Why You Should Consider a Private Exchange
For the vast majority of employers, a private exchange will be a new and welcome direction in plan design. While they have their own inherent challenges, private exchanges offer a number of significant advantages to employers and employees making them a very viable and growing area in plan sponsorship. This is especially true as changes in the marketplace continue to evolve due to shifts in attitudes towards health care consumerism and the impact of the Affordable Care Act (ACA). When looking at private exchanges, here are some of the key advantages:
1. Sustainability Having a Private Exchange offering especially for smaller companies will help
Employers and brokers stay in the game as Public Exchanges (ACA) and similar retail orientated
Marketplaces emerge. Due to ACA subsidies and tax code changes, Public Exchanges will have a
Greater appeal to lower wage earners. At the same time, Private Exchanges may be best suited
to compliment a Public Exchange offering for the higher wage earners within the same employer
Population. This stratified approach can extend further into individual/group coverage
Combinations based on full and part time status. Alternatively as the spectrum of employer plan
Sponsorship dollars grows the private option increases its appeal. And, for many employers,
Retention of their workforce is critical to their organizations success.
2. Expense Control Some employers see this trend towards DC plans as an opportunity to finally
Eliminate direct sponsorship that has historically experienced increases well above inflation, and
instead hitch to a defined contribution model that can be tied to a more consistent budget. This
switch in thinking mirrors the move from defined benefit pensions to 401k plans.
3. Benefits Administration Support Limited staff and resources especially in the smaller market
make it increasingly difficult to manage health plans and benefits. Certain Exchanges can take
much of the burden off the employers shoulders providing enrollment and administration often
tasked to HR and benefits managers.
4. Employee Satisfaction Employees that participate in a competitive Private Exchange will usually
experience a broader choice in their health and benefit options that more effectively meets
their individual needs.
5. A Great Platform for Voluntary Benefits Due to their efficiencies around defined contributions,
Exchanges offers a very effective way to facilitate a worksite benefits package. Many of the early
adopters of Exchanges are finding success at providing a good variety of optional benefits with
the convenience of the online transaction. For a benefits advisor this can provide increased
revenue opportunities as well.