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June 26, 2014

ACA Update: Private Exchanges on the Rise

“One’s an outlier, a few many be a passing fad, but over 50 is the beginning of an industry trend.” Eric Grossman, National Exchange Leader at Mercer

Reuters is predicting 2014 to be a “watershed” year. Over 65 employers are moving to private exchanges, with over 1,000,000 active employees due to participate. Like the Health Insurance Marketplace (i.e., the public exchanges), private exchanges are marketplaces of health insurance and other employee benefit products where employers may purchase the health insurance. Then, the employees can choose from a health plan provided.

Unlike the public, governmental exchanges, there is no governmental subsidy to purchase insurance for those who meet the salary guidelines under the ACA. Instead, there is an employer subsidy to purchase insurance that meets the ACA requirements as well as any state insurance regulations. This shifting in the cost and risk of health insurance allows employers to control their bottom line, while shifting the costs to their employees. Under the private exchanges, employers’ former duties of plan design and other insurance relationships are now outsourced. However, employers will still have to face communication challenges, such as monitoring employees’ relationship and understanding of the exchanges.

What are the benefits of private exchanges?

  • Negotiating Leverage
  • Competition
  • Product Commoditization
  • Administrative Streamlining
  • Cost Trend Control (risk pooling)
  • Cost Trend Control (defined contribution)
CBIZ offers not only a mid to large market private health care exchange, but also a custom version for employers with 25 to 100 employees. Keep an eye on our blog for an upcoming post on CBIZ Choice, our own private exchange. For all questions regarding private exchanges or the Affordable Care Act, please contact Steve Dunavant at sdunavant@cbiz.com or (901) 685-5575.  


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