The last few years have shown that the provision of universal affordable healthcare to all citizens is no small task. While the intent may be noble, the practical considerations associated with the introduction of the Obamacare health exchanges have proven to be challenging, at best. Confusion around eligibility and enrollment periods, technical difficulties with the online registration process, and inept descriptions of coverage offerings clearly besieged program administrators, resulting in a less than stellar debut. However, as with any new product or service, these initial nuisances are to be expected, and if the emerging trends prove correct, public and private exchanges will be central to health care provision and administration in the 21st century.
Healthcare exchanges are just what the name implies, an exchange of services and financial assistance towards the provision of affordable healthcare to subscribers. Both parties should benefit through participating; employees benefit through access to affordable care, and employers can lower healthcare costs by the reduction of waste and inefficiencies.
Public exchanges, created and administered through the Patient Protection and Affordable Care Act (PPACA), target services to those who cannot afford traditional healthcare. This includes, but not limited to, working individuals whose employer do not provide financial assistance for healthcare, some small businesses and sole proprietorships, and those who are unemployed. While sponsored by the Federal government, individuals pay for the services via a public exchange with partial subsidies, which vary by service and geography, paid by State government. Lower wage workers or even moderate wage workers may fare better in public run exchanges due to the subsidies, which limit premiums to roughly 2% of an individual’s annual income.
State exchanges seem to have performed at a satisfactory level as services and fees can better represent the needs of the subscriber base, but inefficiencies remain that still need to be remedied. In a survey by Bankrate Health Insurance Pulse, 51% of exchange veterans say they didn’t plan on returning for round two of the sign up. Even with this slight majority expressing concerns over pubic exchanges, it is nevertheless estimated that public exchanges will expand and standardize coverage for an estimated 30 million individuals by 2017.
Private exchanges are similar in scope, but these services are only available to employees at private companies who elect to participate. A private exchange is an online benefits marketplace which allows individuals to shop for insurance products with a defined contribution from the employer. They are not a part of the Affordable Care Act and thus not eligible for subsidies. The goals of Private Exchanges are to provide healthcare to participants at a fair and transparent cost, with increased choice and reduced administrative burden for employers. Premiums are of course higher than public exchanges, but typically, the services that are covered are broader in scope, and more customizable to the needs of the subscriber and their family. Costs are shared between employer and subscriber (while the employer typically pays the higher portion of the costs) and there are also tax advantages to the employer. Due to these benefits, it is estimated that private health insurance will rapidly topple insurance purchasing for the 170 million people who receive insurance through their employer with private exchange participation approaching public exchange enrollment levels as soon as 2017 and surpass them soon thereafter.
According to a recent Private Exchange Evaluation Consortium/PwC survey, 45% of employers have already implemented or are considering using a private exchange by 2018. Interestingly, only 25% of those surveyed thought a switch to a private exchange would save money; conversely benefits may be realized to the employer through reduced administrative workloads through an ‘outsourcing’ of the service.
1 Rogers, Kate. “The Private Exchange Alternative: How it Compares to Public Health Exchanges”. foxbusiness.com, Sept 2013.
3 Congressional Budget Offices: Estimates of the Effects of the Affordable Care Act on Health Insurance Coverage, February 2013
4 “Are You Ready? Private Health Insurance Exchanges are Looming.” Accenture: Insight Driven Health, 2014.
5 Howard, Paul. “Private Health Insurance Exchanges Unleash Transformational Change.” Forbes.com, 2014.