Questions to ask before joining a private health exchange.

Author:Calvert, Christopher

Now is the time to begin exploring the financial and other pros and cons of the various types of health insurance exchanges (termed "health insurance marketplaces" by the U.S. Department of Health and Human Services) that are now, or will soon be, available.

Though public exchanges--which are being created by the federal and state governments under the Affordable Care Act (ACA) for 2014--are receiving most of the attention, private exchanges have been set up as alternatives to both public exchanges and current forms of employer-sponsored health coverage. These private exchanges are aggressively competing for business and marketing their services to employers. But, before employers sign on, they need to do their due diligence and learn about the various options. (See the sidebar, "Public Versus Private Exchanges" on page 30).

With all the new information, organizations need to answer several questions in order to make informed decisions about private exchanges: how do they differ from public exchanges and how does a company determine if a private exchange is the right fit for its organization? Also, what are the direct financial issues and the related human resources/benefits issues that employers need to consider?

Key Questions about Private Exchanges

Each private exchange is different. Consequently, employers must ask questions about features and be skeptical about promises. Joining a private exchange is bound to change both a company's relationship with its employees and how it administers health care benefits. To determine the potential effect on the enterprise, employers should answer the following 11 questions:


Employers need to consider whether they will be offering health care coverage in light of the ACA provisions. The driver of this decision tends to be financial, partly because employers must look closely at the implications of the ACA's employer shared responsibility penalty and excise tax.

The employer shared responsibility penalty of Section 4980H of the Internal Revenue Code (IRC) will be imposed on "large" employers with at least 50 full-time equivalent employees under certain conditions. The amount of the employer Penalty will be based on whether the employer offers health coverage to employees. A large employer will be treated as. having offered coverage to its full-time employees and their dependents for a calendar month if, for that month, it offers...

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