Why private health insurance exchanges are still a good deal?

Quite a few private health carriers operating in the healthcare landscape have strategically planned ahead to invest in private health exchanges. While some of these leading carriers have already established their health insurance exchanges, several others are actively hunting for a comprehensive, private exchange application or private exchange hosting solutions. But, a few health care experts are wondering if setting up private health exchanges is still a viable business plan considering that the state based health insurance exchanges are ready to kick-off in January 1, 2014.

Setting up private health exchanges is still a sustainable business plan because of several design and operational differences between the state-based HIX and the private health insurance exchanges, which work to the advantage of private insurance exchanges.

The private health exchanges have an early bird advantage over the state based health insurance exchanges. Several private exchanges are already operating in the U.S. healthcare sector and many more are lining up to join the wagon over the next couple of years, before the state based HIX finally come into operation. So, before the state HIX even begins their functioning, the already-operative private exchanges would have a deeper understanding of various exchange related operational and technical best practices and issues. Not only this, the market penetration of private health insurance exchanges would be relatively larger than the state HIX. The private health exchanges definitely have a head start on the state-based HIX which are still two years hence.

Another advantage the private health insurance exchanges have over the state based HIX is that the private exchanges are not bound by too many federal regulations. For instance, state based SHOP exchanges at least initially would be open to only small businesses with 100 or lesser number of employees. On the other hand, private health insurance exchanges are facing any such restrictions. Private insurance exchanges can therefore open their businesses to large employers from the very time of their inception.

Private health insurance exchanges can help reduce the administrative burdens for employers and instead of employers designing, managing and subsidizing health plans for their employees, the private health insurance exchanges can offer a choice of health plans from which employees can pick a plan of their preference. The exchange can take over the end-to-end process of health insurance application, right from – eligibility checking, enrollment, benefit management and any other supplementary support functions. The employers will just need to decide their contribution in the DCHPs.

To attract more consumers and increase insurance market penetration, private health insurance exchanges will need to keep in mind that to reel in small businesses, they will need to offer plans and services that help these businesses in containing administrative and health coverage costs, improve access to high quality plans, and offer higher ROIs to employees.

With the U.S. health carriers’ arena buzzing with activity and an untapped pool of millions of uninsured Americans needing coverage, private health plans and carriers are expected to launch several more private health insurance exchanges over the next few years.