It has been stated repeatedly that the Affordable Care Act (ACA) with its 900+ pages is the single most controversial law passed by Congress in the last 10 years. Since the ACA was signed into law in March 2010, the industry has been buzzing about the development and implementation of the health insurance marketplace, or exchanges as they are often called. Exchanges function much like the familiar travel websites, but rather than searching for your next hotel stay or flight, health plans are the product offering. Exchanges allow the consumer to shop online for health insurance, compare coverage and fees, and enroll in the plan that best suits their needs. There are various exchanges available and each one is designed to serve a select group of consumers. We will explore the differences between limited, private, and public exchanges for employers in this article.
Employer-sponsored plans are the source of health insurance for nearly 55% of Americans, so it is not surprising that the ACA has made a significant impact on employers. The ACA emphasizes the need for employer-sponsored health insurance plans, and employers will generally choose from the limited, private, and public exchange options in their approach to employee health benefits.
Traditional employer-sponsored health plans are available through a limited exchange. For the 2014 enrollment period, limited exchanges remain the most common way for employers to offer employees access to an employer-sponsored health insurance plan. During open enrollment, the employee visits the benefits website, reviews the options, including health plans and other employer-sponsored programs, and ultimately selects a plan that meets their needs. A limited exchange typically offers three to six plan options for employees to select from, and is available only to that employer and its employees.
As reported recently in the media, some employers have transitioned from a limited exchange to a private exchange for the 2014 enrollment period. Private exchanges offer multiple, competing insurance plans from many carriers, and they cover large geographic regions and various company sizes. A private exchange includes a variety of benefit plans selected based on employer-specific interests and employee demographics. A private exchange may offer more plan choices for employees than a limited exchange. Employers sponsoring retiree health plans may opt to send their retirees to an exchange because of the increased plan offerings available. Employees and retirees may also receive a fixed sum either in the way of a subsidy or health reimbursement account (HRA) to manage their own care and health plan selection.
The ACA requires individuals to purchase coverage or pay a penalty. Individuals without health insurance through an employer and those not on Medicare will visit a public exchange to obtain access. The state and federal public exchanges have several plans available from competing insurers; and similar to the private exchanges, these plans vary by cost, coverage, and out-of-pocket expenses. Income-based federal subsidies may be available through the public exchanges and are determined during enrollment.
Employers offering health plans to part-time employees, retirees, and employees in certain scenarios may opt to provide money to the individual to obtain health insurance from a public exchange. Some large companies are moving employees who work fewer than 30 hours a week to public exchanges citing that they would be able to access affordable coverage, and some may be eligible for federal subsidies through a public exchange.
The various exchanges include some similarities and advantages. Plans offered within a limited exchange are employer-specific; and within a private exchange, employers have a say in the health plans made available to employees, or individuals can seek a plan that meets their unique needs and interests. Employers accessing private exchanges may see a benefit in the plan rates as the population accessing the plans is broader than a single employer. While the plans may have common aspects nationally, they will vary by jurisdiction in coverage, quality, and participant support. All exchanges offer plans with different premium levels and out-of-pocket costs for consumers.
The current focus is on healthcare, but exchanges are likely to be a growing vehicle for human capital administration. Private exchange models will evolve to include additional employer sponsored benefit programs with a continued focus on improving employee engagement.
I will continue to address key topics related to healthcare reform in future blog posts. I invite you to join my LinkedIn group – Transforming Healthcare for Tomorrow – and share your thoughts.
Kimberly George, SVP, Senior Healthcare Advisor