There has been a lot of hue and cry about state exchanges and private insurance exchanges in recent times. However, even after so much going on around these two keywords, most Americans do not know what they mean. Most Americans do not know the concept behind implementation of these health insurance exchanges and how private health insurance exchanges differ from the state exchanges. Let's start with that concept first.
A private healthcare exchange is a health insurance marketplace managed and run by either a health insurance carrier or a nonprofit organization. All the insurance carriers participating in the exchange need to abide by the rules set by the management. These exchanges can be used to offer subsidies to large organizations who participate to enroll their employees or find specific plans for customers looking for something extremely specific.
A public health insurance exchange is an entity managed by the state or federal authorities. According to the Patient Protection and Affordable Care Act (PPACA), every state is required to setup a health insurance marketplace for its residents. Every Americans needs to have health insurance post January 1, 2014, else they would be liable to pay penalties. The public insurance exchanges will be setup by either the state or the federal government, as decided by the state government.
Now that we have the definitions out of the way, we have a yardstick to compare them by. These exchanges can be compared to each other from different perspectives. For instance, a private benefits exchange is not mandatory for anyone, but a public exchange needs to be setup by every state by October 1. The premium rates for insurance carriers participating in the exchange will have to be approved by the state/federal authorities before they are published on the exchange. In case of private health care exchanges, the same will be done by the exchange management, which could comprise of insurance carriers, nonprofit organizations or third party agencies.
Due to the inherent differences between public and private insurance exchanges, the audience for both would be considerably different. As trending, employers are increasingly looking toward private exchanges for meeting their employee insurance requirements. Since they are eligible for substantial subsidies for their large workforce, many organizations are moving their current and retired employees to these exchanges for maximizing benefits and reducing the associated overhead and costs. IBM, Walmart, Time Warner, Sears etc. are only some of the names who have already made their move to private benefits exchange. On the other hand, an average citizen would find that better coverage, subsidies and discounts are available on public exchanges. The income-based federal subsidies are exclusive to public exchanges, which makes them the best option for most Americans.
The difference in intended audience for both these exchanges makes one thing clear - there is something for everyone in this new age of health reform and people should be able to choose easily between public and private insuranceExchanges.