Private Health Insurance Exchange: Does It Make Sense For Your Business?

In the wake of the Affordable Care Act, a network of privately-formed online insurance marketplaces have evolved as an alternative to the so-called “Obamacare” exchanges for smaller employers, or for larger employers, as a way to help them provide health coverage to employees. Over the past few years, these exchanges – set up by carriers, brokers or technology companies – have become increasingly popular among employers.

In addition to just providing a portal through which to purchase coverage, these private exchanges also strive to add value for employers in the following ways:

  • Provide a set of pre-screened health plans to choose from
  • Benefits administration, including retirement plan administration
  • Advice, assistance and support on the coverage decision from licensed agents
  • Supplemental insurance marketing, such as long-term care, disability, dread disease, term life and other types of insurance
  • Access to wellness programs

Research from the Kaiser Family Foundation also indicates these private exchanges have also been useful for companies looking to switch to a ‘defined contribution’ model for their employees’ health care. That is, companies that want to just provide a set amount for each employee and have employees go shop for their own care have increasingly been turning to these private exchanges.

Benefits for Employers

While the private exchange market is still fairly early in its evolution, the industry and its benefits are starting to take shape.

These private health insurance exchanges are allowing employers to unburden themselves from a wide variety of employee benefit responsibilities, particularly when it comes to administration of health benefits. This is more important to smaller employers, in light of the significant compliance requirements imposed by the Affordable Care Act.

Employers can also better control their expenditures on health benefits, thanks to defined contribution models. Even if the cost of care goes up, employers can keep their contribution level, if desired, and let employees make up any shortfall on the exchanges.

Smaller employers are able to make more cost-efficient plan purchases, as well, thanks to the economies of scale introduced by the exchange system. Employers are also able to make informed decisions concerning health care data, because of the increased level of access to data and analytics.

Early studies also indicate that larger employers are moving from self-insuring their own employee health plans and moving towards transferring all their risk using an insurance carrier.

Applicability to Smaller Employers

While there are many private exchange platforms with offerings from multiple carriers, smaller companies with 50 employees or fewer have generally gravitated to single-carrier ones, as well as broker-distributed exchanges that are built with a technology company’s platform, according to the Kaiser Family Foundation. These businesses aren’t subject to the same employer mandate as larger businesses are. They therefore have the option of sending their workers to the individual ACA exchanges.

Benefits for Employees

Employees are benefitting, too, from expanded choices offered on the private exchanges, which often offer more choices than an individual company plan would ordinarily include.

Do They Make Sense For Your Business?

Using a private insurance exchange may be for you if:

  • You want to have more control over your health care expenditures
  • You want to expand offerings to employees, including ancillary policies like dread disease policies, vision and dental.
  • You want to free your team from routine benefit administrative tasks.

To gain more insight into how private exchanges work and if it’s the right choice for your company, contact Doeren Mayhew Insurance Group’s employee benefit specialists.