If you work in your company’s HR department, you’ve likely been hearing a lot about private health insurance exchanges as alternatives to traditional group health insurance plans. With their increasing popularity, you can expect to hear even more: According to Accenture, private exchange enrollments have annually grown more than 100 percent since 2013. In 2015, nearly 6 million people received their health insurance benefits through a private exchange; Accenture forecasts that number will grow to 12 million enrollees in 2016, skyrocketing to 40 million enrollees by 2018. Leading the private exchange trend are mid-sized companies employing between 100 and 2,500 people.
Yet what are the main factors driving the popularity of the private exchange health insurance model? Let’s take a closer look.
More Choice For Less Money
Simply put, private exchanges offer employers and their employees a greater number of plans from which to choose, at a cost lower than many group health insurance offerings. In a group health insurance situation, employers may be able to offer one or two distinct plans; private exchanges are often able to offer many more than that, with a variety of add-on insurance options available, as well. Employees are able to choose a plan that best meets their needs and their budget, and employers aren’t stuck paying for one-size-fits-some plans, including benefits that will go unused.
Fewer Administrative Headaches
There are numerous compliance-related regulations associated with the Affordable Care Act (ACA) that require companies to file detailed reports. In a traditional group health insurance model, much of the reporting falls on the shoulders of the human resources department. Private exchanges reduce the paperwork burden for HR teams by handling most, if not all, of the compliance-related reporting. This means HR staff can focus on other pressing issues rather than get stuck in increasingly complicated benefits administration and compliance-focused tasks.
Avoiding Cadillac Tax Concerns
Starting in 2018, employers who provide employees with high-cost health coverage — annually, over $10,200 for individuals and $27,500 for families — will be subject to a 40 percent excise tax on any amount that exceeds the maximums. As the time for the Cadillac tax to take effect gets closer, many employers are looking for strategies to help them avoid running into tax issues. Private exchanges allow employers to reduce costs and sidestep Cadillac tax issues, while still offering their employees a robust benefits package.
Fulfilling the Employer Mandate
Also known as the Employer Shared Responsibility Provision, the ACA’s employer mandate states that companies employing 50 or more full-time employees must provide health insurance to at least 95 percent of their employees and employees’ dependents, or face a fine. With this provision going into effect in 2016, many employers are looking for a fast, cost-effective way to ensure they’re in compliance. Private health insurance exchanges allow employers to quickly deploy comprehensive health insurance solutions for their employees that meet those federal guidelines.
Private Exchange Popularity Continues to Grow
The popularity of private exchanges is growing, and experts predict the trend will continue. Because they offer a greater variety of plans at a lower cost, they’re attractive to both employers and employees. Additionally, they reduce the administrative burden on HR teams while fulfilling the ACA’s employer mandate and helping businesses avoid getting hit with the Cadillac tax.
About the Author:
Lauren Mandel is the Content Marketing Manager of GoHealth Insurance. GoHealth powers one of the nation’s leading private health insurance exchanges for individuals and families.