Private Exchanges, Public Griping

The old saying goes: There’s more than one way to skin a cat. There’s also more than one way to define a private exchange. And confusion around which way is the right way — and how to support employees either way — is causing some employers undue stress.

When the Affordable Care Act was first designed, private exchanges were envisioned as an alternative to the state and federal exchanges. Private exchanges would be run by private companies, such as Aetna Inc. or Mercer. Individuals could enter the exchange with a defined contribution from their employer and make their own benefits choices.

Sounds simple enough, but the waters got murky when the vision became a reality and employers began to direct their employees to these private exchanges, said Nikki Kresse, vice president of corporate human resources, benefits and payroll at G6 Hospitality.

The main confusion is whether private exchanges offer fully insured or self-insured products.

In a fully insured plan, the employer pays a per-employee premium to an insurance company and the insurance company assumes the risk of providing health coverage for insured events.

In a self-insured plan, instead of purchasing health insurance from an insurance company and paying the insurer a per-employee premium, the employer acts as its own insurer. In the simplest form, the employer uses the money that it would have paid the insurance company and instead directly pays health care claims to providers. Self-insurance plans often contract with an insurance company or other third party to administer the plan, but the employer bears the risk associated with offering health benefits.

In fact, they can offer both.

“There’s going to be a lot of choice, but I don’t necessarily see a lot of value in that choice,” Kresse said.

For Kresse and other employers that were already asking their employees to take on the majority of the responsibility for managing their benefits plans, it created a problem.

“What brought us the greatest concern was the thought of losing that relationship with our employees as well as the ability to manage their plans for them by having them select a fully insured option,” Kresse said. “My experience has been that our employees have had to interact directly with that insurer, and we no longer have the ability to advocate on their behalf or support them in the way we’ve supported them in the past.”

As a result, employers have been almost forced to invest in technology platforms from benefits software companies, such as bswift, to help their employees make informed decisions while out on their own on the private exchange.