These are typically software companies that have developed, and in most cases, continue to refine proprietary technology that powers private health insurance exchanges. They may sell or lease the use of their software to other exchange vendors and sometimes may integrate it with other employee benefit services. They may also license users on a SaaS (software-as-a-service) basis, charge fees to those who wish to private label and co-brand the technology, and may even play the role of a “marketplace” for the purchase of employee and retiree group health plans. Many of these companies will work to add members to their own exchanges by working directly with employers or through brokers and consultants without a private label or co-brand arrangement.
What is a “Private Exchange marketplace?”
A private health insurance exchange “marketplace” is an organization set up to facilitate the purchase of health insurance and other employee benefits. The exchanges are similar to shopping malls with a broad variety of products and competitors. Marketplaces provide standardized health care plans and ancillary benefits, such as dental, vision, life, disability, accident, cancer, critical illness, hospital indemnity and other products, offered by different insurers.
Essentially, a marketplace is a “distribution channel.” These marketplaces are typically sponsored by insurance brokers, insurance carriers, industry associations and affinity groups, and benefit consultants who, in many cases, have paid a license fee to use the enrollment software, built and powered by a private exchange technology company.
What is a “single carrier exchange?”
Single-carrier exchanges are operated by a single insurance carrier. These exchanges carry the same definition as a ‘marketplace’ but are owned and offered by insurance carriers to employers and employees and retirees for the exclusive purchase of their own health insurance products. However, some insurers are considering offering another carrier’s specialty or ancillary products. Most single health carrier exchanges pay for the right to use technology software from PHIX technology companies.
What is a “multi-carrier exchange?”
A multi-carrier exchange is operated by a third party (not the insurance carrier or the employer), which, in most cases, is a broker or consultant. These exchanges contract with multiple insurance carriers for health and voluntary benefit plans. However, multi-carrier exchanges can come in many forms. For example, some are set up to compete for enrollment by offering multiple health plans and pricing structures, along with additional services. Others are “customized” exchanges in which plan designs are tailored specifically by the employer or the exchange. In that example, the exchange may contract with multiple carriers but offer employers only one carrier per region. Additionally, in a customized exchange, an employer may choose to only offer one carrier from what’s available on the “product shelf” and then offer employees different plans from that one carrier.
HealthCare.gov is a health insurance exchange website operated by the federal government under the provisions of the Patient Protection and Affordable Care Act (also known as ACA, or ‘Obamacare’). This federal exchange facilitates the sale of private health insurance plans to residents of the United States and offers subsidies to those who earn less than four times the federal poverty line. The website also assists individuals who are eligible to sign up for Medicaid, and has a separate marketplace for small businesses.
Note: HealthCare.gov is designed to serve residents of the 36 states that have opted to not create their own state exchange. Fourteen states – Washington, Oregon, California, Nevada, Colorado, Minnesota, Kentucky, Maryland, New York, Vermont, Massachusetts, Rhode Island, Connecticut, and Hawaii –operate their own “state” exchange, with different websites. However, all state exchanges are considered “federal marketplaces” under the ACA.
Have a question we didn’t cover in this edition of Ask Me Anything? E-mail your question to Jennifer Jones at JJones@KTPadvisors.com. I’ll answer five more of your questions about private exchanges soon.