November 24th, 2015
With the passing of the Affordable Care Act and recent health reform updates, many businesses are looking for alternatives to traditional group health insurance. One of the more common options is the private health insurance exchange. However, what are the benefits of a private health insurance exchange and how can you determine if it would be the right approach for your business? Here are the top four questions HR managers need to ask when evaluating whether a private exchange is a good fit for their company.
What are the potential benefits of joining a private exchange?
Private exchanges offer a variety of benefits to both employers and employees. Employee benefits include:
- Greater choice: Businesses that opt for a private exchange are often able to offer employees many more plans from which to choose, versus one or two plans as part of group health insurance. Employees are better able to customize their coverage to meet their specific needs and preferences.
- Lower costs: Employees can select plans that meet their needs without having to pay for unnecessary plan benefits, keeping their overall health care costs down.
Employer benefits of joining a private exchange include:
- Easier administration: The self-service nature of private exchanges eases the burden on HR employees. Employees are able to interact directly with the health insurance companies through the exchange, meaning that HR team members can focus on other tasks rather than helping employees navigate enrollment.
- Improve morale: Offering employees more choices at a lower cost is one of the biggest benefits of choosing a private exchange model. Employees value their benefits, and allowing them to take their health insurance into their own hands will give them more freedom and more peace of mind.
Should the Cadillac tax have any impact on your company’s decision to choose a private exchange model?
Slated to go into effect in 2018, the Cadillac tax is an excise tax that will be triggered by high-cost employer-sponsored health insurance plans, which are currently plans in excess of $10,200 for an individual or $27,500 for a family. The tax, which is non-deductible, will be 40 percent of the total cost of any benefits above the government threshold.
Choosing a private exchange is one strategy that many businesses are implementing to try to avoid the Cadillac tax. Offering coverage through a private exchange allows many employers to drop their high deductible group plan options that were making them susceptible to the Cadillac tax in the first place.
How will your current and potential employees feel about a private exchange?
When you’re considering a private exchange, it’s important to also determine how current and potential employees would view the exchange. Recruiting and retaining top talent is imperative to the success of any business, and overall company’s benefits package is likely to impact a candidate’s decision to accept an offer and a current employee’s decision to stay.
Keeping your finger on the pulse of health insurance trends within your industry will also help you make more informed decisions about your company’s health insurance choices, including choosing a private exchange.
Is a private exchange the right fit for your company?
Certainly, private exchanges offer a number of benefits to employers and employees, including cost savings, easier administration, and more plans from which to choose. Additionally, choosing private exchanges may help businesses avoid the Cadillac tax that will take effect in 2018. However, before opting for the private exchange model, it’s important to determine how it will impact your ability to recruit and keep talented employees. Do your homework to make sure you understand all the different ways a private exchange could affect your business before making your final decision.