An Introduction to Private Exchanges

As part of the health care reform and Patient Protection and Affordable care act (PPACA), companies who meet specific criteria will be expected to provide health care coverage to their employees. In addition to the new public benefit exchanges being set up in each state, there will be an increasing number of additional options available to employers, such as private exchanges. These act as a marketplace in which employers can shop for health care coverage from a single carrier or several carriers. Employers will have the ability to access the private exchange web portals and compare plans side by side based on specific search criteria, in particular the amount of contributions the employer is able to make towards their employees premium. As health care carriers will be required to make their plans easier to understand, this will also enhance the search process, making it easier for employers to compare plans with each other. Not only does this provide businesses with a greater flexibility and choice, it can also offer employees greater freedom to choose between several coverage plans selected by their company. This is particularly beneficial, as rather than offering all employees the same coverage, which runs the risk of over insuring some of their staff, it allows employees to only choose plans which meet their specific needs. Private exchanges not only offer health care coverage, but also provide additional benefits, such as vision, disability, dental, life, and even auto insurance.

Choosing plans based on a defined contribution amount, helps companies maintain control over their group health insurance, plan ahead, and build the cost of contributions into their company budget. Private exchanges may also offer consultation services, helping companies to choose the most appropriate plans, especially important when considering if the plans offered meet the new benefit regulations. For example, plans will no longer be able to impose annual or lifetime dollar amount restrictions on what they will cover, they cannot refuse coverage based on pre-existing conditions, amongst many other requirements. Therefore receiving guidance through the decision making process is particularly important.

Private exchanges also offer flexibility, allowing employers to change their defined contributions each year based on their budget, and may reduce their overall costs of providing health care coverage. Exchanges also help to support companies during the enrolment process, helping to advise companies on budget and financial planning, and helping to define employee eligibility. This helps to simplify the benefit administration process, enabling the benefit exchanges to manage some aspects of these. Companies will also be required to ensure that their own processes and technology are compatible with those of their health care carriers to ensure their employees can access their benefit information and that payroll and accounting departments are integrated.

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