Private health insurance exchanges, embraced by both payers and employers, enable businesses to cap how much they spend on employee healthcare benefits. One report says enrollment in private HIX may exceed public by 10 million members in 2018.
Insurers and employers have historically squared off in an annual battle over premium costs. But as healthcare reform becomes more entrenched and pressure to reduce healthcare costs approaches a fever pitch, health insurers and employers are both embracing private health insurance exchanges as a way to affect healthcare costs by making a paradigm shift in how employers pay for employee benefits.
Private HIX can be used by employers to transition to a defined contribution strategy where the employer puts a cap on how much to spend on employee healthcare benefits. It works like this: Each employee receives a set amount to spend on the exchange to purchase the benefits that meet his or her needs.
Private exchanges are similar to public HIX, which are a central component of the Patient Protection and Affordable Care Act, only in that both are on-line marketplaces that will sell health insurance to individuals.
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While public exchanges will be government operated, private exchanges are being developed by consulting firms, such as Aon Hewitt, Mercer, and Towers Watson, as well as retailers, such Walgreens, and even insurance brokers.
Health insurers are not only joining private HIX, some like Aetna and Cigna have plans to develop proprietary exchanges of their own.