Private Health Care Exchanges May be a Model for the Future

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By Lydia Beyoud  

Private exchanges could be the health care model of the future, now that the Affordable Care Act appears to be “the law of the land” following the re-election of President Obama, an employee benefits expert predicted Nov. 14.

If competition is allowed to flourish in the private market, it is possible that a situation may arise in which more small businesses opt for public state-based exchanges while larger employers join private exchanges, said Alden J. Bianchi, employee benefits and executive compensation practice group leader at Mintz Levin Cohn Ferris Glovsky & Popeo in Boston. Bianchi's comments came during a session on the Affordable Care Act at Bloomberg BNA's Tax Policy and Practice Summit.

Clarification from regulators on the ACA's nondiscrimination rules could help encourage this situation, Bianchi said. The law imposes nondiscrimination rules for fully insured plans that are modeled on the nondiscrimination standards that have applied to self-funded plans since 1978.

Bianchi predicted that “a lot of people in the industry” would be satisfied if regulators deem an employer as having passed the nondiscrimination test if it offers a broad-based health care plan with the same options to all employees, and in which employer contributions are the same in each case. “This is a key part of sustaining [a private exchange] model,” Bianchi said.

By contrast, in a voucher system, or what Bianchi called the “holy grail” advocated by some consumer-driven health care advocates, employers would provide a fixed sum of money for employees to purchase health insurance coverage in the individual market without restriction and without any further employer involvement. This “does not work from a regulatory perspective,” Bianchi said.

A blossoming private exchange market could encourage “the development of new and innovative features, additional product add-ons, voluntary benefits, additional advice, and compliance help … who knows where that could go,” Bianchi said.

However, “the big challenge for underwriters is that they may not want to participate in these private exchanges,” Bianchi told BNA after the panel. He gave the example of insurance provider Blue Cross Blue Shield (BCBS), which chose not to participate in the private exchange that some large employers such as Darden Restaurants and Sears are in “because they're worried that only the oldest and sickest people will choose BCBS.”

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