Guest blogger Justyn Harkin outlines the pros and cons of various health insurance exchange scenarios. Do you agree? Share your thoughts in the comments. —Andrea Davis, Managing Editor
Although considering the new health care exchanges may have seemed radical a few weeks ago, now that everybody gets to drop ten and punt on the employer mandate penalty in 2014, the idea may not be so strange.
Sure, migrating employees to the exchanges isn’t right for every organization. If the move would upset your workforce, then keeping your current group plan is probably best. But if employees would view exchange offerings as equal or better than what they current have, then there could be plenty of upsides.
If you think the exchanges would be better than what you have now for both your company and your employees, or even if you just want to get a leg up on communications (and believe me, that’s never a bad idea), then you and your employees have three options — public exchanges, private exchanges (fully insured), private exchanges (self-insured).
Which one might be best for your organization? Let's see.
One of the most attractive ideas about moving to a public exchange has to be handing over the considerable financial and administrative burdens for running your company’s health benefits.
For some organizations, the move might be cheaper than what they are doing now. Even when you factor in the likely, eventual activation of the $2,000-per-employee fine for not providing insurance, you could still be paying less than what you would if you were covering premiums.
Of course, sending employees to public exchanges isn’t necessarily a slam-dunk move. Your workforce could straight-up riot if you tell them you’re cutting health benefits, and even if you raise salaries (oh, hello there, higher payroll taxes) to help them cover the costs of buying their own insurance, your recruiting efforts could take a hit if your competitors keep their health benefits.
Private exchanges with fully insured plans
Perhaps the biggest advantage of using a private exchange is the ability to shift some of the rising costs of health care to employees and give them the ability to control their spending.
In a private exchange, employees get an allowance from their employer that can be used to buy insurance. The idea is that giving employees control of the purchasing decision takes some of the heat off of your company. After all, if the cost of health care rises, that’s not your fault?
So what’s the downside to this type of exchange? Well, in the worse-case scenario it’s a less healthy, less productive workforce. Because employees will be making purchasing decisions, they may choose lower premiums over better coverage, and that can contribute to poorer health and higher rates of absenteeism.
Private exchanges with self-insured plans
The last of your exchange options are private exchanges with self-insured plans. Compared with the types of plans offered on public exchanges and private exchanges with fully insured plans, the plans available on private exchanges with self-insured plans can seem very attractive employees — generally lower premiums, more generous plan features, and more in-network doctors — but they will be more expensive.
The self-insured private exchange option might be slightly more expensive than what you could do with a fully insured private exchange, that’s true, but the available plans would be more oriented toward long-term health.
Still, using self-insured plans means you’ll have to assume all the risk and pay for all your employees’ claims. Also your employees will become customers of the private exchange insurance companies, and that means you won’t have the same influence (over the companies or choices) that you would otherwise have.
How will you spend the bonus year?
Assistant Secretary for Tax Policy Mark J. Mazur’s July 3 announcement might have seemed like the best health care reform–related thing to happen to employers all year.
If you take the “transition year” at face value, meaning the mandatory employer and insurer reporting requirements are being postponed, then you have the perfect chance to carefully consider your company’s next moves.
Maybe you’ll decide to take the plunge. Perhaps you’ll rule out the exchanges altogether. You might even decide to let other companies test the waters first so you can be prepared later on.
No matter what path you chose, though, the most important thing is taking the time to make the best decision for your company and your employees. And then communicate that decision in a clear and engaging way. Good luck!
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