The Wall Street Journal Blog, "Corporate Intelligence," posted a great
FAQ for employees whose employers may begin offering health benefits on their own online marketplace. These private exchanges would be similar to the public marketplaces set up by individual states or the federal government pursuant to health care reform. Below are the Q&As from yesterday's WSJ blog post.
Online marketplaces, known as private exchanges, allow employers to offer their workers a range of choices for health-insurance coverage. Companies jumping in—including benefits-consulting firms like Xerox Corp.’s Buck Consultants, Marsh & McLennan Cos.’ Mercer and Towers Watson & Co., as well as insurance brokerages such as Willis Group Holdings PLC and Digital Insurance Inc.—are betting that 2014 is the year the exchanges will start to take off. Here’s what you need to know:
What is a private employer exchange?
Generally, these are online marketplaces where an employer’s workers can shop for different types of health plans, as well as other types of benefits such as dental or vision plans. They are operated by a growing variety of companies, including benefit consultants and insurance brokers.
What does it offer?
The setups vary; at least one, from Buck Consultants, generally offers health plans from just one insurer in a particular location, and the employer has chosen the lowest-cost carrier in each geographic area. Usually, there will be a variety of health plans and insurance carriers for workers to choose from. But insurers themselves are also offering exchange setups, typically stocked only with their own products.
How much does the employer pay?
This, too, will vary. The typical approach is likely to be a “defined contribution,” or a set sum of money from the employer for workers to use in their shopping. The amount will often be larger if the worker is covering a family. If the employee wants a plan that costs more than the set amount, he or she would pay the difference. If the worker finds a plan that costs less than the contribution, some employers may let the employee keep at least part of the difference.
But employers can also use these private exchanges without taking the set-sum approach, and a number of them are likely to do so, particularly initially as they are trying out the new setup. In that case, employees could see a variety of approaches to the funding.
In addition, a number of the exchanges let employers remain self-insured, meaning that the employer is responsible for the cost of claims, with the insurer acting only as an administrator. Such employers may still want workers to have the “shopping” experience with the feeling of a defined contribution.
How widespread will this approach be?
Exchange operators project that at least tens of thousands of workers will see versions of this approach toward benefits take effect in January 2014, and other employees will be switched at various points next year. Few very large employers are likely to jump in so soon with active employees, but some are likely to move retirees into exchanges. Many in the health-benefits industry are betting that the growth will be far greater in future years.
How are the exchanges different from the marketplaces created by the federal health law?
The health overhaul law is creating exchanges in every state that will sell plans to individual consumers and small businesses. They will be operated by government entities, not private companies, and won’t initially serve big employers.
