In the first edition, we looked at how Private Exchanges are expected to operate and the benefits that they might provide to individuals and small businesses.
In this post, let’s look at State or Public Exchanges. These exchanges, according to the PPACA, will be State or Federally operated exchanges where public and private plans will offer a number of options to the citizens of that given state. Although similar in concept, State and Private Exchanges have some significant differences.
The functions of a Public Exchange can broadly be defined as follows.
• Certify health plan offerings as Qualified Health Plans (QHP) based on certain pre-defined standards
• Assist employers and individuals with purchasing and enrolling in QHPs
• Develop a standardized rating system using quality assurance measurements for QHPs
• Provide standardized information on health plans including ratings etc.
• Provide premium subsidies to qualified individuals and tax credits to small businesses
• Provide access to government subsidized programs such as Medicaid, Medicare and Children’s Health Insurance Program (CHIP)
• Provide customer service support with standardized information using means like toll-free telephone numbers and a website
A Private Exchange on the other hand, due its nature, does not have most of these responsibilities. It is, by design, an alternate, to the Public Exchanges and has its own benefits. But for this post, let’s concentrate on Public Exchanges.
Who will benefit the most from Public Exchanges?
– Individuals who do not have access to employer sponsored health insurance
– Individuals that do not qualify for Medicaid
– Individuals eligible for income-related subsidies
– Small businesses that qualify for tax credit
This discussion poses a crucial question – What is the purpose of having both, Public and Private Exchanges? While there have been many debates and discussions about the same, a simple explanation can be formulated as follows –
Public Exchanges, cannot be a one-stop shop for everyone. Individuals and small businesses that are eligible for subsidies are typically the target customers for Public Exchanges. Private Exchanges, on the other hand, are ideal for customers that are not eligible for subsidies and tax credits as private exchanges can offer a lot of flexibility, choice (such as ability to purchase supplementary products), much better customer service and integrated offering (such as HRA, HSA, FSA administration).
In the next post, we will look at the complex jargon included in the PPACA and what they really mean i.e. things like bronze, silver, gold and platinum plans, Cadillac plans, ‘Doughnut Hole’ etc.