficient purchasing, limiting employer cost through a defined contribution, and participant choice. Plan options through a private exchange should be available at lower cost than comparable plans obtained directly from insurance carriers. The selection of an exchange provider should include an analysis of the quality and network access of insurers, the ease of utilization by employees, the mechanics of the flow of employer subsidy, and the value provided by the exchange, Milliman noted.

The Milliman paper provides two items to consider about private exchanges for plan sponsors:

• It is important to understand the commission structure of individual products relative to group products to be clear on how dollars are being spent, relative to the current commission structure of their group plans.

• Be aware of the for-profit nature of private exchanges and ask unbiased experts about particular private exchanges.

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