The Facts on Private Health Insurance Exchanges
The current hot topic in the world of insurance is private health insurance exchanges, or “private exchanges.” Although the discussion is relatively new, most private exchanges have been in existence for a number of years and pre-date the enactment of the 2010 Patient Protection and Affordable Care Act. At its core, a private exchange is a private business – typically operated by brokers or insurers – that sells insurance products to health care consumers through an on-line product. What makes private exchanges unique is their ability to enable the health care consumer to shop from a wide-variety of major medical health plans and supplemental insurance products through the use of interactive technology. There are varying business models, but most exchanges service the “group” health insurance market and include both the fully-insured and the self-insured markets. They offer group health plans to both large and small employers.
Private exchanges differ from more traditional insurance offerings by utilizing interactive technology and by offering employees options like “decision support” or “recommendation technology,” services that may not be offered in a traditional setting. They provide time-saving benefit administration services and beginning-to-end services, such as the collection of enrollment information to the insurance carrier electronically. They also offer benefits administration services to employers and support for individual health care consumers that may have questions about their coverage. These features make a private exchange an attractive option for many individuals and businesses.
Exchanges can do some of the heavy lifting that usually accompanies workplace benefits, such as implementation paperwork or coordinating between multiple carriers. This can help businesses to save on administrative costs. Additionally, some exchanges offer a defined contribution option, so employers can pay a fixed amount for benefits, allowing employees to buy up if they want additional health care coverage and helping to make health care costs predictable for employers. Private exchanges are generally open to employers of all sizes and can offer multiple options. Unlike the Health Insurance Marketplace or SHOP, which can only offer medical and dental insurance, private exchanges can offer a variety of voluntary products, including pet insurance, vision, dental, disability, and more.
Several features that make a private exchange successful:
- Cost of coverage – Offering a seamless way for the health care consumer to purchase coverage, regardless if the coverage is subsidized by an employer or paid for entirely by an individual purchasing an individual plan.
- Diverse major medical health plans – Allowing the consumer to shop from a variety of health insurance products with differing plan designs.
- Enhanced insurance products – Offers a wide menu of health care products (voluntary benefits) ranging from stand-alone vision and dental plans to pet insurance and wellness programs.
- Decision support – Assists the consumer in deciding what major medical health plan or health insurance package is best for them to purchase.
- Customer support services – Provide services from the beginning to the end of the purchase process, ensuring the employee is certain they have chosen the best health care coverage options.
Private exchanges will play a critical role in the future of health care. Why? Because private exchanges provide a consumer-friendly way to purchase health insurance, often times at a lower cost. They also make it easy to choose a plan that best fits the consumer’s needs. Notably, private exchanges will not replace the role of benefit consultants or the traditional agent or broker. Instead, private exchanges are a product for the next generation, and consultants/agents/brokers working with a private exchange will likely profit from selling insurance products to a larger number of health care consumers. Health plans participating in a private exchange will also be able to reach a wide variety of customers and consumers that are anxious to transition from a one-sized-fits-all model to customized health care solutions.
Insurance carriers must continue to adapt and find innovative ways to market their insurance products in an evolving market. They continue to re-examine their current offerings and develop ways to compete. Private exchanges know they have to appeal to potential customers actively looking for new alternatives to traditional health insurance as they continue to emerge as the viable option consumers are searching for.