The Basics of Private Health Insurance Exchanges for Business Owners

Posted on Monday, April 15, 2019

Private health insurance exchanges are online portals that provide 'one-stop shopping' for businesses looking to provide employees with health insurance and other ancillary forms of coverage. They are not set up by state or federal government, but by private industries - insurance companies, insurance brokers who sell for several different companies, and increasingly, technology companies who create these online platforms and then sell access to them to insurance carriers looking to pick up customers.

These online exchanges provide a convenient, efficient way for employers to get basic "quotes" for employee coverage, and allow employees to elect coverage options online and make changes to their insurance.

Do These Exchanges Hold Value for Employers?

For some employers, these private health insurance exchanges can be of tremendous assistance. For example:

They pre-screen health plans to offer the most competitive, saving management a good deal of time investigating coverage options from marginal carriers.
They assist with benefits administration, taking it out of managers' and HR's hands.
They make licensed insurance professionals available to answer coverage questions.
They streamline access to supplementary insurance, including disability, cancer insurance, term life insurance, long-term care, and of course dental and vision plans.
They help administer wellness plans that can reduce overall costs, reduce absenteeism/presenteeism and help increase productivity.

According to the Kaiser Family Foundation, private health care exchanges have also been popular with employers seeking to migrate to "defined contribution" health insurance plans, in which employees take a set "allowance" for health care and then make their own purchasing decisions.

Why It May Make Sense For Your Business

Private insurance exchanges are providing a mechanism by which employers are able to offload a wide range of benefits management burdens, of which health insurance is only a part. Smaller employers, especially, stand to benefit a great deal from these emerging innovations, since they may not be able to maintain a large human resources staff on the payroll to handle these things for employees.

Private health insurance exchanges are also making it much easier for smaller employees to manage the significant compliance challenges of the Affordable Care Act, since so many of their responsibilities are outsourced to the exchange.

In addition, private health care exchanges allow smaller employers to better manage their expenditures. For example, by adopting a defined contribution model for providing health care benefits to workers, and directing workers to use a private health insurance exchange to administer the model, an employer can insulate itself from increases in the costs of health insurance.

As a result, even larger employers have begun to migrate from the practice of self-insuring employee health plans and transferring health-related risk to the insurance carrier, rather than retaining that significant uncertainty on their own books.

For Smaller Employers

If your business has 50 employees or fewer, or less than 50 full-time equivalents, you are generally not subject to the "employee mandate" under the Affordable Care Act. Smaller employers will sometimes refer employees to the individual exchanges and rid themselves of the health care burden entirely.

However, this may not work for employers who need to offer a strong health insurance plan in order to retain workers and attract talent. Instead, many smaller employers are using private health insurance exchanges developed by individual health insurance carriers. These exchanges are fairly simple to create and administer for carriers, and therefore they can help control costs to the employer, although they offer fewer choices of health plans to workers.

Value for Employees

In many cases, private health insurance exchanges have proven popular with workers, who are benefitting from an increased number of choices. Even single carrier exchanges frequently offer more coverage choices than they had via a basic group plan in the past.

Should You Consider a Private Health Insurance Exchange?

You may consider using a private health insurance exchange for you and your company if one or more of the following apply:

You want to increase control over the amount and timing of your health care-related expenditures.
You want to streamline your HR responsibilities
You want to offer more benefits and coverage options for your employees than you can working on your own.

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Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.