Health Insurance Buying Power: Public vs. Private Exchange
posted by Outside Source on Wednesday, July 16, 2014
Health Insurance Buying Power: Public Marketplaces vs. Private Exchanges
The Marketplace concept is the backbone of PPACA, to the point of requiring each state to operate one, in some manner, as of January 1, 2014. In fact, on October 1, 2013, every employer was required to furnish employees with a Model Notice that announced the existence of the public Marketplace along with more information about where to find one. A “Marketplace” is an online health insurance clearinghouse from which individuals can select a health insurance plan among several insurance carriers and varying plan designs. The Marketplace is a concept that we will all likely become more familiar with in the months and years to come, some of us sooner rather than later.
A public Marketplace is a very convenient forum that addresses several PPACA goals: to mete out the health insurance premium subsidies to those who qualify, to standardize health plan offerings, to engage consumers in the selection process, to inspire price competition among the insurance carriers, and to offer a solution for individuals who simply do not have access to employer-sponsored coverage.
To make matters a little more complicated, there are both public and private versions of a health insurance clearinghouse. “Public marketplaces” are mandated under PPACA and offered to individuals, who may qualify for premium subsidies so long as their household income is lower than 400% of the Federal Poverty Level, and they have no access to affordable coverage through an employer plan. Public marketplaces also exist for the small business segment, known as Small Business Health Options Program (SHOP). SHOP marketplaces do not provide premium subsidies , but allow premiums to be paid on a pre-tax basis. The state of Massachusetts operates a fairly sophisticated public marketplace by the name of The Health Connector, which was borne of Mitt Romney’s Massachusetts Healthcare Reform law back in 2006.
“Private exchanges”, by contrast, are generally run by healthcare consultants or other entities and are offered to groups of very large employers for the benefit of their employees. Though federal premium subsidies are not available through a private exchange, an employer can contribute to the purchase of healthcare through a private exchange, most typically a flat dollar amount for each employee.
Public Marketplace
- Federal premium subsidies available
- Available for individuals and small businesses
- Post-tax premiums (for individuals)
- Offer a variety of carriers and plans
- Individual policies, not protected under ERISA
Private Exchange
- No federal aid available
- Available for employees of a certain employer
- Pre-tax premium payment allowed
- Single carrier or multiple carrier models
- Group coverage protected under ERISA
The correct approach depends on the employer’s size, culture, budget and employee benefit goals. It is important that employers take some time to quantify that now before more choices start emerging. Is this approach a way for employers to effectively outsource health insurance or will it result in de-valuing one of the core offerings employers have always been able to use to attract and retain employees?