What is a Private Health Exchange and how is it different from public exchanges?

Private health insurance exchanges are similar to public health insurance exchanges, but differ from each other across several parameters such as operational markets, time of inception, federal ruling conformance regulations etc.

Operational markets: While private health exchanges are most likely to primarily serve in group insurance markets, public health exchanges would allow both individuals and small businesses to purchase insurance through them.

Implementation time: There are several private exchanges currently operational in the U.S. healthcare space as compared to a couple of state health insurance exchanges presently functioning in the U.S. Officially, public health exchanges are scheduled to come into operation by January 1, 2014. By the time public HIX come into existence, private exchanges set up by large health plans and carriers would already have been in operation for some time. The early bird advantage that private health plans presently enjoy, gives them the leverage to pull in small businesses and other groups that operate in the group markets and are aiming to purchase health insurance for their employees through the private exchanges.

Most healthcare consumers are not too well aware of the advantages, possible risks and options available with public health insurance exchanges. Purchasing group insurance through the exchanges can free employers from the complexity associated with selecting insurance plans for the employees as the private exchanges would take care of the end-to-end health insurance purchase process.

Federal mandate conformance: While the public exchanges need to abide by many mandates that the federal government has rolled out, private exchanges are more or less free from such stringent federal measures. Through private exchanges, insurers retain the flexibilities and control associated with running a personal health benefits exchange.
     
The defined contribution plan model is gaining popularity among the private exchange implementers as it allows them to attract small and large businesses looking for a pre-defined defined contribution health packages.  Purchasing insurance through a private exchange which are available today, allows employers to enjoy cost-effective benefit packages and wider plan choices today, rather than waiting for public health insurance exchanges to come into operation two years later. Thus employers can cut down on their health care costs and offer wider choices to their employees in terms of their health coverage.

Private exchanges are likely to benefit a lot from their current market position as the state exchanges plans for most states are still in limbo and employers are on the lookout for newer and smarter ways to minimize escalating healthcare costs, improve employees access and choices to different plans and improve the wellness quotient of their employees.