Time was when the word marketplace conjured up images of village locals peddling their wares to eager residents, or tourists looking to sample native foods or purchase artistic creations from an open-air market nestled within a quaint town.
In the tech-savvy business world of 2015, however, with the implementation of the governments Affordable Care Act, the definition of the word has taken on a governmental connotation health insurance marketplaces. These online competitive insurance-shopping venues, which connect buyers and sellers, offer a collective variety of health insurance plans to both individuals and employers. Managed by the federal and state governments, public exchanges include mandated essentials but are subject to changing regulations, including recently added fees and taxes.
Private exchanges, on the other hand, although still under the authority of governmental guidelines, allow private companies to offer employees a unique one-stop competitive alternative to the public marketplace and to traditional employer-offered insurance benefit plans. These online health insurance meccas remain different and separate from the governments public system, and employers are rallying to switch to them for many reasons the main reason being that they save the employer money.
A recent survey, conducted by BloombergBusinessWeek.com found that one-third of US employers plan to move their workers health-care coverage to a private exchange in the next few years (Chen) as a way to reduce costs. Employers are following the lead of large retailers like Walgreens and Sears, who have already switched to private exchanges for their employees health insurance in order to accommodate all workers full-time, part-time, hourly and salaried.
Why the Shift?
Due to skyrocketing health care costs, many employers are finding it more difficult to pay for traditional insurance plans. Using private exchanges essentially allows employers to dabble in cost-shifting, thereby taking the increasing expense of medical coverage from the employers shoulders and shifting it to the employee. Payment for insurance benefits is replaced with a defined contribution, a fixed amount that can be capped by the employer, similar to that of a 401(k) contribution.
This process works for employers because those who are familiar with using it already feel comfortable with the procedure, and the idea of simply not being involved in benefit management is extremely appealing. Employers are freed from the time-consuming and expensive administrative tasks often involved in sorting through plan options.
Taking the defined contribution route also saves employers money by not subjecting them to unnecessary government penalties if they dont meet certain requirements resulting from changing guidelines.
Additionally, private exchanges allow a diverse population of employees to select their own healthcare plans based on personal needs, wants and budget. Theyre not locked into a one-size-fits-all policy selected by the employer.
When it comes to choosing a medical care plan, for instance, individual preferences can be investigated and compared, and the plan can then be specifically suited to that particular employee and his or her family. By providing a plethora of plan choices from several different insurance carriers, as well as offering alternatives and cost variances within those plan choices, satisfaction and a sense of reassurance prevails.
When individual preferences are met, with prescription drug, vision, dental care, fitness and wellness opportunities for those who require them, employees are not saddled with paying for unnecessary benefits they dont particularly want. Its a win-win situation.
A No-Strings Commitment
Still other employers are gravitating toward private exchanges because many view them as a no-strings-attached type of commitment the employer is financially tied to the employee through a defined contribution but detached from the decision-making process.
Wise employers are thinking long-term. They want to appeal to employees and do their part, but theyre concerned with being locked into the spiraling costs that typically go hand-in-hand with standard one-plan options. With private exchanges, the employer remains out of the picture when the plan announces a price increase. The employee can then either stay with the plan or begin searching for a new plan that suits his or her budget.
The Future Is Bright
While American healthcare goes through continuous changes working its way through initial kinks and glitches, private exchanges have seized the opportunity to successfully carve their niche into employers benefit programs. They offer easy-access online services with consumer-friendly advantages and all kinds of support tools, like interactive communication, live chats and customer call centers.
Aon Hewitt (AON), one of the major private exchange marketplaces, predicts that its private exchange enrollment will grow by 60 percent to 1.2 million enrollees in 2015, as more companies give workers a credit to buy health coverage in an online marketplace (Jaspen).
All things considered, private exchanges remain an excellent, cost-effective option for employers. And despite the fact that information is still being collected and evaluated, current research points to a successful future. As both public and private marketplaces gain some momentum and consumers feel more comfortable browsing around within them, employers opting for private exchanges put themselves in a winning situation both with their companys finances and in the eyes of their employees.
Jennifer Schaefer is a leading Group Health Insurance and Employee Benefits Specialist with more than 20 years of experience managing client benefit programs.
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