Search

Private Exchanges: A Viable Business Option

1012

Kismet Toksu is president of eBenefits. On a single platform, eBenefits software and services enable customers to execute short- and long-term benefits administration, ACA compliance and private exchange strategies. eBenefits is part of the UPMC Insurance Services Division.

Public exchanges have gotten a lot of attention since the advent of the Affordable Care Act, but as the law has evolved, it has worked to increase the popularity of another product — private exchanges.

In 2015, an estimated 6 million workers selected health plans from private exchanges. It is estimated that 40 million will choose private exchanges by 2018.

Private exchanges differ from public exchanges in many ways, the most notable being that public exchanges are always sponsored by either the federal government or state government. A private exchange may be sponsored by an employer, broker or association.

Private exchanges are gaining in popularity because employers realize that they can be a viable business option that provides predictable cost control, while also empowering employees to become smarter consumers of benefits.

Generally speaking, public exchanges serve individuals, or small employer groups, up to 50 lives. Typically, private exchanges serve the employer group market. Private exchanges also vary on the size of the companies they target. Due to rules that govern public exchanges, products offered are more limited than those available on private exchanges. Another big difference would be customer experience and service.

Private exchanges are attractive because of the options that they provide, both in terms of benefits that may be offered and companies that offer products. Under a public exchange plan, members can choose coverage for medical expenses and prescription drugs only. Private exchanges may offer much more than medical and prescription plans, including dental and vision coverage, disability, accident and critical illness. Even non-medical plan options, such as identity protection, may be offered.

Private exchange plan options have fewer limitations and some may be more customized. In addition, there is more cost certainty for employers, who are often responsible for paying the largest portion of the coverage. This type of funding is called “defined contribution.” The defined contribution may be used by the employee to offset costs of the products selected.

Employer Benefits
One advantage for an employer is that they can continue to reap tax benefits by providing employee access to health insurance. Employers can also retain some control over their benefit offering. When employees understand the true cost of their options, they are more likely to make cost-effective decisions. That can be advantageous for both employer and employee.

In addition, by opting for a private exchange, an employer can reduce the administrative burdens on a company, while also maintaining the kind of employee loyalty that is associated with offering coverage.

The Employees’ Advantage
Employees often gain choice on a private exchange which provides the opportunity to select a plan that best fits his or her needs and budget. Many employees find that the options provided by private exchanges spur them to be more serious and to take more time when studying their benefit options, than they had previously.

Private exchanges provide decision support not often available elsewhere. Employees also may find that private exchanges provide better customer service.

The amount an employer contributes toward an employee’s health plan is determined entirely by the employer. With a defined contribution plan, the employer gives the employee a set amount to use for health care, and the employee increases that as he or she sees fit. In some cases, a defined contribution can cover the entirety of an employee’s plan, or only a portion of the total cost.

For information about EBenefits’ private exchange platform, visit http://www.ebenefits.com/PrivateExchange.html. For information about UPMC’s affiliation with the
Manufacturer & Business Association’s private marketplace, Absolute Choice, visit www.mbausa.org.