Affordable Care Act

Understanding Private Exchanges for Insurance Benefits


Beginning Jan. 1, 2014, the individual mandate of the Affordable Care Act (health care reform) goes into effect. This means that individuals who do not have Minimal Essential Coverage (MEC) through an employer, private or public exchange or public program must be offered the new Essential Health Benefit packages (EHBP). Employers of fewer than 50 employees do not have to offer medical or dental benefits. But those that choose to provide benefits will be required to have MEC, unless their medical plan is grandfathered.

These EHBPs include pediatric and vision benefits. Inside public exchanges, pediatric vision will be embedded in medical packages. Pediatric dental may be offered separately, and in most states employers and individuals do not have to purchase it. In the private market, states differ on whether they require medical carriers to carve out pediatric dental and how it can be offered.

Individuals are not required to purchase any health coverage through private exchange, public marketplace or employer-sponsored plans. However, the individual mandate means that unless a consumer has an exception, he or she must have medical coverage, or choose to pay a penalty. For the first year, it could be $95 for the parent and $47.50 per child, up to a maximum of $285 per family or 1 percent of family income, whichever is greater.

Understanding Private Exchange Options

Purchasing options for dental and vision coverage will appeal to employers and individual customers in different ways. Many employers will continue to sponsor insurance benefits for employees, while others are considering private exchange and public marketplace options. Here is an overview of private exchanges:

Private exchanges, which typically are organized by brokers, private enterprise or insurance companies, give large and small employers the opportunity to manage benefit costs, educate employees about coverage choices and simplify plan administration. Private exchanges may be designed as defined contribution plans, with employers designating a specific amount into a health reimbursement account for employees to spend on the benefits of their choice.

The private exchange structure is a collective purchasing system, which can help make benefit purchases more efficient. At the same time, the substantial value added by brokers and consultants are an integral part of the private exchange solution. These relationships with the customer remain paramount to success in the new ACA environment, as it has for years.

Some private exchanges offer a range of benefit plan choices at varying costs, including medical, dental and vision coverage, making it easier for employees to find options that fit their budgets. The customer will continue to look to their trusted advisers, however, for guidance and direction on appropriate benefit selections in this new environment. Private exchange plans may include EHB-compliant or certified product solutions for small employers.

Learn more about the ACA in our Affordable Care Act section.