Learn the key differences between public and private exchanges so you’re armed with knowledge to pass on to your clients!
- Who runs the exchanges?
Public exchanges are offered by the federal government at Healthcare.gov or by states that have launched exchanges of their own. State-run exchanges can be found here. Private exchanges are run by private companies, such as brokerage firms, insurance carriers and other organizations.
- What do exchanges offer?
Public exchanges offer medical, dental and vision insurance primarily. These are offered through multiple carriers. Private exchanges have some flexibility with their offerings, including medical, dental, vision, and many other ancillary products such as life, disability, critical illness and more. These are offered either through a single carrier or multiple.
- Who accesses exchanges?
Public—People buying insurance on their own. Under the Affordable Care Act, individuals and families who aren’t offered health insurance through their employer must purchase health insurance or pay a penalty. They can do so on the federal site or their state’s site, if applicable. Small businesses with up to 100 employees also use the public exchanges, but it’s not required by the law.
Private—Active employees and retirees of employers that has chosen to provide health plan options through a private exchange.
- What do exchanges subsidize?
Public exchanges offer premium subsidies and tax credits to those who qualify. Families who are not eligible for coverage through their employer, Medicaid or Medicare, can apply for tax credit subsidies through public exchanges.
Private—No subsidies are available. Employers utilizing a private exchange typically provide employees with a fixed contribution for the selected health plan.
- Which is more flexible?
While public exchanges have an advantage with subsidies for affordability, private exchanges are attractive because they are flexible and can be customized. Also, they can offer a wider range of products, including ancillary, all of which are appealing to employees.
- What role does defined contribution play?
Private exchanges have a different funding model than public. Again, public exchanges are for those individuals and families who aren’t offered insurance through their employers. They can purchase plans there in order to avoid the penalty for not having health insurance. Private exchanges run on a defined contribution model, which allows employers to set their annual benefits budget, helping them to reduce or stabilize ever-increasing health care costs. Defined contribution also gives employees more choices than ever before as well as transparency about health care costs.
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