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Small Business Employee Benefits and HR Blog

How to Offer a Private Health Insurance Exchange in 3 Steps

The biggest buzzword of this decade in the employee health benefits market is "Private Health Insurance Exchange". Numerous entities ranging from start-ups to new divisions of leading insurance companies have been created to offer new Private Health Exchanges. A private health insurance exchange is a health insurance exchange run by a private company. Here's how to offer a private health exchange in 3 easy steps.online private health exchange

What is a Private Health Insurance Exchange?

Webster defines an exchange as a place where things or services are exchanged, such as a store or shop specializing in merchandise usually of a particular type. So, at a basic level, a private health insurance exchange is a store or shop specializing in health insurance merchandise. More specifically, a health insurance exchange is a broker’s health insurance offering to individuals and/or employees. 

Private health insurance exchanges typically include the following components:

  1. A choice of two or more health insurance options

  2. Advice and recommendation on what health insurance options best fit your needs

  3. Automated billing for the chosen health insurance plan premium(s)

  4. On-going support for the chosen health insurance plan(s)

Thus, a Private Health Insurance Exchange is nothing new! 

The following are 3 steps a health insurance broker may use to help employers offer health benefits through a broker's Private Health Insurance Exchange:

1. Create a Private Health Exchange

Most carriers provide brokers with everything they need to offer a private health exchange. For example, UnitedHealthOne, Cigna, and Aetna all provide a broker with a website and quoting tool that provide clients with:

  1. A choice of two or more health insurance options

  2. Advice and recommendation on what health insurance options best fit their needs

  3. Automated billing for the chosen health insurance plan premium(s)

  4. On-going support for the chosen health insurance plan(s)

So, to create a private health exchange, simply re-brand your existing offerings as a "private health exchange".

2. Connect the Employer and Employees to Your Private Health Exchange Services

Most employers will choose to offer defined contribution as their primary employee health benefit offering, and then provide a gateway to a broker's private health insurance exchange for employees to purchase their own individual health insurance plans. The defined contribution allowance can be used to reimburse employees for their health insurance costs 100% tax-free.

3. Employees Use Your Private Health Exchange to Purchase a Plan

Employees use your Private Health Exchange to shop, select and purchase their individual health insurance plan. Employees use the tax-free allowance provided by their employer to reimburse themselves for the coverage that best suits their family.  

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