It is very likely private health insurance exchanges will be established nationwide this year in order to offer additional health insurance options. The Affordable Care Act (ACA) does not restrict the creation of private health insurance exchanges.
I recently discussed private health insurance exchange possibilities with some health insurance financial officers and their actuaries. These are the folks who determine the feasibility of the concept.
The ACA law requires the creation of government operated health insurance exchanges either by the individual states or by the Federal Government. The details of exactly how these governmental exchanges will operate are currently being worked out by the U.S. Department of Health & Human Services (HHS) and the 20 states who have agreed to setup their own state run exchanges. Currently it appears the only insurance companies that will be allowed into the government operated exchanges will be required to provide only the benefits approved by HHS, accept all applicants no matter their health and pay their health care costs immediately.
Insurance companies participating in the government exchange must pay for all preexisting conditions of those who buy insurance during the designated open enrollment period envisioned to work similar to Medicare supplement insurance’s open enrollment. This feature is expected to drive up premiums, the cost of coverage. To make this increased cost affordable an applicant who has income within the designated levels will receive a subsidy to pay for coverage.
Private insurance exchanges, as insurance companies do now, will seek to insure people in good health. This practice should keep premiums significantly lower than in the “accept all” government exchanges and an applicant would not need to fill out financial disclosure statements in order to determine their subsidy level or tax credit.
Private exchanges would still be required to offer “qualified” insurance plans in order that private policyholders would satisfy the mandatory health insurance purchase requirements of ACA. These “qualified” benefits would be part of the basic required coverage package but additional benefits could be offered in these private plans.
Currently there are versions of private exchange models being tested with selected employers. These internal private exchanges allow an employer to preset a health insurance premium they are willing to pay for to provide basic qualified coverage. The employees then go to the company’s exchange and select the benefits that best satisfy their and their family’s needs. Also, if an employee desires additional benefits they can purchase these at favorable rates.
Health insurance exchanges are being created and evolving, watch for more developments as the year progresses.