Explaining Health Insurance ExchangesGenerally speaking, an exchange is an online marketplace where consumers can review and compare options and complete their purchase. Similar to travel websites that are familiar to most consumers, health insurance exchanges work in the same way. However, instead of comparing and booking air fares, individuals can compare and purchase health insurance.
There are two different types of health insurance exchanges, public and private, and they have both similarities and differences.
|Public Exchanges: The Affordable Care Act requires all individuals to have health insurance in 2014 or pay a penalty. It also provides subsidies and tax credits for low income individuals who can't afford health insurance. These Health Insurance Marketplaces were established by the state or federal government beginning October 1, 2013 to help individuals shop to satisfy the requirement to have health insurance, and to access available subsidies and tax credits. All employers were required to distribute notice of these Marketplaces to all employees by October 1, 2013.|
|Private Exchanges: These enrollment platforms are not part of the Affordable Care Act. They have been created in the private sector by administrators such as brokerage or consulting firms, insurance companies or retailers. Similar to a "cafeteria" plan approach that allows employees to choose between different types of benefits, these platforms are designed to support employer defined contributions for a variety of benefit options, including medical, as well as dental, vision, disability and other benefits for active employees and/or retirees. Government subsidies and tax credits are not available for health insurance purchased on private exchanges.|
Explaining Exchanges – In More Detail
Exchanges are enrollment platforms that offer a variety of options for the consumer. One-stop shopping helps consumers review, compare and purchase insurance that best fits their personal needs and budget. All health insurance plans on the public and private exchanges must comply with Affordable Care Act requirements, and both exchanges provide:
However, they also each offer different features, as described below:
|Selection, monitoring and oversight of a variety of plan options |
|Access to a range of choices with different out of pocket expenses, premiums and provider networks|
|Decision support and education to help consumers compare options and make decisions |
Who runs the Exchange?
Public Exchange: State or Federal Government
Private Exchange: There are different business models and administrators, such as insurance brokers/ consultants, retailers and insurers
Who can use the Exchange?
Public Exchange: Individuals and small employers with up to 50 employees; may expand to large employers in 2017
Private Exchange: Typically, active employees and/or retirees.
Who pays the premium?
Public Exchange: The individual
Private Exchange: Platform supports employer defined contributions, with employee paying the remainder of the premium.
Are government subsidies/tax credits available for individuals?
Public Exchange: Yes
Private Exchange: No
Are employer contributions allowed?
Public Exchange: No
Private Exchange: Yes
What products are available?
Public Exchange: Health insurance, including prescription drugs
Private Exchange: Health insurance, including prescription drugs. May also include dental, vision, disability and other voluntary benefits