A Practice Guide To Private Exchanges

Question 1

Compare public and private exchanges

Answer 1

1. Who sponsors
   
   1. 1 government (public), Employer (priv)
2. Who can enroll
   
   2. 1 individuals and small groups (public), EEs and retirees of sponsoring ER (priv)
3. Types of coverage available
   
   3. 1 medical and prescription drug (public), medical, prescription drug, dental, vision and other (priv)
4. Plan design available
   
   4. 1 plans must provide actuarial values of 90, 80, 70 or 60% as defined by the federal actuarial value calculator (public), exchange operator or employer defines the plan designs (priv)
5. Who pays for coverage
   
   5. 1 individuals and small ER groups pay the premiums. Individuals may be eligible for government subsidies. small ERs may be eligible for tax credits (public)
   6. 2 employers provide a subsidy towards the cost of coverage and covered members pay the balance (private)

Question 2

Different models and approaches of private exchanges

Answer 2

1. Carrier approach (single-carrier vs multi-carrier) and funding methodology (ins vs ASC)
   
   1. 1 single carrier: offer a range of plan options, more control, flexibility in funding mechanism, and carrier reporting
   2. 2 multi-carrier: offer a choice from several instance carriers with various prices, provider networks and coverage levels
   3. 3 fully insured, multi-carrier model: includes risk adjustment
2. Model types
   
   2. 1 fully insured, single carrier: risk transfer but cost increase
   3. 2 fully insured, multi-carrier: leveraged competition, best-in-market efficiencies, EE choice, risk transfer but less control over plan design
   4. 3 self-insured, single carrier: traditional model
   5. 4 self-insured, multi-carrier: EE choice, best-in-market efficiencies but less leverage over carriers

Question 3

Advantages of private exchanges vs traditional ER-sponsored plans

Answer 3

1. In a multi-carrier private exchange, potential cost savings comes from
   
   1. 1 carrier best-in-class pricing
   2. 2 increased carrier competition
2. Increased employee choice
3. Increased consumerism from members buying down benefits
4. Robust online decision-support tools and customer service
5. Benefits administration simplification
6. Shift financial and regulatory risks (fully insured model)
7. Cost predictability under a fully insured model
8. Improved cost transparency

Question 4

Disadvantages of private exchanges vs traditional ER-sponsored plans

Answer 4

1. Items increasing costs
   
   1. 1 costs of moving from a self-funded to a fully insured model: premium tax, state-mandated benefits and insurer risk charges
   2. 2 the exchange operator will charge for running the exchange
2. Additional risk assumed in a fully insured model
3. Less control/flexibility over plan design, clinical management, member outreach
4. Need to increase defined-contribution amount over time
5. Member concerns (e.g. Less generous benefits and general fear of change)

Question 5

Elements of a private exchange

Answer 5

1. Employee choice: private exchanges often offer more plan design options
2. Employer subsidies
3. Ancillary product offerings: products like dental and vision
4. Online enrollment and decision-making tools
5. Benefits administration: enrollment, eligibility, customer service and billing