Understanding health care exchanges for employers and individuals

Health care reform has had a significant impact on individuals and employers, to say the least.

“The creation of public and private exchanges has changed the approach to purchasing health insurance. Whether you obtain health insurance through an employer or on your own, there is a good chance you are doing so through an exchange or will be doing so in the not too distant future,” says Aaron Ochs, consultant and project manager at JRG Advisors.

Studies indicate that by 2017, 1 in 5 Americans will be purchasing benefits from some type of health insurance exchange.

Smart Business spoke with Ochs about what you need to know about exchanges.

What is the public exchange?

The Affordable Care Act (ACA) requires each state to have a competitive marketplace known as an Affordable Health Insurance Exchange or exchange for individuals and small businesses to purchase health insurance.

The public exchange, also known as the Federally-Facilitated Marketplace, performs a variety of functions, including certifying that health plans are qualified health plans (QHP) and eligible for inclusion on the exchange; operating a website to facilitate comparisons among plans; operating a toll-free hotline for consumer support; determining if a person is eligible for a subsidy that lowers their monthly premium; and determining individuals’ eligibility for Medicaid and/or their dependents eligibility for the Children’s Health Insurance Program.

The Navigator program is an essential component of the public exchange. Navigators help consumers learn about and choose coverage. For example, a navigator provides information on the various health programs in a manner that is ‘culturally and linguistically’ appropriate to the needs of the population being served by the exchange. Exchanges have set training standards for navigators to ensure expertise in the needs of the populations served, eligibility and enrollment procedures, and the exchange’s privacy and security standards.

Is there a public exchange for businesses?

There is a public exchange for small businesses known as the Small Business Health Options Program (SHOP). According to the Department of Health and Human Services, the SHOP gives small businesses the same purchasing power as large businesses and will allow small employers to provide their employees with a choice of health plan options.

The ACA defines a small employer for purposes of eligibility for SHOP participation as one that has up to 50 employees.

A SHOP must allow employers the option to offer employees all qualified health plans at a level of coverage chosen by the employer — bronze, silver, gold or platinum. This is called the employee choice model. Under this model, the employer chooses a level of coverage and a contribution amount, and employees then select any QHP at that level.

How does a private exchange differ?

A private exchange is offered by an insurance company or third-party administrator and is available for a business to buy group (versus individual) insurance products. Private exchanges are gaining momentum due to rising premiums and the need for an improved solution for employers.

In this model, an employer determines the dollar amount or ‘defined contribution’ it will make toward the employees’ insurance. The concept of defined contribution is not a new one, but it is newer for small and midsized employers.

Historically, insurance companies placed restrictions on the number of medical benefit options a small employer could offer. As health care costs continue to rise, so did the need for a new model or solution to offering employee benefits.

Most private exchanges offer additional benefits including dental, vision, life and disability, health savings accounts, flexible spending accounts and more. Employers achieve greater cost control, while employees gain choice and flexibility with regard to their benefit elections based on their particular needs.

The purpose of both public and private exchanges is to create an online shopping experience that will simplify the health insurance buying process.

Insights Employee Benefits is brought to you by JRG Advisors