Private exchange

A private exchange, also known as a private benefits exchange or private health care exchange, is an online store or health insurance marketplace where employees or retirees purchase health insurance and other benefits, typically using funds contributed by their employer.
Overview.
A private exchange is an online marketplace that allows employees or retirees to shop for a personalized benefits package from a broad selection of benefit plans, which often includes medical, vision, dental, life, and disability insurance plans, as well as other offerings including non-insurance products like prepaid legal, FSA's, identity theft protection, and so on. Employers choose the plans and products they wish to offer on a private exchange and allocate funds that their employees or retirees can use to purchase benefits in the marketplace. Exchange users have the option to contribute additional funds beyond their employer contribution should they want to purchase more than the employer contribution covers.
Exchange users log into a web-based portal to select the benefits that best fit their needs. In the portal, users are guided by decision support tools, such as educational articles and videos, plan comparison tools, physician look-up tools, cost estimators, and recommendations to help them make informed choices.
Features.
The features of a private exchange include the following:
History.
Although the concept of private exchanges has existed for decades, the first successful private exchanges arose in the retiree health benefits sector in the form of Medicare exchanges. Medicare exchanges provide retirees with a selection of: Medicare Advantage plans (the more comprehensive Medicare plans offered by private insurers); Medicare Part D Prescription Drug coverage; and Medicare supplement policies, also known as Medigap.
The first Medicare exchange was operated by Extend Health, which launched in 2005, and allowed car manufacturer Chrysler to move its retirees from its cost-prohibitive group plan and into the individual Medicare market, where retirees could choose their coverage to fit their budget and health care needs. (Extend Health was acquired by Willis Towers Watson in 2012.).
It's unclear when exactly the first private exchange for employees was formed. Some of the pioneers include bswift (1996), Liazon (2007) Bloom Health (2009), and Connected Health (2009).
Types.
Three major types of companies are building private exchanges:
Public exchanges.
Private exchanges and public exchanges, also known as public health insurance exchanges, both enable the purchase of benefits through an online marketplace. However, private exchanges are offered by employers for use by active and/or retired employees and include health insurance and other types of benefits. Public exchanges, on the other hand, were established under the Affordable Care Act to give individuals the opportunity to purchase health insurance, often with a government subsidy if eligible. Private exchanges are operated by private entities such as brokers, carriers and technology companies, while public exchanges are operated by individual states or the federal government or via a federal/state partnership. Finally, private exchanges typically offer varying degrees of decision support, or ways to guide employees through the benefits selection process, through education and system recommendations. Private exchanges may be accessed by employees throughout the year to review their benefits or make qualifying changes to their coverage, whereas public exchanges currently lack decision support and can only be accessed for Open Enrollment except in the case of a qualifying event.
Benefits administration platforms.
While both private exchanges and benefits administration platforms leverage technology to simplify benefits and reduce the administrative burden on HR, private exchanges take a consumer-driven approach to benefits. A benefits administration platform simply allows a transition from paper enrollment to online enrollment.
A defined contribution strategy is common on private exchanges, allowing employers to control costs by setting a defined budget and then letting their employees shop for benefits. In addition, private exchanges provide meaningful choice through multiple benefit type and plan offerings along with decision support to guide employees through the shopping experience.