The basics of a Private Exchanges
Also known as Health Insurance Exchanges or HIE, private exchanges provide consumers with the ability to shop for benefits coverage from multiple carriers. Premium subsidies and other forms of federal assistance which is available for individuals and small businesses will only be made available through public exchanges. However, private exchanges also offer unique advantages and are good options for those who are not eligible to participate in state exchanges. In some cases, they may offer lower premiums and employers should carefully consider and research their options when choosing which type of exchange to work with.
Private exchanges allow companies to set defined contributions, the amount that companies are able to afford to contribute to their employee’s premiums. This allows companies to choose from a variety of plans within their budget and to offer their employees a choice of plans. Defined contributions also allow companies to engage in forward planning based on the predictability of their defined contributions which they can incorporate into their budget. They also offer flexibility, allowing companies to change defined contributions over the years to adapt to changes in their budget and the needs of the employees. Exchanges also provide a variety of other benefit options, such as dental, life, auto, disability, and pharmaceutical insurance. Providing several plan options to employees, offers staff the flexibility to choose less comprehensive and cheaper plans based on their individual health needs, avoiding running the risk of being over insured. Although employees may find it difficult to choose from several plan options, private exchanges also offer a wealth of information and customer support to help them make decisions. In some cases, exchanges offer interactive tools provided on their website to help guide employees in choosing from their predefined options. Providing several health care options is also a good way for companies to attract and retain employees, particularly as under the individual mandate those without health insurance will face a penalty.
In addition to providing cost effective plans, exchanges may also help to reduce the costs and time associated with certain administrative tasks. For example, many private benefit exchanges are responsible for managing enrolment and premium billing. In many cases, exchanges will provide companies with an invoice which consolidates all costs of the plans that their employees are participating in. They provide invoices which automatically deduct the employee’s contributions and providing employers with their total cost, streamlining the administrative process.
Private benefit exchanges are regulated by the government in terms of the types of plans which can be offered. For employers and individuals who are not eligible to receive subsidies from the government, and who make over a certain amount, premiums offered through public exchanges may prove to be more expensive. Instead, private benefit exchanges may prove to be more cost effective and viable options for certain employers.