Consider a very large company; one with perhaps thousands of employees. Typically near the end of the year, they are required to go to a website and update their benefits selections. Able to spread risk between so many people, the large employer often is able to offer multiple plan designs from more than one insurer.
That’s basically a private exchange.
One goal of The Affordable Care Act was to create a public exchange, allowing individuals and small businesses access to this same broad range of options. The result: HealthCare.gov, branded as “The Marketplace.”
We’re watching closely an emerging trend where private exchanges are being built for individuals and small businesses.
If however, you buy insurance as an individual on a private exchange, you lose the tax advantages of an employer sponsored plan. And for now at least, a small business buying coverage through a private exchange is limited to just one health insurer.
Are exchanges a trend or a fad? Stay tuned.