Understanding health care exchanges for both employers and individuals

By now, everyone has heard about health care reform and its impact on every business and individual in some way, shape or form, says Craig Pritts, sales executive at JRG Advisors.

“You may have also heard about public or private exchanges, and it is very likely that you will be using an exchange to purchase insurance in the future,” Pritts says.

In fact, by 2017, the use of private exchanges are expected to catch up to public exchanges, with one in five Americans purchasing benefits from some type of health insurance exchange, according to projections by Accenture, a global management consulting company.

Smart Business spoke with Pritts about what exchanges are available right now to both employers and individuals.

What is the public exchange?

The public exchange is an option for individuals to purchase health insurance that started on January 1, 2014. States were given the option to create their own state-based exchange, to partner with the federal government on an exchange or to default to the federal government’s exchange.

The public exchange, also known as the Federally-Facilitated Marketplace, determines if a person is eligible for a subsidy that lowers their monthly payment; if a person is eligible for a cost sharing reduction, which can lower the deductible, copayments and/or coinsurance; and if a person is eligible for Medicaid or their dependents are eligible for the Children’s Health Insurance Program.

The subsidy is available for people earning up to 400 percent of the federal poverty level. The marketplace or public exchange was also designed to create an online shopping experience that will simplify the health insurance buying process.

Over eight million people signed up for health insurance using the public exchange, according to the Department of Health and Human Services, through April 19.

Is there a public exchange for businesses?

There is also a public exchange for small businesses known as the Small Business Health Options Program (SHOP).

This option is available for a business with up to 50 employees, but smaller businesses tend to benefit the most. A business with 25 or fewer full-time employees that contribute at least 50 percent of the premium and have an average wage of under $50,000 may qualify for a tax credit up to 50 percent of the premium or 35 percent of the premium if it is a tax-exempt employer.

There is a SHOP marketplace available in each state. Businesses may work with an agent, broker or insurance company to determine eligibility, view plans available and enroll.

How does the private exchange differ?

A private exchange is offered by a private company like an insurance company or third party and is available for a business to buy group insurance products.

Private exchanges have been in existence for a few years and are gaining popularity due to rising premiums and a need for a better way to provide group insurance.

In this model, an employer determines the amount of contribution it will make to the employees’ insurance. It also may budget for future years under this approach. The contribution amount is provided to the employees who are able to select the health insurance plan that is best for their needs.

Many of the private exchanges offer other benefits that may include everything from dental and vision to life insurance, disability insurance, health savings accounts, flexible spending accounts and pet insurance to name a few.

Employers can enjoy cost control and robust benefit packages while allowing employees to take advantage of having more control of their plan selections to fit their specific needs.

What’s the bottom line on exchanges?

Whether you are an individual or part of an employer group, you will be required to have health insurance in 2014 or face a penalty of the greater of 1 percent of your household income or $95. Odds are you may be purchasing that insurance through one of the exchanges in the future. Public exchanges provide a subsidy for individuals that qualify and a tax credit for businesses that qualify, and private exchanges provide cost control for an employer and more choice for the employees.

Insights Employee Benefits is brought to you by JRG Advisors