Private Exchanges Explained
There has been a lot of media attention surrounding both The Affordable Care Act and its alternatives, but you might find yourself wondering what it all really means. Whether you are an employee or an employer, it can be difficult to navigate the shifting landscape of what is best for you and the people you care about. Sonus Benefits is going to take a stab at answering some of the questions that may have been itching at you lately. We’re going to start by focusing on private health care exchanges, but if you click around our website and blog you’ll run across even more excellent information to keep you informed and engaged with your options. Ready? Let’s dive in.
What is a private exchange?
We’ll break it down into two pieces. First, an exchange is an online marketplace for buying health insurance and other related products. What makes it private is who owns the exchange; in this case privately sector company or non-profit.
Oh, well… Then what’s a public exchange?
It’s very similar to a private exchange, but owned and managed by the government. Enrolling in the public exchange may result in a subsidy or tax-credit for participants.
Which is better?
This is the big question right now. We’ll let you officially decide, but in general private exchanges have gained popularity because they exist as an alternative to public exchanges. Many experts believe that private exchanges offer more insurance plan flexibility at lower costs for both employers and employees. Many other experts believe public exchanges give the greatest opportunity for those who truly need insurance to gain access to it. For example, public exchanges may be optimized for individuals and small businesses, while private exchanges may also appeal to mid-sized and large businesses.
So what does the have to do with The Affordable Care Act?
The Affordable Care Act is a hallmark of reform in healthcare. Regardless of the politics surrounding this legislation, change has been instituted because people were unsatisfied with the rising price of health care, lack of customization with regards to insurance plans, and the inaccessibility of medical care. Whether you like it or not, healthcare reform is here to stay and an increased market presence for private exchanges is a byproduct of this shift.
Can I trust something that is brand new like this?
Actually, private exchanges have been around since way before The Affordable Care Act. There are examples dating back to the 1980s. They are just getting extra attention right now. Additionally, that extra attention is resulting in huge innovations in private exchanges that are doing nothing but improving on an already established idea.
Are there different types of Private Exchanges?
Most private exchanges are funded through something called Defined Contribution. This is when an employer gives employees a set amount of money to utilize towards purchasing an insurance plan. There are alternatives to this method, but Defined Contribution is emerging as the most popular way to participate in a private exchange. Within Defined Contribution relationships there are two additional types of exchanges: single-carrier (one insurance provider offering multiple types of plans) and multi-carrier (multiple providers offering multiple plans)
What are the benefits of a private exchange?
It really depends on your needs, but that is the beauty of the private exchange. First, plans are left in the hands of employees, but can still (with the help of defined contribution) be something that is offered as a part of a benefits package from a company. Employees and employers have outstanding flexibility when it comes to selecting the coverage that is best for them. Employers experience decreased administrative costs and unprecedented freedom from climbing health care contributions. Employees gain greater access to higher quality and totally customized plans that are specifically designed to match their budgets.
Isn’t it true that if it costs more, it’ll be better?
This is actually a popular misconception that is currently being challenged by health care reform. Unlike many other goods and services, higher prices in health insurance do not mean better or more extensive coverage. Private exchanges have made this increasingly clear to both employers and employees.
What if I own a business and just want to drop coverage instead?
Ultimately, that is your choice and you should always do what is best for you and your employees. However, forcing employees to a public exchange or to select their own private exchange can be a lost opportunity to leverage your benefits program to attract and retain the best possible candidates.
What if I don’t make the right decisions because I don’t have someone to help me make them?
That’s what we are here for. Sonus Benefits employs experts that are specifically trained in helping you make decisions that will benefit you most. We’ll work with you to identify your goals and then help you develop the best way to get there. If you’d like to ask us any questions even just after reading what we’ve written here, just give us a <>. You don’t have to navigate these changes alone
What does the future of health insurance look like?
That’s an outstanding question. The only thing that we can promise you is that private exchanges will become more and more popular over the coming years. Most employers are gearing up to make the shift, but aren’t quite sold on it yet. What’s most important is what the future of YOUR health insurance and benefits program looks like. Your case is incredibly unique and it will be important to work with an advisor to determine what direction best suits your needs.
Can I have an example of a Private Exchange?
Absolutely! Check this out.