Six key facts about health insurance exchanges
Health insurance exchanges (also called marketplaces) are web portals where individuals and businesses can shop for and buy health insurance. They're gaining popularity and offer a new way for businesses to offer benefits to their employees. Aflac has compiled a list of important details business leaders need to know to understand and take advantage of these emerging employee benefits options.
1. There are two types of exchanges.
- Government-facilitated (public): The Health Insurance Marketplace and Small Business Health Options Program (SHOP) are exchanges facilitated by the state and/or federal government
- Private: Facilitated by industry stakeholders (insurance providers, brokers or benefits consultants)
2. Exchanges can help employers contain health care costs.
Exchanges can do some of the heavy lifting that usually accompanies workplace benefits, such as paperwork or coordinating between multiple carriers. This can help businesses to save on administrative costs. Additionally, some exchanges offer a defined contribution option, so employers can pay a fixed amount for benefits, allowing employees to buy up if they want additional health care coverage and helping to make health care costs predictable for employers.
3. Government-facilitated exchanges are open for small businesses and individuals to enroll on November 15, 2014 for coverage to go into effect January 1, 2015.
The Health Insurance Marketplace and SHOP provide online insurance markets for individuals and small employers.
Who can use government-facilitated exchanges?
- Anyone can use the Health Insurance Marketplace operating in their state to explore health insurance options, even if they already have insurance. The requirements include:
- You must live in the U.S.
- You must be a U.S. citizen or national (or lawfully present).
- You can't be currently incarcerated.
- Generally, small businesses can use SHOP Marketplace to obtain insurance if they have no more than 50 full-time equivalent (FTE) employees. Starting in 2016, the SHOP Marketplace will be open to those with 100 or fewer FTE employees. In 2017, the Health Insurance Marketplace may make provision for businesses with more than 100 FTE employees to purchase employee benefits plans.
4. Private exchanges can provide a larger array of benefits options to more employers.
Private exchanges are generally open to employers of all sizes and can offer multiple options. Unlike the Health Insurance Marketplace or SHOP, which can only offer medical and dental insurance, private exchanges can offer a variety of voluntary products, including vision, dental, disability, accident and more.
5. Tax subsidies and credits are only available through government-facilitated exchanges
Small businesses and individuals may be eligible for a tax credit for their contribution toward coverage purchased in a government-facilitated exchange. While some private exchanges may work with the Health Insurance Marketplace to seamlessly administer the subsidies to individuals, small-business credits are only available when the employer purchases health care coverage for their employees through the Small Business Health Options Program (SHOP).
Individual subsidies and tax credits
Individuals with household incomes between 100 percent and 400 percent of the federal poverty level may be eligible for cost share and/or premium subsidies if their employer doesn't offer affordable, minimum-value coverage.1
Small-business tax credits
Small businesses may be eligible for a tax credit of up to 50 percent of their premium payments if they have 25 or fewer full-time equivalents whose average annual wages are less than $50,000.2
6. Exchanges affirm the importance of a strong financial safety net for employees.
While exchanges offer employers more predictable costs and additional options for employees, there’s a trade-off: Approximately 25 percent of employees enrolled in private exchanges selected less coverage than they previously had, leading to lower monthly premiums, but higher out-of-pocket costs.3 And many employees admit they aren’t prepared to pay for out-of-pocket expenses related to an unexpected serious illness or accident not covered by health insurance.4 So, with more choices than ever before, it’s important that employees understand their benefits options and are equipped to cover out-of-pocket costs.
One way employers can help protect their employees is by adding voluntary benefits to their employee benefits profile to help provide an extra layer of financial protection. Unlike major medical insurance, voluntary policies pay cash benefits directly to the policyholder (unless assigned otherwise) if they get sick or injured and are a way to offer a broader benefits package to your workforce. Additionally, employees who are offered and enrolled in voluntary benefits by their employer are 38 percent more likely to say their current benefits package meets their family’s needs extremely or very well than those who aren’t offered voluntary benefits through their employer.4
For more information …
As you continue to navigate health care reform, you can rely on Aflac to provide helpful information and resources at: aflac.com/healthcare_reform. To learn more about health care reform and coverage available in your state, visit healthcare.gov, http://cciio.cms.gov and irs.gov.
1 Congressional Research Service (2012). Health Insurance Exchanges Under the Patient Protection and Affordable Care Act (ACA), accessed on October 9, 2014, from https://www.fas.org/sgp/crs/misc/R42663.pdf.
2 Internal Revenue Service (2014). Small Business Health Care Tax Credit for Small Employers. Accessed October 9, 2014, from http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers.
3 Accenture (2014). Three Million U.S. Employees Enrolled in Private Health Insurance Exchanges, According to Accenture, accessed on August 6, 2014 from http://newsroom.accenture.com/news/three-million-employees-enrolled-in-private-health-insurance-exchanges-in-2014-according-to-accenture.htm.
4 2014 Aflac WorkForces Report, conducted in January 2014 by Research Now on behalf of Aflac, accessed June 18, 2014 – www.AflacWorkForcesReport.com.