Health Care Reform and Private Exchanges: How are They Connected?

Now that the Patient Protection and Affordable Care Act (PPACA) mandate that larger employers provide health care coverage for their workers or pay penalties has been delayed until 2015, employers have been asking how this delay will affect private Health Care Exchange initiatives.

Public vs. Private Exchanges

Many people in our industry mistakenly view public exchange developments under PPACA as similar to employer private exchange solutions.  They are generally two separate concepts.  While PPACA will establish public exchanges, they address different objectives and target different individuals than private exchanges do.

  • The Public Health Insurance Exchange is a federally mandated platform under Health Care Reform that provides individuals access to a set of government-regulated and standardized health care plans from which they may purchase health insurance. These plans are also eligible for federal subsidies.
  • A Private Health Insurance Exchange operates independently of Health Care Reform and is a viable solution for employers looking to control costs, increase employee choice and expand consumerism.

A private exchange platform utilizes the combination of:

  • A defined contribution approach for an employer which provides employees a set dollar amount for the purchase of health care coverage
  • A number of plan choices
  • An intelligent  technology platform to assist employees in making appropriate  choices for themselves and their families

Why Private Exchanges?

The value for an employer to transition their health benefits from a defined benefit to a defined contribution model has existed for years and will continue to exist regardless of the status of health care reform.  Additionally, the defined contribution/private exchange approach provides value in a robust platform of benefit choices with less administrative burden and more cost predictability.

While the rhetoric and reporting around health care reform and rising health care costs has spurred a resurgence of critical thinking around private exchanges, the opportunity for an employer to move to a private exchange platform exists independent of the legislation and its implementation schedule.

A defined contribution approach offers potential value regardless of what the Federal government does or does not do. And, when partnered with a multi-choice benefit offering under a robust exchange platform, a private exchange may reduce health care costs.

Certainly the ongoing uncertainty around health care reform’s impact on employers continues to influence decision-making for employers formulating a multi-year health care strategy. However, the need to manage health care costs while addressing employee health, education, and engagement, remain critical regardless of Federal mandates.

We’ve seen delays and revisions; therefore employers need to continue to evaluate all possible options for offering health care benefits in this evolving market.  There is a universe of benefit and exchange options available; the key is to find the solution that’s right for your organization.

About Rob Harkins

Rob Harkins is the Group Marketplace Leader, Brokerage and Advisory, for Health and Benefits, North America, at Wil…
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